Rize ETF: separating the medical cannabis science from the hype

Rahul Bhushan, co-founder of European exchange-traded fund issuer Rize ETF, discusses global trends in medical cannabis regulation.

The world of cannabis is full of unlikely conversion stories according to Rahul Bhushan of Rize ETF.

Take former US Speaker of the House of Representatives John Boehner, a man who went from being overtly opposed to cannabis during his time at the House, to a staunch proponent in his new role as an advisor to Acreage Holdings, one of the largest cannabis companies in North America.

Or former Mexican President, Vicente Fox, who during his presidency took a bold stand against cannabis but now sits on the boards of various cannabis companies. My personal favourite is the story of Joy Smith – a grandmother from Colorado – who went from being a Christian minister to a full-fledged hemp (defined as cannabis with less than 0.3% THC) entrepreneur, and who today helps people find holistic healing with her range of organic cannabidiol (CBD) products.¹

Cannabis in the United States

Amazingly, the industry often uses Joy’s example to evoke the rapid dissolution of stigma around the cannabis plant. Cannabis is no longer seen as a social pariah, or a discretionary vice. Organisations such as the World Health Organisation (WHO) have played a key role in bringing about a change in people’s perspectives.²

The WHO’s recommendation to reclassify cannabis under international treaties in February 2019 came at a time when a growing number of countries were enacting cannabis reform. While few countries have gone as far as Canada, Georgia, South Africa and Uruguay, where cannabis is completely legal both for medicinal and adult use, a host of countries are now powering ahead, at least with a focus on the medicinal side. In the US, where neither medicinal or adult use cannabis is legal at the federal level, calls for complete legalisation have been increasing. Until now, individual states have enacted their own cannabis legislation. Today, there are 33 states with full medical cannabis programmes – compared to 13 states just 10 years ago – 11 of which also permit legal adult use of cannabis.

The pace of state legalisation has also been picking up. But whether this state-level story goes federal is still unclear. 2020 could be a decisive year. In the last six months, the world has watched as an eclectic mix of presidential hopefuls – all with different views on cannabis – have squared off against each other. We have heard from pro-cannabis candidates such as Elizabeth Warren, Bernie Sanders, Andrew Yang and Pete Buttigieg (all of whom support federal legalisation of cannabis), neutral candidates such as Joe Biden (supports decriminalisation) and Donald Trump (has expressed mixed support for medical cannabis specifically); as well as anti-cannabis candidates such as Michael Bloomberg and Mike Pence (support neither legalisation nor decriminalisation).³ The race is now down to essentially two or three candidates, neither of which have yet indicated any fervent objection to cannabis reform.

Cannabis in Europe and the rest of the world

On the European side, countries have also been enacting cannabis reform: cannabis is now legal for medicinal use in over 30 European countries.5 Because of the fragmented nature of the market, approaches taken have varied somewhat in terms of the types of products allowed and the regulatory frameworks governing their provision. However, legalisation has truly been a pan-European story. Today, the biggest markets for legal medicinal use are France, Italy, Germany and the UK.

In the rest of the world, calls for expanding medicinal access are also loudly reverberating. Globally, now, a total of 56 countries have made some form of medicinal cannabis available for legal use.⁴

Medical cannabis as a therapy option

More countries are going to jump on this bandwagon. All eyes are set on Asia, especially China, as the next frontier in medical cannabis. It just so happens that China is the largest grower of hemp on the planet, producing almost half of the world’s legal hemp.⁵ As the cannabis story goes global, and as the cannabis plant gains further ground as a new form of medicine with real world applications, we are going to see expanded access to this therapy option around the world.

The rapid proliferation of cannabis-derived pharmaceutical medicine or drugs by biotech/pharma companies has certainly been accelerating this trend. 2018 and 2019 were milestone years for cannabis-derived medicine. In June 2018, GW Pharmaceuticals – the largest pure-play company in the cannabis-derived biotech and pharmaceutical space – received Food and Drug Administration (FDA) approval for its new drug, Epidiolex, the world’s first CBD-based medicine targeting seizures resulting from two rare forms of childhood onset epilepsy: Dravet syndrome and Lennox-Gastaut syndrome.⁶

Then December 2018 saw the Agriculture Improvement Act of 2018 (also known as the US Farm Bill) become law, effectively removing hemp as a Schedule 1 controlled substance⁷. Finally, in September 2019, Epidiolex was approved in 28 European countries under the name Epidyolex, with an expected rollout plan over 2020 and 2021.⁸

Top conditions for which medical cannabis is used

With the advent of cannabis-derived pharmaceutical drugs, the evidence is now clear that cannabinoids (the active compounds found in the cannabis plant) exhibit therapeutic value. Cannabinoids have been shown to help people suffering from illnesses such as nausea, chronic pain, multiple sclerosis, epilepsy, glaucoma, Crohn’s disease and symptoms of certain types of cancers, such as basal cell carcinoma⁹ – and these are really just the tip of the iceberg in terms of indications.

Studies are now looking at the effects of cannabinoids on brain cancer, autism, traumatic brain injury, Alzheimer’s, psychiatric disorders, Parkinson’s and more.¹⁰ On the back of these studies, we are now seeing a whole host of biotech and pharma companies looking to tap into the medical cannabis opportunity, drawing on the successful precedent set by GW Pharmaceuticals. These companies are looking to develop new drugs that tackle new indications.

Market growth projections

This sets up the industry for rapid growth in the months and years ahead. Narrowing in on the US cannabis industry alone, medical sales are expected to grow at a compound annual growth rate (CAGR) of 16.8% through to 2025, for a market that will be worth just over $13bn.¹¹ Globally, the medical cannabis industry is expected to be worth as much as $56.5bn by 2025 according to the Imarc Group, which translates to a CAGR of 22.8% during 2020-2025.¹²

Rize ETF

The cannabis plant has been used medicinally in ancient Indian, Chinese, Egyptian and Arabic cultures for centuries. Nowadays, cannabis is rediscovering its application in the treatment of a wide range of diseases and symptoms in the western world. The global medical cannabis movement is backed by the tailwinds of social acceptance, favourable legislation and medical application.

As the movement gathers further steam in the months and years ahead, catalysed by breakthroughs in our understanding of cannabinoids and the corresponding trend towards liberalisation and legalisation, getting on the front foot of this megatrend has its perks for those who can spot the investment opportunity today.

Rize ETF Limited is an appointed representative of Aldgate Advisors Limited (Firm Reference number 763187) which is authorised and regulated by the Financial Conduct Authority.

Related exchange-traded fund

FLWR: The Rize ETF, Medical Cannabis and Life Sciences UCITS ETF, seeks to track the Foxberry Medical Cannabis & Life Sciences Index. The objective of the index is to provide exposure to companies involved in the global medical cannabis and cannabis-related life sciences sectors, with a focus on companies in the biotechnology, pharma and hemp and CBD sectors. The index excludes companies that are considered to be either noncompliant with state and federal laws in the countries in which they operate and/or directly involved in the production and/or distribution of cannabis and/or cannabis-derived products containing more than hemp-defined levels of tetrahydrocannabinol (THC) for the recreational consumer market.

Capital at Risk Warning: an investment in the Fund(s) involves risks, including illiquidity, lack of dividends, loss of investment and dilution, and it should be done only as part of a diversified portfolio. The Funds may be registered or otherwise approved for distribution to the public in one or more European jurisdictions.

Investors should continue to consider the terms of investment in any Fund (or Share Class thereof) carefully and seek professional investment advice before taking any decision to invest in such Fund (or Share Class thereof).

References

1. Forbes, “This Grandma Went from Christian Minister to CBD Evangelist – And Entrepreneur”, May 2019. Available at: https://www.forbes.com/sites/javierhasse/2019/05/15/this-grandma-went-from-christian-minister-to-cbd-evangelist-and-entrepreneur/#504c7dc42ee8
2. Forbes, “World Health Organisation Recommends Reclassifying Marijuana Under International Treaties”, February 2019. Available at: https://www.forbes.com/sites/tomangell/2019/02/01/world-health-organization-recommends-rescheduling-marijuana-under-international-treaties/#4fee9bf6bcc0
3. Mazakali, “Cannabis 2020: Five Things to Watch”, January 2020. Available at: https://mazakali.com/cannabis-2020-five-things-to-watch/
4. New Frontier Data, “The US Cannabis Report: 2019 Industry Outlook”, Page 37, September 2019. Available at: https://newfrontierdata.com
5. The Economist, “Industrial cannabis is booming in China”, April 2019. Available at: https://www.economist.com/business/2019/04/04/industrial-cannabis-is-booming-in-china
6. U.S. Food and Drug Administration, “FDA approves first drug comprised of an active ingredient derived from marijuana to treat rare, severe forms of epilepsy”, June 2018. Available at: https://www.fda.gov/news-events/press-announcements/fda-approves-first-drug-comprised-active-ingredient-derived-marijuana-treat-rare-severe-forms
7. Reuters, “Senate approves farm bill compromise that avoids food stamp cuts”, December 2018. Available at: https://www.reuters.com/article/us-usa-farmbill/senate-approves-farm-bill-compromise-that-avoids-food-stamp-cuts-idUSKBN1OA0BY
8. GW Pharmaceuticals, “GW Pharmaceuticals receives European Commission approval for EPIDYOLEX® (cannabidiol) for the treatment of seizures in patients with two rare, severe forms of childhood-onset epilepsy”, September 2019. Available at: http://ir.gwpharm.com/news-releases/news-release-details/gw-pharmaceuticals-receives-european-commission-approval
9. British Medical Journal, “Medical Cannabis: The Evidence”, February 2015. Available at: https://www.bmj.com/sites/default/files/
10. response_attachments/2015/03/Medicinal%20Cannabis%20The%20Evidence%20V1.pdf
11. Bedrocan, “Indications”, September 2019. Available at: https://bedrocan.com/products-services/healthcare/indications/
12. New Frontier Data, “The US Cannabis Report: 2019 Industry Outlook”, Page 37, September 2019. Available at: https://newfrontierdata.com
13. Imarc Group, “Medical Cannabis Market: Global Industry Trends, Share, Size, Growth, Opportunity and Forecast 2020-2025”, February 2020. Available at: https://www.imarcgroup.com/medical-cannabis-market

Rahul Bhushan
Rize ETF
rahul.bhushan@rizeetf.com
rizeetf.com

This article will appear in the second issue of Medical Cannabis Network which is out in April. Click here to get your free subscription today.