Pot Stock Volatility Is Something This Company Wants No Part Of

(Bloomberg) -- The frenzy in Canadian pot stocks has created plenty of opportunities for short-term traders. That kind of volatility holds no attraction for one European medical cannabis company.

“We don’t want to have our stock go up by 200 percent one day” only to plunge the next, Ben Langley, the chief executive officer of London-based Grow Biotech Plc, said in an interview. “Frankly, we can grow our business exactly as we want to grow it right now without going to the public markets."

Grow Biotech, which advises medical-cannabis producers on their operations, has just kicked off a private fundraising round and has pushed back plans for a stock-market listing in London that had been penciled in for late this year.

The company raised 4 million pounds in 2018 and says it’s targeting investors in its new fundraising round who are already involved in North American cannabis. This makes for easier conversations than attempting to persuade fund managers with no experience of the market that medical cannabis is a legitimate industry, according to Grow Biotech.

Pot stocks in Canada boomed in 2018 with valuations soaring ahead of the eventual legalization of recreational marijuana in October. That created some behemoths of the industry, at least in terms of market value, and came with a side of rampant volatility. Canopy Growth Corp., for example, has a market capitalization of about $14.5 billion on 2018 revenue of $61 million.

Investors haven’t been discerning enough in choosing between North American pot companies that have fundamental value and those that are just out to “ride the wave,” said Langley. That means all cannabis stocks are rolled into a single group and move as one, even if all aren’t created equal, he said.

Inefficient

Langley, a 36-year-old former JPMorgan Chase & Co. commodities banker, got into the market back in 2016 by building a portfolio of small investments in North American pot firms. He founded Grow Biotech in 2017 and is a founding partner of European Cannabis Holdings, an investment firm housed in the office next door to Grow Biotech in a co-working space north of Oxford Circus.

With cannabis, he found the “most inefficient market you’re ever going to see in any industry.” To tackle this, Grow Biotech advises firms at all ends of the supply chain on making their processes better.

It also has labs in the U.K., Canada and the U.S. to work on research and development projects. It helps to improve the process of extracting and identifying active pharmaceutical ingredients from cannabis plants. And has also recently agreed principal terms on a medical cannabis distribution joint venture with pharmaceutical import firm IPS Specials, a firm it worked with to bring the U.K.’s first bulk medical cannabis shipment into the country in February.

Big Moment

A milestone moment for the U.K.’s cannabis industry will come in October from the National Institute for Health and Care Excellence, which determines which drugs should be paid for by the country’s National Health Service. The agency, known as NICE, is due to publish a report on cannabis-based products for medical use.

Since the U.K. legalized medical cannabis on Nov. 1, a common complaint has been that it remains difficult for patients to get ahold of. Under the rules, doctors can prescribe medical cannabis but only if all other licensed treatment options have been exhausted first.

If NICE’s recommendation is positive for medical cannabis, that could change, said Hari Guliani, Grow Biotech’s chief operating officer. “It will certainly help,” said Guliani, 32, a former lawyer who also co-founded Blume Jobs, a cannabis sector recruitment website. “It will reduce some of the pressure [doctors] might have in terms of knowing what they should and shouldn’t do.”

Research

Grow Biotech intends to help package research into a more coherent form on the advantages of medical cannabis over opioids for ailments like pain relief, chemotherapy-induced nausea and even palliative care. Given the concerns about the addictive nature of opiates, this could also help increase the acceptance of cannabis-derived therapies by doctors, according to the company.

Guliani predicted medical cannabis will shed the niche therapy label within 12 months. But more research and greater collaboration across Europe in researching the treatments will be required before medical cannabis is seen as “just another medicine.”

To contact the reporter on this story: Sam Unsted in London at sunsted@bloomberg.net

To contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, Phil Serafino, Celeste Perri

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