Companies in Canada’s cannabis sector could be well-positioned to be suppliers to the United Kingdom’s newly opened medical marijuana market, says analyst Martin Landry of investment bankers GMP Securities.
As of November 1, doctors in the UK have for the first time been given the option to legally prescribe cannabis-based medicines, a law change that was brought about due to concerns from parents of children with conditions such as severe epilepsy who could benefit from the drug.
Parliament acted quickly in a country where the topic of medical marijuana had received limited public discussion until recent high-profile cases involving children being denied access to cannabis oil to control epileptic seizures were brought to light.
“Having been moved by heartbreaking cases involving sick children, it was important to me that we took swift action to help those who can benefit from medicinal cannabis,” said Home Secretary Sajid Javid in a press release on October 11. “We have now delivered on our promise and specialist doctors will have the option to prescribe these products where there is a real need.”
Landry says legal cannabis in the UK will likely be prescribed in a limited number of cases as a last resort treatment, with the National Institute for Health and Care Excellence to produce more formal guidance on prescribing cannabis by October 2019.
UK marijuana legalization could be big for Canada
Landry says Canadian licensed producers could become the main source of Britain’s supply over the near term.
“Domestic production and importation of cannabis products will be permitted in the UK provided the products come from an EU Good Manufacturing Practices (“GMP”) certified facility and the companies hold the appropriate licences. EU-based importers may have an easier path to licensing relative to those based outside of the EU,” says Landry in an equity research update to clients on Wednesday. “In our view, Canadian LPs could be well positioned to supply the UK market either through imports in the near term, by leveraging their existing GMP certified production capacities or by applying their cultivation expertise to domestic production.”
Landry estimates the potential market size to be between one and two billion, with market penetration likely to be a slow build-up over an estimated five-year timeline to maturity.
“The opening of the medical market in the UK is a significant shift in regulation and perceptions for this major economy. The pace at which this shift occurred is impressive and could lead other countries to follow suit,” he says. “While potentially limited at the beginning, we would expect a broadening of potential indications and wider physician support over time, as experienced in Canada “