8 cannabis investors share their prospects for the European market in H1 2022 – MovieUpdates

German government created quite a stir when it announced recreational cannabis would be legalized during its current term. Does this mean that recreational use of cannabis for adults will become a common policy in Europe? It’s too early to say.

After interviewing several active investors in cannabis-related startups, we learned that the regulatory and functional landscape in Europe is just as fragmented as it is in North America. Another key data point connecting both regions: the black market is a competitive factor. According to Europol, illegal expenditure on cannabis in the EU amounts to €9 billion annually.

However, things are on the legal side of the market – it seems medical cannabis still has the most momentum, and it’s only accelerating. According to market research firm Prohibition Partners, approximately €354 million worth of unlicensed medical cannabis will be sold in Europe in 2022, and this number is expected to increase to approximately €2.3 billion by 2026.

Investments and mergers and acquisitions in the sector are also boosted by the promised German legislation.

“Our belief is that mergers and acquisitions will be at the forefront of all legal cannabis operators. The difference in Europe is that there are opportunities for non-cannabis players to potentially get strategic and try to enter the market through an integration of cannabis as a CPG [consumer packaged good] or a pharmaceutical grade option,” said Todd Harrison, founder of CB1 Capital Management.

Also encouraging for producers and operators is the fact that medicinal cannabis is not banned at the federal level across the EU, allowing companies to legally sell their products across borders.

“This means, for example, you can produce cannabis in Portugal and sell it to any EU country, as long as you have export/import licenses. Therefore, cross-border trade in Europe is relatively fluid, which means that companies can scale relatively quickly if they know what they are doing,” said David Bonnier, founder of Enexis AB.

We spoke with:

  • Todd Harrison, Co-Founder and CIO, CB1 Capital Management
  • Yoni Meyer, partner, Casa Verde Capital
  • Viken Douzdjian, Managing Partner and Co-Founder, Argonautic Ventures
  • David Bonnierco-founder, Enexis AB
  • Will Gibbs, Director, Octopus Ventures
  • Oliver Lamb, Co-Founder and Investment Manager, Óskare Capital
  • Leah Fletcher, Founder and Director, Arbutus Innovation Center
  • will.i.aminvestor, Sanity Group

David Bonnier, Co-Founder, Enexis AB

What are some of the biggest challenges facing the European cannabis industry right now?

Europe is currently largely a medical market. Unlike the US, medicinal cannabis in Europe is regulated as a medicine and is subject to EU and national pharmaceutical regulatory systems.

As such, the standards for the production and distribution of medicinal cannabis are exceptionally high. In addition, European physicians are generally more conservative and evidence-based. Therefore, it takes time to build the necessary infrastructure to get the buy-in from stakeholders.

Key challenges include (1) lack of training and support from industry stakeholders such as physicians, research institutes, insurance companies, politicians, etc.; and (2) lack of downstream infrastructure such as research centers, specialty clinics, authorized wholesale distributors and manufacturers.

The good news is that as cannabis companies in Europe have to operate under pharmaceutical regulatory systems, we are seeing a material accumulation of high-quality patient data.

As valuations soar, the exciting market developments in Germany still require business leaders to perform and scale. Viken Douzdjian, managing partner, Argonautic Ventures

Keep in mind that doctors in Europe can only prescribe a finished product to patients, unlike the US where you only need a medical card. Patients often have to contact doctors multiple times, yielding several valuable patient data that can be used in real-world evidence studies.

As such, we believe that Europe will most likely become a major leader in medical cannabis research, further helping to improve the scientific basis and general acceptance.

How do these issues affect your advice to your cannabis-related portfolio companies?

We target companies that know how to navigate the European regulatory landscape and fill key market gaps.

For example, we currently like the downstream part of the value chain, which has so far been underexposed, which includes distribution companies, specialty clinic platforms, research and development centers and companies that collect patient data, which we believe will become very important over time. will become valuable. time. We also like side activities.

As in the US, legislation across Europe is fragmented but evolving. Are these situations similar to you?

To some extent, although there are some key differences. As North America has already blazed a trail (starting with medical cannabis in California in 1996, and again in 2012 with adult use in Colorado and Washington), legislation in Europe is accelerating at a faster pace.

While the Netherlands was the first to legalize medicinal cannabis in Europe in 2003, the wave of legalization came much later, when Italy legalized it, followed by Germany, Poland, the United Kingdom and many more. Currently, nearly 400 million Europeans now have legal access to medicinal cannabis in one form or another, which is more than in the US

Also, Europe is not bothered by a federal ban on medicinal cannabis as in the US. There is an EU-wide guideline on production and distribution standards for medicinal cannabis products, which is interpreted by each country.

This means that you can, for example, produce cannabis in Portugal and sell it to any EU country, as long as you have export/import licenses. Therefore, cross-border trade in Europe is relatively fluid, meaning businesses can scale relatively quickly if they know what they are doing.

Which sector promises the most growth in Europe this year: medical or recreational? Has the popularity of CBD products made investors feel more comfortable with recreational use?

While there is a lot of buzz around adult use of cannabis, it is still largely a non-existent market from a commercial point of view. Malta has legalized (although it has a small population); The Netherlands has a pilot program for legal production, which was previously illegal; Switzerland is conducting a commercial pilot program; and a few other countries have legalized home-grown cannabis for personal use.

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