Bryan, Garnier & Co investing in cannabis: driving growth in Europe

Medical Cannabis Network speaks to Dominic Wilson at Bryan, Garnier & Co, Europe’s leading investment bank for fast-growth health and technology companies, about the future of investment in cannabis.

As cannabis receives legal approval in a growing number of countries, the financial and economic profile of the cannabis industry is on the rise. Medical Cannabis Network speaks to Dominic Wilson, Managing Director of UK Equity Sales Healthcare at Bryan, Garnier & Co, Europe’s leading investment bank for fast-growth health and technology companies, about the future of investment in cannabis.

How would you describe the current business ecosystem in terms of investment in medical cannabis?

For the cannabis sector as a whole we have companies operating in recreational; recreational and medicinal or wellness; medicinal; and then we have pure medical, which involves the formal Phase 1, 2, and 3 clinical trial process. There is a lot of interchangeable terminology within the industry. To my mind, there are clear differences between medicinal and medical cannabis.

To get products that are clinically proven and can therefore be described as medical, you have to go through clinical trials. To date, GW Pharma is the only company to have done that. Over a long period, they have run rigorous clinical trials and got FDA regulatory approval for their cannabis products. There are other companies growing and marketing cannabis both for recreational use and for medicinal benefits; but these are products that have medicinal or wellness benefits but are not yet clinically approved, because they haven’t gone through that rigorous trial process.

The ecosystem has this whole range of companies. At one end you’ve got large organisations such as Canopy Growth, growing and selling into the recreational market; and at the other, you’ve got companies that are growing products, selling into recreational sectors – but also targeting the medicinal end of the market. That group includes, for example, Flowr, Khiron, Tilray, Aurora: they are selling products from a recreational point of view, but also trying to promote the medicinal angle.

How can the investment banking sector support growth and innovation in the medical cannabis industry?

The investment banking sector has supported the industry and continues to do so, by providing corporate advice and raising funds to enable businesses to grow. In order to do that ethically, investment banks will want to raise money for companies with good management teams, good strategic vision and a clear business plan; both private companies and those in the public sector. That’s where we come in: we introduce companies to investors.

For early-stage businesses, these may be venture capital investors, family offices, and specialist funds; there are a number of investors who are known as specialists. And then as businesses’ credibility gathers momentum, which has certainly been the case in Canada where cannabis has been legalised, mainstream institutions – both generalists and medical specialists – have got involved. There are generalist funds that can invest across all sectors and in both recreationally and medically oriented cannabis companies as well as a combination of the two; and then there are specialist medical funds, which would be unable to invest in any companies that are operating in the recreational space.

The medical cannabis company that’s been around for a long time is GW Pharma, which was originally listed in London then got a listing in the US. That was on the basis that it has a clinically proven medical product in Sativex for spasticity in MS patients, and in Epidiolex, which targets Dravet syndrome epilepsy, where children have fits multiple times a day. I haven’t come across many quoted companies operating in the purely medical space, but one that springs to mind is a Canadian company called Cardiol, which is quoted on the Toronto Stock Exchange. The business has a clear strategy targeting the use of cannabis in the treatment of acute myocarditis and heart failure.

Which business types are likely to remain profitable as medical cannabis becomes more commercially accepted and more widely legalised?

Apart from having a good strategy and good management, it’s about the extraction and purity of products, knowing exactly what the constituents are in the product that you’re selling. If you’re going to go down the clinical trial route, which costs a lot of money, you need to have IP coverage, in the form of patents. It’s very difficult for anyone to try and patent cannabis, but you might be able to patent a formulation or a process of extraction or handling – various techniques that will give you protection over your product.

One of the things you can also do is go down the orphan drug route. If the patient population is less than 200,000 in the US, you could get orphan status from the FDA in your clinical trial process, which gives you seven years’ market exclusivity. If you can show your purity and demonstrate that your product is the only one approved for the indication, you can then command better margins; clearly, that’s what GW Pharma has managed to do.

In the example of Cardiol, if they get their clinical trial up and running in acute myocarditis, where the target patient population is 73,000 patients, then can get exclusivity on the basis of orphan status and then no one can compete against them.

The Cardiol strategy is this: they launched a product in 2019 called Cardiol RX, which is targeting the $1.2bn CBD market to bring in initial revenues; followed by the orphan drug programme for myocarditis for which they plan to initiate clinical trials. Obviously, in these trials, they will have to make the endpoints. This is applicable for anybody conducting clinical trials.

Additionally, companies need to know that their product is going to be pure, that it is GMP (good manufacturing practice) certified; that they can repeat the dosing and the batches are consistent; and if it is a CBD product, that it’s THC-free.

I believe in the medical space; successful companies will be growing cannabis inside, under strictly controlled environments with a specific strain and with knowledge of the active profile and constituents. So, indoor cultivation with carefully controlled temperature, light and nutrient conditions is probably the way to get the purest product. The next stage would be growing in polytunnels; and then the next stage down is growing out in the open, where you’re going to get greater variations because of the elements – sun, rain, wind. In the medical space, those who are growing under controlled conditions are going to have the greatest ability to produce a pure product with a known profile that a doctor would be prepared to prescribe.

The regulatory environment in Europe is changing quite rapidly. Germany is the furthest ahead, the UK gave approval for medical cannabis last year and local regulator NICE (National Institute for Healthcare Excellence) approved reimbursement by the NHS in November 2019. Last year, we believe between 200 and 250 prescriptions were written in the UK. As the market opens up, we expect a rapid expansion in prescriptions written.

At the moment, prescriptions can only be written for cannabis under the guidance of a specialist. This scenario is moving to having GPs with a special interest in a disease writing the prescriptions: so, a GP has a patient who has already been prescribed cannabis by a specialist, say for MS spasticity, the GP with a specialist interest could then fill the repeat prescriptions – though the patient would have to stay under the care of the specialist.

In an increasingly crowded commercial field, how can companies ensure they stand out and stay relevant?

I think it’s going to be about quality and branding – but that’s always been the case in any industry. If a product is approved and provides relief, then I believe doctors will continue to prescribe it for their patients. That comes back to the strategy of good management: have you got the right distribution channels? Are you in the right place so that when the prescription gets written, you can provide medical cannabis? The same applies in the recreational space: good brands, high quality. If you have a high-quality product at the premium end of the market, then recreational users are prepared to pay a premium price for a premium product.

What future commercial and regulatory developments do you foresee for cannabis and its derivatives?

Elsewhere in Europe, we’re going to see more countries opening up; and I think the move to ever-increasingly pure product is going to continue. There is also potential further down the line that synthetic cannabinoids will come to the fore. If you can chemically synthesise a particular cannabinoid, you know that it is the only constituent. So, if you’re producing CBD, you want to be certain that it’s pure CBD and there’s no THC, and vice versa.

There’s a company in Belgium called Cannovex that is working in the area of developing synthetic products: they’re going to have to do the pre-clinical testing, and then Phase 1 testing on healthy volunteers; and then they will test the products for efficacy and dosing. Ultimately there will be a need for Phase 3 large scale multi-centre studies to gain authorisation. These things take time. GW Pharma has been down that path, and it took a long time. Other companies coming through with new products should know where the hurdles are when constructing trials.

Dominic Wilson
Managing Director, UK Equity Sales, Healthcare
Bryan, Garnier & Co
+44 (0)207 332 2500 
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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.