Ones To Watch is a newsletter about the people shaping the European cannabis sector.
Each update contains a brief note on some of the exciting entrepreneurs and startups I’ve met on my journey and some of the talent that is moving through the sector.
The theme of this issue is research and development – inspired by the 20-year journey of GW Pharmaceuticals from small British biotech to $7.2 billion exit to a pharma giant last month.
EARLY MOVERS, LONG HORIZONS
News broke on the 3rd of February that Jazz Pharmaceuticals, an Irish pharmaceutical company specialising in drugs for neuroscience and oncology, was to acquire the British cannabinoid company GW Pharmaceuticals. The story caught most in the industry unexpected.
GW holds a strange place in the folklore of the cannabis industry – seen as a saviour to many who use their cannabis medicines, as a cruel and opaque corporate by long-time activists, and as one of the only ‘credible’ cannabis operators by financial analysts.
The deal was a reminder that we are very much in the early days of this cannabis thing, but a sign that we’re entering a more mature mainstream phase.
How did a small British biotech company, founded in 1998, foresee the opportunity that lay ahead of them?
GW is a particularly interesting business. Disciplined in their strategy and communications across 2 decades, they set their sights on creating condition-specific cannabinoid pharmaceuticals easily understood by doctors and patients.
Their story shows that plant-based medicines have a place in the modern doctor’s toolbox, and pharmaceutical companies should take note. It also highlights the differing conceptions of timelines and exit strategies at play in the sector.
Central to their strategy was R&D. According to GW (in a submission to the Labour Party National Forum Consultation in 2020), they invested approximately £470m in R&D and £114m in manufacturing facilities in the UK between 2015 and 2020. In 2020 GW’s total R&D spend accounted for 1,349.9% of its total revenue for the year.
I’m not suggesting that R&D is the only way to build value in the cannabis sector, but R&D-led businesses will be instrumental in bringing the sector into the mainstream.
Businesses that use R&D to increase the efficiency of medical cannabis medicines and their delivery infrastructure are creating companies that financial analysts and pharmaceutical incumbents understand.
VARIATIONS ON THE APPROACH
Clinical data and drug development take time, but if you are targeting useful and underserved parts of the market it can pay off big time. Funnily enough, the first UK cannabis operators and investors I met, back in 2016/17, have all found themselves in the R&D space almost 5 years on.
DEVELOPING CONDITION-SPECIFIC DRUGS // UK-based Oxford Cannabinoid Technologies is focussed on drug development for indications in severe, chronic pain conditions – their pre-clinical CB2 agonist (OCT461201), is being developed as a potentially effective treatment for Irritable Bowel Syndrome. The venture was co-founded by Neil Mahapatra of private equity firm, Kingsley Capital Partners – one of the earliest movers and most mainstream characters in UK cannabis – and Gavin Sathianathan of Alta Flora.
The company is backed by a diverse array of investors, including Imperial Brands, the venture arm of nicotine giant Imperial Tobacco, and Casa Verde, the California-based cannabis fund that boasts Snoop Dogg as a general partner. To see these names united under an R&D led vision for the sector, alongside a top team of researchers and advisors, says a lot about where the smart people are putting their money.
Early movers, with a proven track record, and mainstream backers make OCT ones to watch.
MAKING CANNABIS WORK FOR PATIENTS // Grow are one of the most interesting British medical cannabis businesses. Diverging from the pack, they have built an asset-light, impact-heavy business aimed at providing cannabis medicines to patients in the UK and Ireland. Playing an independent role between local clinics and international producers, they focus on product sourcing and manufacturing, doctor education, and distribution.
The group was founded by Ben Langley, a former JP Morgan banker, and Ian Atkinson, a scientist and biotech entrepreneur. Their board is bolstered by Dean Gainsley, one of the first British-based cannabis investors. What sets them apart is their focus on R&D, within their science unit, Grow Biotech based in Rothamstead, ‘one of the oldest agricultural research institutions in the world’. The research they are undertaking is not focussed on drug development or clinical trials, but on how they can increase the efficiency of the supply chain from extraction through to manufacturing.
Grow are innovative dealmakers worth keeping an eye on as the European sector continues to heat up.
Note: I am using the Eurovison Song Contest definition of Europe here, which allows me to include an interesting Israeli company in this list.
SERVING THE UNDERSERVED // Gynica focuses on clinically-proven cannabis medicines in the field of women’s health. The project, led by gynaecologist Professor Moshe Hod, the President of the European Association of Obstetrics, is looking to treat illnesses such as endometriosis with cannabinoid-based medicines. Gynica works through a partnership with Lumir Labs, a Jerusalem-based R&D lab.
The CEO of Lumir Labs, Yotam Hod, has been busy developing his plans across the Mediterranean. His holding company Asana Bio Group, which, as reported by The Times of Israel, holds a Maltese production licence through their Terrapeutics brand, invested $2.3m in Lumir Labs. The group plans to commercialise their R&D-led products in the European market.
Tapping into large underserved markets with well-respected scientists is a strategy we’ll see a lot more of in the coming years.
BREAKING THE PRESCRIBING BARRIER // Sana Life Science are one of the sharpest teams in the European cannabis sector. Most European specialist cannabis distributors are focussed on unlicensed (not marketable) cannabis medicines. Their healthcare business, Sana Healthcare, focuses instead on market access for clinical trial-backed medicines. Through partnering with R&D businesses, many of them in Israel, to bring their medicines to UK patients, Sana is using clinical data to tackle doctors’ reluctance to prescribe unlicensed cannabis medicines.
Arjun Rajyagor and Ben Hamburger – the two recovering BCG consultants turned entrepreneurs – who founded Sana, have assembled a top clinical team including the former Chairman of the British Medical Association, Dr Steve Hajioff as their CMO. They have already started signing deals to bring products doctors can trust for specific conditions to UK patients. Their recent deal with MedC, a Canadian clinical-stage biopharmaceutical company, will see them develop MedC's product platform for the treatment of Cutaneous T-Cell Lymphoma (CTCL) Sezary Syndrome in the UK.
Strategy, data, and a culture of problem-solving positions Sana as serious sector disrupters.
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