Home Editor's Pick Carl Esprey of Botanical Holdings looks at 2021 medicinal cannabis investment prospects

Carl Esprey of Botanical Holdings looks at 2021 medicinal cannabis investment prospects

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Carl Esprey is CEO of Botanical Holdings looks at the medicinal cannabis investment prospects in 2021.

What does the cannabis industry have in store over the next year? And how does this impact medicinal cannabis investment strategies?

From the impact of COVID-19 and the changes Brexit has made, to the fast- developing legislation in the Americas, there are many factors playing into the market’s development.

How has medicinal cannabis investment been impacted by COVID-19?

I’ll start with the impact of COVID-19 on the medicinal cannabis market. While we all hoped to leave the pandemic behind in 2020, it is still front and centre in most countries around the world.

And of course, the pandemic has had a profound impact on the global economy. Lockdowns, job losses, economic uncertainty and whole sectors in hiatus has led to many businesses downsizing in some way. From dropping the burden of office rent to making some of the workforce redundant, downsizing measures are necessary for many businesses to survive. This has affected the cannabis industry in exact the same way, with medicinal cannabis producers re-evaluating their strategies.

Many countries are looking for ways to help them recover financially from the worst impact of the pandemic. This leads to them looking for new taxable revenue sources, and medicinal cannabis can offer this. The potential of medicinal cannabis in treatments for COVID-19 is also being researched.

At least 16 groups of researchers are researching the use of cannabinoids as treatments for the symptoms of COVID-19. This is effectively boosting overall medicinal cannabis research and is something that provides enormous opportunity for investors in this space.

A new US administration will expand medicinal cannabis market

The US election results in November 2020 will change the cannabis debate too. Not only did President Joe Biden and Vice President Kamala Harris win, but cannabis legalisation was passed in five states. Both of the new leaders have said that they have an interest in reforming federal cannabis laws during their term.

For example, President Biden wants to decriminalise the use of cannabis and move it to a Schedule II classification. While VP Harris is more progressive and wants to remove the drug from the Controlled Substances Act entirely. When the Democrats also won Georgia in January 2021, the Republicans lost their hold over the Senate. This will likely lead to progressive legislation regarding both medicinal and recreational cannabis use.

EU member states begin to legitimise CBD products

In Europe, it’s likely that EU member states will follow the verdict from the European Court of Justice on CBD products, and register it as legitimate in various industries. This follows the UN voting to reschedule cannabis across all its uses as a less dangerous product.

All of this coincides with the rollout of the GW Pharma medicinal CBD product, Epidiolex. As the product will be both an over-the-counter wellness product and a pharmaceutical product, it’s not yet clear exactly how regulation will work. But the CBD industry in Europe is set to boom either way in 2021.

The European medicinal cannabis market is growing all the time in a bid to meet demand. Previously, Canada and the Netherlands were the main exporters, but in 2020 they have been joined by the likes of Portugal as major suppliers. Smaller success stories in growing and exporting cannabis can be seen from Israel, Spain and Australia.

Throughout this year, I think that Spanish exports in particular will increase, and from countries like Colombia and Israel if they can meet EU production and trade standards.

The market for dronabinol is also growing fast in Europe. This compound contains cannabinoids and standardised concentrations of THC. It’s used to treat vomiting and nausea in people suffering from side effects of chemotherapy and by people with AIDS to combat loss of appetite.

In 2020, a number of suppliers entered the market, including Cantourage, Breath of Life Pharma and Echo Pharmaceuticals. All of this competition will lower prices within the European market and change its dynamic.

Brexit may change the way the UK trades

The cannabis industry is also hoping that Brexit will mean an easier trading environment in the UK. While medicinal cannabis is notoriously difficult to get hold of, the UK’s Food Standards Agency have classified CBD as a novel food.

This effectively gave CBD companies in the UK a head-start on EU companies ad is behind the success of UK companies like GW Pharma. And while there is now an opportunity for the UK to forge its own path towards medicinal cannabis regulation, it’s not yet clear whether it will.

However, its CBD market is already strong and it may be that we see fewer restrictions on medicinal cannabis trade deals between growers in the Americas and the UK. We can certainly expect to see more medicinal cannabis companies drive the industry forward this year.

Diversification or medicinal cannabis products

Following the gradual legalisation of medicinal cannabis, research on other minor cannabinoids is on the rise. Most of the research has focused solely on CBD and THC, but there are more than 120 cannabinoids and 150 terpenes (aromatic compounds) in cannabis.

The search is on for any medicinal or therapeutic properties from these lesser-known cannabinoids, such as CBG (cannabigerol) and CBN (cannabinol). So far there is evidence to suggest that CBN contains properties that could be relevant as an anti-convulsant, antibiotic, to fight cancer, as a sedative or pain reliever. CBG is thought to have antimicrobial, antibiotic and anti-inflammatory properties.

As research on these minor cannabinoids ramp up, it’s likely that CBD brands will begin to include them in their portfolios. Product innovation and differentiation is highly important for any developing market sector and will bring in more investor interest.

A global shift towards legalisation of medicinal cannabis

Many countries outside of Europe and North America are moving towards legalisation of medicinal cannabis, and in some cases recreational cannabis. The impact of COVID-19 on tourism in many key areas has led to governments considering legalising cannabis to boost the sector and stimulate the economy. For example, the Barbadian Government is considering legalising cannabis as part of an overall recovery plan for the country.

More African countries, including Ghana, Zambia, Malawi and Zimbabwe, are now cultivating medicinal cannabis. Profits have been good so far, so we will likely see more African countries beginning to develop similar cannabis industries throughout the year.

For a number of reasons, the overall cannabis industry has endless momentum right now. This means more investment opportunities across both medicinal cannabis and recreational cannabis use. It’s particularly exciting to see that there is so much innovation in this burgeoning industry and that there is so much more potential for investors and consumers.

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