Investing in medical CBD
Cannabis is well known as an illegal drug for recreational use, but it now has another, more salubrious reputation. It is becoming increasingly recognised for its health benefits. Attitudes towards cannabis – both recreational and medical − have been changing over the past few decades.
Attitudes in Europe have been evolving , with more countries becoming receptive to the medicinal use of cannabis in particular. However, development has not been homogeneous. The Netherlands legalised cannabis for medical use in 2003, while others such as Greece and Germany waited a little longer, following suit in 2017. There have been other recent signs that medical cannabis is being viewed in a positive light. Towards the end of last year, the European Court of Justice ruled that CBD (cannabidiol, a medically beneficial substance found in the cannabis plant) is not a narcotic substance. Soon afterwards, in another landmark move, the UN Commission on Narcotic Drugs reclassified cannabis and removed it from a list featuring addictive opioids such as heroin.
Signs of its move into the mainstream have been apparent in the UK too. British American Tobacco took a 19.9% stake in a Canadian cannabis company earlier this year, then invested in another a few months later. Also, Cellular Goods, a London-based cannabis business which listed on the London Stock Exchange earlier this year, hit the headlines on reports that David Beckham was backing it. Its skincare products are due to launch in the autumn.
The numbers demonstrate how far things have come. The European Cannabis Report, published this March by cannabis advisory company Prohibition Partners, estimates that more than 60,000 people were able to access cannabis medications for the first time in Europe last year. Medicinal cannabis is used to help ease serious illnesses and conditions such as cancer, multiple sclerosis, epilepsy and chronic pain.The report also anticipates that the European medical-cannabis market will be worth €403.4 million by the end of 2021 and that it will grow at a compound annual rate of 67.4% from this year, hitting €3.2 billion in 2025. According to Prohibition Partners’ estimate, Germany alone is expected to constitute more than half of the European market until 2024 and will be worth at least €840 million.
More and more companies are getting involved, says McNeil. “Our holdings started off at about 13 when we launched the ETF and now it’s well over 30. Every time we do a rebalance, we seem to add about ten new companies, so it’s a burgeoning sector from that perspective.”Rize seeks out companies that potentially stand to benefit from the increased adoption of medical cannabis, focusing on companies in the biotechnology/pharmaceutical, hemp and CBD sectors. Co-founder Rahul Bhushan says: “There’s going to be an entire tech industry that’s going to sit around the cannabis industry and we’re interested in those that provide services to the medical-use market.”Although medical cannabis is becoming more acceptable, the rules and regulations remain tight.
Last September, the UK’s Financial Conduct Authority set out its approach to assessing cannabis-related businesses looking to list in the UK – which it permitted, as long as they are medicinal-based. It also drew attention to the potential to fall foul of the Proceeds of Crime Act (POCA) if they were not. In other words, they must not operate in the recreational-cannabis space (or in any other activity illegal under UK jurisdiction). McNeil has already identified such a possibility and taken action to avoid it, as he explains: “It’s in the index rules that if a stock diversifies or moves into the recreational sector, it has to be taken out of the ETF immediately.“We did this with Namaste Technologies, within two weeks of listing the ETF originally, because it diversified into the recreational sector. But this proved that we could spot it and remove it pretty quickly. I think that’s a big plus for investors.”In the future, cannabis has further to go, according to Bhushan: “I think the medical-cannabis ‘story’ is going to get much bigger in Europe. As a continent, in terms of demand, it’s bigger than the US.”
At Swiss Life Sciences Group (SLSG) all investments into production and manufacturing are 100% fully owned, which is a cornerstone of our company strategy. This means that as SLSG expands with acquisitions across the continent, the valuation of our company increases, underpinned by tangible freehold land, buildings and manufacturing equipment.
This ownership gives investors and shareholders confidence that the company’s funds are secured against the company’s assets and market valuation