Germany's government created quite a buzz when it announced that recreational cannabis would be legalized during the current term. Does this mean that adults will be allowed to use cannabis for recreational purposes in Europe? It's too early to say.
The regulatory and functional landscape in Europe is the same as it is in North America, after interviewing several active investors in cannabis-related startups. The black market is a competitive factor. According to Europol, the EU has 9 billion dollars spent on cannabis each year.
Medical cannabis is still the leader in the legal market, and it is only getting better. The number of unlicensed medical cannabis sold in Europe is expected to rise to over 300 million by the year 2022, according to the market intelligence firm.
Investments and M&A in the sector are being spurred by Germany's promised legislation.
Our belief is that M&A will be front of mind for legal cannabis operators. In Europe, there is an opportunity for non-cannabis players to potentially get strategic and attempt to enter the market through an integration of cannabis as a consumer packaged good or pharmaceutical-grade option.
The fact that medical cannabis isn't banned at a federal level across the EU is positive for producers and operators.
If you have an export/import license, you can produce cannabis in Portugal and sell it to any EU country. David Bonnier said that companies can scale quickly if they know what they are doing.
We spoke with someone.
What are the biggest challenges facing Europe's cannabis industry right now?
Europe is mostly a medical market. Medical cannabis in Europe is regulated as a medicine and falls under EU and national pharmaceutical regulatory systems.
Medical cannabis production and distribution standards are high. European doctors are more conservative and evidence-based. It takes time to build the necessary infrastructure in order to get stakeholder buy-in.
Key challenges include lack of education and buy-in from industry stakeholders such as physicians, research institutes, insurance companies, politicians, etc.
Since cannabis companies have to operate under pharmaceutical regulatory systems in Europe, we are seeing material accumulation of high-quality patient data.
While valuations are trending up, Germany’s exciting market developments still require business leaders to perform and scale. Viken Douzdjian, managing partner, Argonautic Ventures
In Europe, doctors can only prescribe a finished product to patients, unlike the U.S., where you only need a medical card. Valuable patient data points can be used in real-world evidence studies if patients follow up with their doctors several times.
Europe will most likely become a key leader on the research front for medical cannabis, which will help lift the evidence base and general acceptance.
What are the issues that inform your advice to your cannabis-related portfolio companies?
Companies that know how to navigate the European regulatory landscape are our focus.
We like the downstream part of the value chain, which has been underserved so far, including distribution companies, specialized clinics platforms, research and development centers, and companies that are accumulating patient data, which we believe will become very valuable over time. We like ancillary businesses as well.
Legislation in Europe is not the same as in the U.S. Are these similar to you?
There are some key differences. Legislation in Europe is moving at a faster pace than it did in North America, which paved the way for medical cannabis in California and adult use in Colorado and Washington.
The legalization of medical cannabis in the Netherlands in 2003 was the first in Europe, but it wasn't the end of the legalization wave. More than 400 million Europeans have legal access to medical cannabis, which is more than in the U.S.
Europe does not suffer from federal prohibition of medical cannabis.
If you have an export/import license, you can produce cannabis in Portugal and sell it to any EU country. Companies can scale quickly if they know what they are doing, because cross-border commerce in Europe is relatively fluid.
Which sector has the most promise for growth in Europe this year? Is the popularity ofCannabidiol products making investors more comfortable with recreational use?
There is a lot of interest in the use of cannabis by adults, but it is a non-existent market. The Netherlands is running a pilot program for legal production, which was previously illegal, as well as Switzerland and a few other countries that have legalized home-grown cannabis for personal use.
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