European cannabis first mover now has a clear line of sight to a London Stock

The $7.2bn takeover of GW Pharma has defined what success looks like for cannabis companies on this side of the Atlantic.

GW’s Home Office licence award, allowing it to grow commercial quantities of high-THC cannabis, coupled with a scientific breakthrough created a blockbuster drug for epilepsy, which ultimately resulted in significant returns for long-term investors.

That a UK company can sensibly, methodically and profitably carve out a niche in medicinal cannabis provides inspiration for the next generation of entrepreneurs looking to build new medical or pharmaceutical businesses.

Two things have happened to change the landscape for would-be growers, retailers and the end-user here in Britain. They are legislation and financial regulation.

The drug was finally legalised for medical purposes in 2018, and specialist doctors are learning to become more familiar in writing cannabis prescriptions for some of the 1.4 million people in the UK that consume cannabis on a weekly basis to help alleviate a wide range of ailments.

FCA green light

However, it took until September last year for the Financial Conduct Authority to catch up with the change in sentiment.

The City watchdog decreed that UK-based medicinal cannabis companies could list their shares publicly – partially clearing up a grey area around the Proceeds of Crime Act.

As a result, the logjam of businesses waiting to float on the London Stock Exchange has begun to break.

is one of those companies that now have a clear path to the market and is on a pre-IPO fundraising round from which it hopes to bring in £5mln.

The cash will be used for continued capital investment in facility expansion as well as ongoing working capital costs. The intention is to float the business on the LSE later this year.

Analysts see the European market developing in a more regimented and organised way than North America, which is complicated in extremis by the addition of recreational use of cannabis to the mix.

Not helping this already dysfunctional market is federal illegality of the drug in the US (despite the almost wholesale legalisation at the state level).

And adding to the sense of confusion is the role of the Canadian equity markets in funding growers and retailers.

Of course, the wild west-style green gold rush has gone from boom to bust on the other side of the Atlantic.

Europe is the focus

Luckily, ’s target markets are on this side of the Pond. It wants to plant its flag in the UK, Germany (the continent’s most advanced medical cannabis market), Italy, Spain, Portugal and Denmark.

It currently has 75,000 square feet of growing capacity under glass on the island of Jersey with the ability to expand to 636,000 square-feet across its two sites.

The plan is to develop as a low-cost grower, wholesaler and distributor of traditional flower before building a vertically integrated operation.

Northern Leaf’s strategy is then to move into extraction, formulation, manufacturing and branded products.

It has overcome a significant barrier to entry by landing only the second ever Home Office-sanctioned THC licence (the first was granted to GW 22 years ago).

Meanwhile, the award of EU good manufacturing practice (GMP) accreditation by the medicines regulator will provide another competitive advantage.

The location, Jersey, where it has the island’s only commercial cannabis licence, has a number of commercial upsides.

Among them are the existing agriculture industry, proximity to the UK and European markets and the climate.

Low-cost operator

Northern Leaf expects to be one of the lowest-cost operators in the world because of the Goldilocks weather conditions of the British Crown Dependency, which receives over 2,400 hours of sunshine a year.

It should be noted the company has carried out several dry runs for cultivation through 2020 by growing hemp from which CBD can be extracted.

The half-cousin of weed, hemp lacks the psychoactive chemical…