The UK is a special geography within the medical cannabis space with incredibly strong fundamentals. But it has also had a few obstacles slowing it from reaching its true potential to become a dominant market for medical cannabis in Europe within the next few years.
On the surface, the UK is a very fertile place for medical cannabis: accounting for 44% of global exports of cannabis for medicine and scientific research as well as having legalized cannabis prescriptions by specialist doctors in 2018. However, patient access to prescribed medical cannabis has been slow to implement and for many it is prohibitively expensive due to obstructive regulations and a lack of specialized doctors. An estimated 1.4 M people in the UK regularly use cannabis to treat chronic health issues, yet it was a slow start with only 154 prescriptions issued shortly after the market opening in 2018. Furthermore, the ecosystem of cannabis companies and R&D teams in the UK has a difficult time getting funding. That being said, we are now starting to see large tailwinds in favour of the UK medical cannabis industry and would like to share our enthusiasm for this market.
During our screening process of the wider European medical cannabis market for Óskare Fund I, we noticed that an outsized proportion of the dealflow was coming out of the UK. This finding makes a lot of sense in light of projections that the UK medical cannabis market is expected to see the largest growth in Europe between 2020 to 2025, with a 98% CAGR. The legalization of medical cannabis is also strongly supported across the UK, with 77% of respondents stating that it should be permitted , according to a 2018 YouGov survey. This no doubt was a pivotal factor in the government’s enabling of the sector.
The UK has also seen the launch of the Academy of Medical Cannabis, which offers educational resources and training to practitioners. In addition to this, we have seen a big uptick research funding from the National Institute for Health and Care Research (NIHR) and studies such as project Twenty21, which monitors the health outcomes of over 20,000 patients cannabis-based medicinal products. We expect these developments to increase healthcare practitioners’ confidence in prescribing medical cannabis. Furthermore, the UK government recently started including medical cannabis companies under the SEIS/EIS tax schemes, which will greatly improve access to funding.
The most prominent success story in the UK to date is GW Pharma; the first company to ever get market approval of a natural cannabis derivative with its multiple sclerosis treatment, Sativex. GW Pharma also brought the groundbreaking epilepsy drug, Epidolex, through clinical trials and was approved by the US FDA in 2018 and European EMA in 2019. Last year, the company was acquired by Jazz Pharmaceuticals for $7.2Bn.
The UK medical and pharmaceutical cannabis sector is exceptionally diverse and deep, with a large array of entry points, such as e Alta Flora (research software service which has been applied in medical cannabis studies), Celadon Pharma (research and manufacturing of cannabinoids for pain treatment), and retailers of CBD products such as Alphagreen. These are only a few examples out of a multitude of new companies being formed in this space every year.
To capture this new wave of growth, Óskare Capital has launched the MEDCAN Fund in partnership with Sapphire Capital Partners. The fund will invest in SEIS/EIS-compliant start-ups with strong IP that can address a wide range of conditions and result in greater exits. The minimum subscription amount is £10k with a 8-year holding period and a target return of 3x. To learn more the MEDCAN Fund, visit this webpage.