24 January 2020

Why Cannabis Is a Risk Worth Taking for Big Pharma.

By Jack Shute

In 2018 everyone wanted to talk about medicinal cannabis, but last year the global market suffered a setback seeing major M&As fall through.

While there wasn’t any rapid sales growth in 2019, opportunity is still rife in medicinal cannabis. Billions of dollars have been pumped into the market. It’s popular with patients. The public’s perceptions are changing (for the better) and competition is minimal... for now.

Cannabis has been used in medicine for over 6,000 years. Multiple studies suggest its cannabidiol’s (CBD) therapeutic properties can treat various health conditions including epilepsy, schizophrenia, multiple sclerosis, migraines, arthritis, cancer side effects and more.

Its potential for pain management has even led experts to recommend it as an alternative to addictive opioid painkillers.

It’s time for Big Pharma to step in.

Last year’s opioid crisis was a nightmare for pharmaceuticals across the globe. You couldn’t move for high-profile court cases like Johnson & Johnson’s which resulted in a $572m fine. This has since been reduced to $465m.

Entering the medicinal cannabis market would help repair damaged reputations, offering a safer option.

While a move into a safe alternative market would be popular, there’s more reason for Big Pharma to enter medicinal cannabis than public relations. It’s estimated that the medicinal cannabis market could poach more than $4bn worth of pharma sales each year - should it reach its potential.

Back in 2018, this was enough to tempt some multinationals into the market. That year UK company GW Pharmaceuticals brought to market the first FDA-approved cannabinoid, Epidiolex. From this, GW have experienced a major US expansion. This is now where most of their shares are held and traded.

Thanks to a flurry of legalisations in the US (recreational use is now legalised in 13 states, plus Washington, D.C.) and full legalisation in Canada, North America possesses the major geographic market share. US giants like Abbvie, Merck, Bristol-Myers Squibb and Pfizer have all entered the frame, taking out multiple patents on cannabinoids.

These patents prove that there’s interest from Big Pharma, but there’s apprehension too. No-one is keen to make a big move. That’s especially after the first major deal in cannabis between MedMen Enterprises and PharmaCann went up in smoke last year. This cost both companies: MedMen were forced to forgive a $21m line of credit and PharmaCann surrendered a handful of licenses and assets in return.

While knowledge about the benefits of medicinal cannabis is out there, evidence is now crucial for upward trajectory. GW are going someway to support this, having registered over 40 clinical trials on cannabinoids.

The evidence is building and leading to approvals in healthcare. In November 2019 the UK’s NHS approved its first two cannabis-based medicines for use. This was a major milestone for the nation’s healthcare system.

These approvals are helping change perceptions about the treatment. This is highlighted by an increase in the sales of consumer products. It’s estimated that 1.3m UK consumers spend £300m a year on cannabidiol (CBD) products. Similar uptake is being seen around the rest of Europe and in North America too.

Globally, consumers and healthcare organisations are ready for a boom in medicinal cannabis. But the market needs backing. It needs Big Pharma. The entrance of these behemoths will radically transform the cannabis industry with their resources leading to improved R&D, more clinical trials and a stable market.

While there’s challenges to overcome and previous failed M&As serve as a welcome reminder of the market’s fragility, this is risk worth taking. Medicinal cannabis presents a game-changing source of growth that can’t be ignored anymore.

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By Jack Shute

Jack Shute is an Associate Director and was a founding member of CM Life Science. In his 7 years with the business he has worked across a range of pharmaceutical markets. Today he manages a team of life science research and pharmaceutical specialists with a global reach.

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