Cannabis is a commodity that is in high demand across the world. There are many different types of products that cannabis can be used for, which leads to low profit margins when they are sold wholesale. Much like how other industries have diversified due to increased competition and an ever-increasing market cap, there may be opportunities ahead for cannabis companies who want to take their business model in another direction..
The cannabis industry is growing with legal pot sales in Canada expected to reach nearly $5 billion by 2020. There are essentially two types of companies: the “diversification” model and the “specialization” model. The former invest in many different brands throughout a wide range of industries, while the latter focus solely on marijuana products for their own market share.
The “how to start a clone nursery” is the business model that many cannabis growers are using. It’s an effective way to diversify your income, but it can also be limiting.
LeafCann, a medical cannabis expert, talks about the present state of the global medical cannabis industry and what the future holds.
The emergence of medical marijuana
The worldwide market for medical cannabis is expanding. Despite a few regulatory stumbling blocks, the industry is now experiencing the rising trend that has been predicted for years. However, the growing acceptability of medical cannabis inevitably creates the specter of adult-use cannabis legalization, which in turn sparks discussions among investors about future possibilities for businesses currently operating in the field.
Medicinal cannabis businesses who are currently manufacturing high-quality medication under GMP guidelines are aware of the stringent requirements that must be met in order to create a high-quality product. They realize that if you want to make a medication that patients and prescribers can trust to give relief, you can’t cut shortcuts. They also realize that it doesn’t take much for the public to lose faith in the industry when they hear tales about bad procedures resulting in substandard goods, as well as recent cases when customers discovered pollutants, forcing recalls.
As a result, individuals in the medical cannabis industry may be enticed to diversify into other sectors, such as adult use cannabis, where the circumstances are allegedly less stringent and revenues are presumably simpler to come by. Although appealing, the adult usage market may not be the best option for individuals seeking to broaden their horizons. Indeed, people in the industry may adapt their existing methods to other botanicals and take advantage of the possibilities that other plants may offer. Many other plants, like cannabis, have been utilized for medical reasons for thousands of years.
Cannabidiol is already being used in conjunction with some botanicals in the novel food sector. However, recent well-documented decisions to make registration of novel foods in the UK mandatory has seen companies rushing to create expensive novel food safety dossiers just to keep their products on the shelf until they can be registered.
The Taskforce on Innovation, Growth, and Regulatory Reform (TIGRR) report has thrown the UK innovative food industry into disarray. “Regulation of medical cannabinoids and medicinal CBD should be transferred from the Home Office to the Department of Health and Social Care (DHSC) and the Medicines and Healthcare Products Regulatory Agency (MHRA) to create a regulatory pathway for assessment and approval based on patient benefit,” the report recommends.
Many in the business would like a clear separation between the treatment of industrial hemp, cannabidiol, and medical cannabis. After the World Health Organization (WHO) issued suggestions to alter the illegal status of cannabis and its components since they caused minimal damage, the United Nations’ International Narcotics Control Board (INCB) debated this extensively.1
This advice will take time to filter down to nation states. For example, in Australia, industrial hemp and hemp seed are regulated by state licenses and local government standards, while medicinal cannabis, including CBD, is regulated by the Department of Health’s Therapeutic Goods Administration, Office of Drug Control.2 In the United Kingdom, all aspects of the cannabis plant, whether industrial hemp, medicinal cannabis, or CBD, are regulated at the state and federal levels. The sole exception is Product Standard cannabidiol (CBD), which is being regulated as a new food by the Food Standards Agency. In the midst of the chaos, farmers, manufacturers, merchants, and consumers need certainty. Separating cannabis applications for adult and non-adult use would assist all stakeholders avoid misunderstanding, disinformation, and stigma.
Many in the UK industry, for example, want hemp and all of its applications, including as a construction tool (industrial hemp) and a food (hemp seed products and cannabidiol food standards products), to be governed by DEFRA, and Cannabis Based Prescription Medicines (CBPMs) to be managed by the Department of Health and Social Care (DHSC). Others would like to see a totally new body devoted to all elements of hemp, food-grade CBD, and medicinal cannabis, with specialized competence in order to create evidence-based laws. Until these issues are resolved in the UK and clear, evidence-based regulations are implemented, investment will gravitate toward the importation and distribution end of the industry, rather than incremental development of domestic medicinal cannabis production, which would be a huge missed opportunity for the UK economy.
Adult-use cannabis: is it a worthwhile investment or a waste of time?
The legalization of cannabis for adult use in certain jurisdictions, such as Canada and some states in the United States, has met with varied degrees of success, casting a shadow over many other countries where legalization is under consideration.
Although adult-use cannabis is still subject to manufacturing regulations, it does not get the same level of scrutiny as medical cannabis markets throughout the world. As was the case with counterfeit vaporizer liquid from China making its way into the US market in 2019, this has already resulted in certain bad practices and ‘unregulated legacy market’ goods entering the regulated market, resulting in severe negative effects, including fatalities. Even more hazardous for medical cannabis growers is the possibility that low-quality adult-use cannabis products may infiltrate the market.
So, should medical cannabis manufacturers consider expanding into adult-use cannabis, and if so, is it a wise financial decision? To begin with, expanding into the adult-use cannabis market is completely speculative at this time, particularly given the INCB’s position on THC, which prohibits the use of THC-containing products unless they are certified medicines or under special access medication programs. Signatories to the United Nations Single Convention are usually wary of violating it. Only Canada and Uruguay have legalized the manufacture and sale of adult-use cannabis on a federal level, while Portugal has decriminalized all drugs of abuse and the Netherlands permits adult-use cannabis products to be sold in Amsterdam cafes under tight restrictions. Adult use businesses in the United States operate under state-based legislation, which is in violation of federal laws. Only the Australian Capital Territory has enacted laws to legalize adult use cannabis use and possession, but commercial production and sale of adult use cannabis remains illegal.
Adult use cannabis use is substantially decriminalized in certain regions of Australia and the United Kingdom, which are still many years away from contemplating its legality on a federal level. While public support for adult-use cannabis is growing, a federally mandated framework will require a complete shift in government mindset, as well as a shift in UN opinion, where such moves are strongly opposed by Security Council members such as Russia, the United States, China, the United Kingdom, and France, as well as the Philippines and most Middle Eastern member states. The idea of damage minimization is considered anathema to the ongoing ‘war on drugs’ mentality in many of these countries, where narcotic laws are among the most restrictive in the world. Second, expanding into adult-use cannabis would dilute the resources available to a medical cannabis business, which should be focused on research and development, as well as developing, implementing, and maintaining GMP standards. It has the potential to perplex authorities, the market, and customers, as well as cast doubt on their commitment to providing high-quality medication.
Investing in adult-use cannabis in countries where it is not yet completely legal is a hazardous and unpredictable business, and it may be against the investor’s domestic laws in certain instances. The cannabis industry is in a state of upheaval, which raises the stakes. In contrast to the medical market, the adult use market is much more vulnerable to political and societal pressures. With such strong opinions in the community, the process of legalizing adult-use cannabis has the potential to go on for years. Furthermore, involvement in the adult use sector may preclude entry, licensing, or listing in other jurisdictions, as the United Kingdom recently confirmed when it announced that the Proceeds of Crime Act (PoCA) would be used to determine whether applicants to the London Stock Exchange would be approved for listing. Any engagement by a business, directors, or significant shareholders in the adult use cannabis industry, wherever in the globe, would restrict access to the UK’s vast pool of investment money, according to the clarification.
Because of their ownership of adult-use assets in Canada or the United States, many major medical cannabis businesses have had their hopes of listing on the London Stock Exchange dashed. Instead of adult use cannabis, medicinal cannabis businesses looking to diversify their portfolio could look into the possibilities of other botanicals or pursue a route of cannabis-based medical product registration. A good example is functional foods.
Using medical cannabis in conjunction with functional meals
Functional foods provide a variety of diversification choices, and they often need the same expertise as the legal medical cannabis industry. Many of the botanicals used in aromatherapy and beauty products may be designed to be safe to consume while yet having enough potency to have an impact. They are, in fact, a meal that serves a purpose.
The health advantages of functional meals far outweigh their nutritional worth. Oily fish, nuts, beans, hemp, and other traditional functional foods are examples. Hemp foods produced from hemp seed have acquired widespread popularity throughout the world, and the CBD industry in the United Kingdom has grown fast. Companies should not, however, restrict themselves to the conventionally linked hemp industry; instead, they may find genuine success by branching out into the intriguing pharmacopeia of plant remedies. Essential oils derived from botanicals may also be utilized as functional meals with added health advantages.
Essential oils that are edible are one example of this. These oils are not to be confused with essential oils used in aromatherapy. These Activated oilsTM are swallowed and depend on the so-called “entourage effect,” in which the overall impact is larger than the sum of its parts. The entourage effect, which is caused by the interaction of cannabinoids and terpenes, is often linked with medical cannabis. It comes from a mix of active components including terpenes (yes, other plants have terpenes), sterols, flavonoids, and fatty acids in the case of Activated OilsTM. Below is a short list of some of the most often utilized botanicals, along with some of their possible benefits:
Lavender has the ability to relieve anxiety and tension. Linalool, -ocimene, -caryophyllene, and myrcene are among the terpenes found in it.
Polyphenol antioxidants found in fennel oil are helpful to human health.
The terpenes fenchone, limonene, and -pinene are found in fennel oil.
Clove oil contains antimicrobial, antibacterial, and antifungal effects, according to studies. The terpenes eugenol and b-caryophyllene are found in it.
The CBD market in the United Kingdom has changed.
The decision to regulate standards in CBD products is a step in the right direction and will go a long way toward ridding the industry of bad actors, but the current system is inefficient and excessively costly. Hemp regulations also prohibit the domestic production of CBD-producing crops, denying UK farmers access to this lucrative cash crop. Furthermore, given the unjustifiable delays in the Novel Foods registration procedure, the question now is how long will high-quality goods take to register, and how long will customers have to wait for innovative products to hit the market? While it’s important to set guidelines, low-dose CBD found in new foods should not be mistaken with high-dose medical cannabis.
We may once again turn to the TIGRR report, which was just published. The new foods industry, which includes CBD products, is not included in this study. Given that the CBD novel foods sector has already spent millions of pounds to comply with new laws, there is worry that if the TIGRR report is not clarified to exclude hemp products, all of these efforts may be put on hold (both for industrial use and CBD derived for novel foods). Unfortunately, nothing in the study suggested a clear route for local cultivation or manufacturing of CBD innovative foods, allowing imports to control the lucrative UK CBD industry.
CBD novel foods also include CBD amounts that aren’t deemed therapeutically relevant, which is why they’re classified as new foods rather than medications. In an ideal world, the UK would have three distinct categories, each of which could be legislated separately: a special category for low-dose CBD whole-plant hemp foods or extracts regulated by DEFRA; a category for medium-dose CBD derived from nutraceutical CBD (under 300 mg) regulated by the FSA; and a category for higher-dose medicinal cannabis containing CBD and/or THC and other psychedelics regulated by the FSA (MHRA).
With so many changes coming to the hemp, CBD, and medical cannabis industries across the globe, it’s critical that businesses have the knowledge and experience to manage and remain on top of regulatory developments. Industry actors must make choices based on facts and regulatory realities, while also keeping an eye on creating avenues for innovation and diversification so that opportunities may be grasped when they occur.
Towards a paradigm of precision medicine
Many patients’ interactions with the healthcare system consist of being diagnosed with a condition or illness and then being given medicine, which is often in the form of a pill or capsule. These medicines are taken by hundreds, if not millions, of people who are all different, yet we anticipate the same outcome from them all. Many patients, however, grow disillusioned with conventional healthcare and seek alternative treatment options. Seeing alternative experts such as naturopaths, adopting significant dietary and lifestyle changes via new foods, or even relying on uncontrolled legacy market cannabis supply may all be examples of this.
A ‘person-centered’ approach of healthcare, in which healthcare professionals collaborate with individual patients to determine their unique requirements and create precision medicine solutions tailored to them, is the future of all medicine. In today’s climate, when patients want to be treated as individuals with their needs addressed holistically, the days of giving the same pill to hundreds of patients and expecting the same outcome are no longer viable. The contemporary patient, especially the younger generation, wants to feel that their concerns are heard and that their demands are met.
The inclusion of functional foods, as well as the capacity to change the CBD:THC ratio in medical cannabis, moves us closer to person-centered medicine, which uses highly specialized and exact medicines for each individual while simultaneously providing alternatives. This is already starting to take form with medical cannabis, where prescribers and patients utilize dose titration of oil products to determine the optimum amount.
Suppliers of medical cannabis may have other alternatives.
With adult use cannabis remaining a risky business proposition, what are the options for medicinal cannabis producers seeking to diversify their business interests? As mentioned, complementary botanical products such as functional foods provide an opportunity to enter the market with products requiring less stringent regulations than medicinal cannabis. Hemp-based products are one such example. Products containing hemp seeds are becoming more common within health food stores, as well as some pharmacies. The opportunity is there for other botanicals to enter this market and remains a viable option. This should be supported by jurisdictions with incentives for further research and development so that high-quality products find their way to the shelves, not poorly produced products that have little nutritional value to the individual. Once a reasonable evidence base has been established, more organisations will look at the developing opportunities in the functional foods market.
There are additional opportunities to create new dosage forms, but these will need sufficient evidence to justify their usage. Medical cannabis businesses may distinguish themselves by investigating new dosage forms and formulations, affecting the effectiveness and convenience of cannabis medications, based on studies in the medicinal cannabis industry and elsewhere in pharmaceutical development. When physicians prefer precise dosages of medicines to address particular illnesses, this will become even more essential in the future. Those that discover new technologies that make it simple to administer exact doses of cannabinoid-based medications in conjunction with particular plant extracts may be richly rewarded.
Finally, the non-therapeutic usage of hemp, known as industrial hemp, should not be overlooked as a potential source of diversification, especially for farmers. If industrial hemp were regulated similarly to any other crop grown for industrial reasons, it might offer a much-needed income stream for businesses during their intensive research and development period for medical cannabis products. Agriculture, especially in nations like the United Kingdom and Australia, need new high-value cash crops to diversify away from commoditized basic goods, while governments seek new sources of tax revenue and export income. In Australia, the United Kingdom, and Europe, eliminating the requirement for hemp license for the cultivation of non-therapeutic hemp crops would send a signal to encourage investment in processing infrastructure and increase the amount of hemp biomass and value-added outputs.
Industrial hemp has a plethora of applications, ensuring that there will always be a demand for this crop. Its applications range from stylish clothing to composite construction materials, especially in the United Kingdom’s building insulation. Hemp has outstanding thermal characteristics, allowing for carbon sequestration, land regeneration, and the creation of a carbon credit market. Another advantage of growing industrial hemp crops is that they require less water and resources than other plants, such as cotton, which accounts for one-third of all textiles worldwide.
The medical cannabis market’s future
Patients want treatments that are customized to them and their desired results, such as supplementary therapies to medical cannabis or new dosage formulations. As a consequence, the medical cannabis industry has expanded and become more complex, with a wider variety of products and novel delivery systems. Only the strongest and most helpful goods will survive in the long term, as patient demand for quality, consistency, accuracy, and personalization will continue to influence the market.
For the immediate future, the ambiguity surrounding adult-use cannabis in many countries acts as more of a distraction than a possible economic opportunity. Diversifying into other goods and formulations, such as natural botanicals and new dosage forms, is a more effective method to diversify and may offer a supplementary treatment to medical cannabis. Again, this will need a concerted effort on the part of businesses and governments to devote more time and money to research and development in order to fully comprehend the potential of botanicals as stand-alone products or as supplements to medical cannabis.
Despite the fact that some firms have begun research and development, the industry has to invest in novel formulations and dosage forms right now in order to continue to grow and offer helpful solutions to patients and prescribers.
The medical cannabis business must continue to hold all market players to the highest of standards. We must guarantee that GMP standards become the industry standard and that unethical manufacturers are driven out. All goods should be sold with the assurance that no shortcuts have been made and that the products’ integrity is unquestionable. Non-GMP manufacturing is not only undesirable in the long run, but it is also unacceptable in the medical cannabis business; nevertheless, GMP transition periods will be needed to ensure that patients do not go without medication.
To attain high standards, the industry must have more confidence that law will not change often and will be unambiguous in its objectives. This implies clearly distinguishing hemp-based goods from high-dose medical cannabis and, if feasible, enabling a third category of low-dose nutraceutical CBD products. This would offer the industry the certainty they’ve been searching for, giving them the confidence to create new products and drive innovation.
Finally, the ability for certain businesses to take advantage of lower growing expenses and more readily accessible markets for industrial hemp may be a benefit for those in the medical cannabis industry who are unable to generate income during the research and development stages.
Furthermore, the industrial usage of hemp should not be governed by the same legal framework that governs cannabis as a medication. Relevant agricultural authorities should regulate hemp plants with insignificant THC levels that are destined for industrial or food usage.
We at LeafCann see a lot of potential in expanding our business into the United Kingdom, particularly given the regulatory parallels between Australia and the United Kingdom. The functional food industry has a sizable following and is one worth investing in. We are committed to raising industry standards and working with manufacturers and other supply chain players to achieve GMP certification. This is a significant step in the right direction, in our opinion. If more manufacturers adhere to GMP standards and refuse to deal with those who do not, undesirable goods will begin to disappear from store shelves and pharmacies. It is essential for increased patient access to high-quality products and the success of future clinical trials. Transitions must be managed carefully so that domestic production may expand to meet patient demand, since it is critical that patients have access to a consistent, cheap supply.
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