Medicinal cannabis specialist LeafCann discusses the current direction of the global medical cannabis market and the expectations for its future.
The rise of medicinal cannabis
The global medicinal cannabis market is growing. Occasional regulatory hurdles notwithstanding, the sector is finally seeing the upward progression that has been promised for several years. However, the increasing acceptance of medicinal cannabis invariably raises the spectre of the legalisation of adult-use cannabis, which in turn introduces conversations amongst the investment community regarding future opportunities for companies already working in the sector.
Medicinal cannabis companies already producing high-quality medicine under Good Manufacturing Practice (GMP) standards understand the strict conditions necessary to produce quality product. They understand no corners can be cut if you are to produce a medicine that patients and prescribers can rely on to provide relief. They also understand that it does not take much for the public to lose confidence in the sector when they hear stories of poor practices leading to inferior products and recent instances where contaminants have been found by consumers, prompting recalls.
Therefore, those in the medicinal cannabis sector may be tempted by diversification into other areas, such as adult use cannabis, where the conditions may not be as strict, and profits are ostensibly easier to make. Although desirable, the adult use market may not be the answer for those looking to diversify. Indeed, there are opportunities for those in the sector to apply their current practices to other botanicals and take advantage of the opportunities that other plants may present. Just as cannabis has been used for medicinal purposes for thousands of years, so too have many other plants.
Cannabidiol is already being used in conjunction with some botanicals in the novel food sector. However, recent well-documented decisions to make registration of novel foods in the UK mandatory has seen companies rushing to create expensive novel food safety dossiers just to keep their products on the shelf until they can be registered.
Now with the release of the Taskforce on Innovation, Growth and Regulatory Reform (TIGRR) report, the UK novel food sector has been put in flux. The report recommends that: “Regulation of medical cannabinoids and medicinal CBD should move from the Home Office to the Department of Health and Social Care (DHSC) and Medicines and Healthcare products Regulatory Agency (MHRA) to create a regulatory pathway for assessment and approval based on patient benefit.”
Many in the industry would prefer a complete distinction between the way industrial hemp, cannabidiol and medicinal cannabis are handled. This has been discussed at length by the United Nations through the International Narcotics Control Board (INCB) after the World Health Organisation (WHO) made recommendations to change the illicit status of cannabis and its constituents because they posed little harm.1
It will take time for this guidance to flow down to nation states. For example, in Australia these issues are handled at the State and Federal levels; with industrial hemp and hemp seed regulated by state licenses and local government standards, and medicinal cannabis, including CBD, falling under the Department of Health’s Therapeutic Goods Administration, Office of Drug Control.2 In the UK, all aspects of the cannabis plant, whether industrial hemp, medicinal cannabis, or unregulated cannabis fall under the jurisdiction of the Home Office. The only exception at present is Food Standard cannabidiol (CBD), which is currently managed by the Food Standards Agency as a novel food. Farmers, manufacturers, retailers, and consumers need clarity amid all the confusion. Separating the adult use and non-adult use applications of cannabis, would help all stakeholders avoid confusion, misinformation, and stigma.
For example, many in the UK industry would like hemp and all its applications, including as a construction tool (industrial hemp), and a food (hemp seed products and cannabidiol food standards products), to be governed by the Department for Environment, Food and Rural Affairs (DEFRA), and for Cannabis Based Prescription Medicines (CBPMs) to be managed by the Department of Health and Social Care (DHSC). Others would prefer to see a completely new body, dedicated to all aspects of Hemp, Food Standard CBD, and Medicinal Cannabis and with specific expertise to ensure evidence-based regulations are developed. Until these issues in the UK are clarified and clear, evidence-based regulations are put in place, investment will tend towards the importation and distribution end of the sector and incremental development of domestic medicinal cannabis production, which would be a massive, lost opportunity for the UK economy.
Adult use cannabis – good investment or unnecessary distraction?
The legalisation of cannabis for adult use in some jurisdictions, such as Canada and certain states within the US, has had varying degrees of success and has cast a shadow over many other jurisdictions where there exists some pressure to legalise.
Although producing adult use cannabis is still subject to production standards, it does not have the same rigour applied to it that occurs in many medicinal cannabis markets globally. This has already resulted in some poor practices and ‘unregulated legacy market’ products entering the regulated market, which, in turn, has led to serious negative consequences, including deaths, as was the case with counterfeit vaporiser liquid from China finding its way into the US market in 2019. Even more dangerous for medicinal cannabis producers is the potential for substandard adult use cannabis products to enter the medicinal cannabis market.
So, should medicinal cannabis producers entertain the notion of diversification into adult use cannabis, and if so, is it a sound investment decision? Firstly, diversifying into the adult use cannabis market at this point in time is entirely speculative, especially given the INCB’s stance on THC and prohibition on the use of THC containing products except as a registered medicine or under special access medicine schemes. Signatories to the UN Single Convention are generally loath to fall foul of this convention. To date only Canada and Uruguay federally legalised the production and sale of adult use cannabis, while Portugal has decriminalised all drugs of abuse and the Netherlands allows Amsterdam cafes to sell adult use cannabis products under strict conditions. In the US, adult use companies operate under state-based legislation in contravention of Federal US laws. In Australia, only the Australian Capital Territory has so far passed legislation to legalise adult use usage and possession, but still prohibits the commercial production or sale of adult use cannabis.
Jurisdictions such as Australia and the UK are several years away from considering the legality of adult use cannabis on a federal level, although regional differences mean that, in some areas, adult use cannabis usage has been largely decriminalised. While public support for adult use cannabis is growing, a federally mandated framework will require a complete mindset change on the part of government, and a sea-change in opinion at the UN, where such moves are heavily opposed by Security Council member nations like Russia, the US, China, the UK, and France, as well as the Philippines and most Middle Eastern member states. In many of these jurisdictions narcotic laws are some of the most repressive in the world, and the concept of harm-minimisation is considered anathema to the persistent ‘war on drugs’ mindset. Secondly, a move into adult use cannabis will effectively dilute the resources of a medicinal cannabis company that should be focused on research and development, as well as working towards and ensuring GMP standards are developed, implemented, and maintained. It may confuse regulators, the market, and consumers and cast doubt over their commitment to producing high-quality medicine.
Investing in adult use cannabis in jurisdictions where it is not yet fully legalised is a risky and uncertain proposition, and in some cases may be in contravention of the investor’s domestic laws. The cannabis market is in flux, which increases the risk. The adult use market is also susceptible to political and social forces far more than the medicinal market. With such strong views in the community, there is the potential for the process of legalisation of adult use cannabis to go on for many years. Further, involvement in the adult use sector may preclude entry, licensing or listing in other jurisdictions, as was recently confirmed when the UK clarified that the Proceeds of Crime Act (PoCA) would be used to determine if applicants to the London Stock Exchange could be approved for listing. The clarification means that any involvement by a company, directors, or major shareholders in the adult use cannabis sector, anywhere in the world, would prevent access to the UK’s enormous pool of investment capital.
Several large medicinal cannabis companies have had their dreams of listing on the London Stock Exchange smashed because of ownership of adult use assets in Canada or the US. Medicinal cannabis companies seeking to add some diversification to their portfolio would be better off examining the potential of other botanicals or pursuing a path of cannabis-based medicine product registration, rather than adult use cannabis. Functional Foods are a case in point.
Complementing medicinal cannabis with functional foods
Functional Foods offer a range of options for diversification and often call on the same skillset required to operate in the legal medicinal cannabis market. Many of the botanicals currently being used in aromatherapy and in skincare products can be formulated so that they are safe to be ingested but still potent enough to create an effect. They are, in effect, a functional food.
Functional foods provide health benefits that exceed their nutritional value. Conventional functional foods include oily fish, nuts, legumes, and hemp etc. Hemp foods made from hemp seed have gained wide appeal globally, and the CBD market has expanded rapidly in the UK. However, companies should not limit themselves to the traditionally related hemp sector and could gain real traction looking further afield into the fascinating pharmacopeia of botanical medicines. Essential oils extracted from botanicals also have the ability to be used as functional foods and provide additional benefits.
Edible essential oils are an example of this. These oils are not the same as essential oils that you might see used in aromatherapy. These Activated oils™ are designed to be ingested and rely on an ‘entourage effect’, where the total effect is greater than the sum of its parts. The entourage effect is often associated with medicinal cannabis, arising from the combination of cannabinoids with terpenes. In the case of Activated Oils™ it arises from a combination of the effects of active ingredients like terpenes (yes, other plants have terpenes too), sterols, flavonoids, and fatty acids. A small list of some of the more common botanicals being used are shown below with some of their potential benefits:
- Lavender has the potential to calm stress and anxiety. It contains terpenes such as linalool, β-ocimene, β-caryophyllene, and myrcene.
- Fennel oil contains polyphenol antioxidants which are beneficial for human health.
- Fennel oil contains the terpenes fenchone, limonene, and α-pinene.
- Clove oil has been found to contain antimicrobial, antibacterial and antifungal properties. It contains the terpenes eugenol and b-caryophyllene.
Changes to the CBD market in the UK
The decision to regulate standards in products containing CBD is a step in the right direction and will go a long way to rid the sector of substandard operators, however the system as it stands is cumbersome and prohibitively expensive. Hemp laws also prevent domestic cultivation of CBD producing crops, meaning UK farmers are denied the opportunity to benefit from this cash crop. Additionally, with unjustified delays in the Novel Foods registration process, the issue now becomes how long will registration take for high-quality products and how long will consumers have to wait for new products to enter the market? While it is wise to enforce standards, low dose CBD found in novel foods should not be confused with high dosage medicinal cannabis medicine.
We can again refer to the recently released TIGRR report. This report makes no mention of the novel foods sector and the CBD products found within it. Given that the CBD novel foods industry is already spending millions of pounds to conform to new regulations, there is a concern that all these efforts might have to be put aside if the TIGRR report is not clarified to exempt hemp products (both for industrial use and CBD derived for novel foods). Sadly, nothing in the report indicated a clear path for domestic cultivation or production of CBD novel foods, leaving the lucrative UK CBD market in the hands of importers.
Furthermore, CBD novel foods contain CBD levels that are not considered high enough to be therapeutically significant – hence their classification as a novel food rather than as medicines. Ideally, the UK would have three different categories that could be legislated individually: a special category for low dose CBD whole-plant hemp foods or extracts regulated by DEFRA; a category for medium dose CBD derived from nutraceutical CBD (under 300 mg) regulated by the FSA; and a category for registered or unregistered, higher-dose medicinal cannabis that contains CBD and/or THC and other cannabinoids, regulated by the Medicines and Healthcare products Regulatory Agency (MHRA).
With the raft of changes coming to the hemp, CBD, and medicinal cannabis markets around the world, it is important that companies have the skill and expertise within them to navigate and stay abreast of regulatory shifts. It is crucial that industry players make decisions based on evidence and regulatory realities, while keeping an eye on developing avenues for innovation and diversification, so that opportunities can be seized when they arise.
Towards a precision medicine model
For many patients, their experience with the healthcare sector is one in which they are diagnosed with a condition or disease and then prescribed medication which is often in the form of a tablet or capsule. These medications are used by thousands, and in some cases millions, of patients that are all different and yet we expect the same result for all of them. However, many patients become disillusioned by the traditional healthcare sector and try other avenues to get themselves better. This can involve seeing alternative professionals such as naturopaths, adopting major dietary and lifestyle changes through novel foods, or even resorting to unregulated legacy market supplies of cannabis.
The future of all medicine is in a ‘person-centred’ model of healthcare in which healthcare professionals work with individual patients to identify their specific needs and develop precision medicine solutions specifically for them. The days of prescribing the same tablet for hundreds of patients and expecting the same result is not sustainable in today’s current environment where patients demand to be treated as an individual and have their needs considered holistically. The modern patient, particularly the younger generation, want to know that they are being listened to and that their needs are being addressed.
The addition of functional foods, and the ability to alter the ratio of CBD:THC in medicinal cannabis brings us one step closer to person-centred medicine, employing such specific and precise medications for every individual, while also offering alternative options. This is already beginning to take shape with medicinal cannabis where dose titration of oil products is used by prescriber and patient to identify the optimal dosage.
Other options for medicinal cannabis suppliers
With adult use cannabis remaining a risky business proposition, what are the options for medicinal cannabis producers seeking to diversify their business interests? As mentioned, complementary botanical products such as functional foods provide an opportunity to enter the market with products requiring less stringent regulations than medicinal cannabis. Hemp-based products are one such example. Products containing hemp seeds are becoming more common within health food stores, as well as some pharmacies. The opportunity is there for other botanicals to enter this market and remains a viable option. This should be supported by jurisdictions with incentives for further research and development so that high-quality products find their way to the shelves, not poorly produced products that have little nutritional value to the individual. Once a reasonable evidence base has been established, more organisations will look at the developing opportunities in the functional foods market.
Opportunities in developing novel dose forms also exist, although these will need strong data behind them to support their use. On the back of research in the medicinal cannabis market, and elsewhere in medicine development, medicinal cannabis companies can differentiate themselves by exploring novel dose forms and formulations, influencing the efficacy and convenience of cannabis medicines. This will become even more important in the future when doctors will preference precision doses of medications to treat specific conditions. Those who develop new technologies that make it easy to deliver precise concentrations of cannabinoid based medicines, in combination with specific botanical extracts, may be rewarded handsomely.
Lastly, the non-therapeutic use of hemp, industrial hemp, is another area that cannot be discounted as a potential area for diversification, particularly for cultivators. If industrial hemp were to be regulated as any other crop used for industrial purposes it could provide a much-needed revenue base for companies during their heavy research and development phase for medicinal cannabis products. The farming industry, particularly in countries such as the UK and Australia needs new high value cash crops to diversify from commoditised primary products, while governments are looking for new sources of tax revenue and export income. Removing the need for hemp licensing in Australia, the UK, and Europe for the production of non-therapeutic hemp crops would provide a signal to support investment in processing infrastructure and increase the volume of hemp biomass and value-added outputs.
The uses for industrial hemp are endless, which means that there will always be available markets for this crop. Opportunities exist for its use from fashionable garments to composite building materials, particularly building insulation in the UK. Hemp has excellent thermal properties and provides the opportunity for carbon sequestration, land regeneration, and development of a carbon credit market. A further selling point for establishing industrial hemp crops are their ability to use less water and resources than other plants such as cotton, the latter of which is used in one third of all textiles globally.
The future of the medicinal cannabis market
Patients are looking for solutions tailored for them and the outcomes they desire, which may include complementary therapies to medicinal cannabis or novel dose forms. As a result, the medicinal cannabis market has grown and is showing more depth, with a greater range of products, including new methods of administration. Patient demand for quality, consistency, precision, and personalisation will continue to shape the market with only the strongest and most useful products surviving in the long run.
The uncertainty around adult use cannabis in a lot of jurisdictions serves as more of a distraction than a potential area of commercial opportunity for the foreseeable future. Branching out into other products and formulations, including natural botanicals and novel dose forms, is a more useful way to diversify and potentially provides a complementary therapy to medicinal cannabis. Again, this will require a concerted effort from companies and governments alike to put more time and resources into research and development to understand the potential of botanicals as stand-alone products or complementary to medicinal cannabis.
Although some companies have initiated research and development, the industry needs to invest in new formulations and dose forms now so that the sector can continue to evolve and provide useful solutions to patients and prescribers.
The medicinal cannabis industry must continue to demand the highest of standards from all market participants. We need to ensure GMP standards become the norm for the sector and that unscrupulous producers are drummed out of the industry. All products should be dispensed with the knowledge that no shortcuts have been taken and the integrity of the products is beyond reproach. Long term, non-GMP production is not only unwanted but is not acceptable for the medicinal cannabis industry, however GMP transition periods will be required so that patients are not left without viable medicine.
To achieve high standards there must also be greater certainty in the sector that legislation is unlikely to change often and is clear in its intentions. This means clearly demarcating hemp-based products from high dosage medicinal cannabis and allowing a third category of low dosage nutraceutical CBD products, if possible. This would provide the assurance that the industry has been looking for and give them confidence to develop their products and propel innovation.
Finally, the opportunity for some companies to take advantage of the cheaper growing costs and available markets for industrial hemp could be a boon for those in the medicinal cannabis sector without revenue during research and development phases.
Additionally, the industrial use of hemp should not be regulated through the same legal instruments that regulate cannabis as a medicine. Hemp plants with negligible levels of THC and bound for industrial or food use should be governed by relevant agricultural bodies.
At LeafCann we see some great opportunities for extending operations into the UK, especially considering the similarities between Australian and UK regulatory environments. The functional food market has a large support base and is a market worth entering. We have a real commitment to raise standards across the sector and work with producers and other supply chain participants to transition to GMP certification. We see this as an important step in the right direction. If more producers work to GMP standards and refuse to work with those that will not, the market will begin to see the elimination of unwanted products from store shelves and pharmacy. Increased patient access to high-quality product and future clinical trial success depends upon it. It is important that transitions are staged sensibly so that domestic production can grow to support patient demand, as it is crucial that patients have the security of ongoing, affordable supply.
- After a vote, it was recommended that cannabis used for medicinal purposes be removed from the same register containing known dangerous drugs. Although the United Nations rejected a proposal (which included the UK) to exempt CBD preparations with less than 0.2% THC from international control, there is hope that these preparations will eventually be removed.
- The Australian Government recently legislated that low dosage CBD under 300mg can now be purchased over the counter, as long as the product is registered with the TGA. No products are currently registered but expected in the next 12 months. Novel foods containing CBD are not permitted in Australia.