The Former Uber Man Navigating Europe's Complex Cannabis Rules
(Bloomberg) -- While Europe’s cannabis market remains a byzantine puzzle of regulation, countries are embracing the medical uses of the drug at a serious clip and creating the potential for significant growth, according to the boss of one of the first movers in the industry.
That’s quite different from the 45-year-old’s time spent as head of public policy and government relations at Uber Technologies Inc., when getting governments to open up a previously closed market was a fight, he said. In common with ride-sharing, however, regulations and attitudes toward medical cannabis differ by country.
At present, 31 countries in Europe have legalized medical cannabis, according to consultant Hanway Associates. But they’re all at different stages. Germany is already prescribing to patients, the U.K. has legalized but very few prescriptions have been written, and France is reviewing its regulation.
EMMAC raised 17 million pounds ($22.4 million) in two private financing rounds this year, giving it a valuation of about 77 million pounds. The company’s strategy is to try to build its own “single market” for cannabis by investing in businesses in larger European countries that are liberalizing their way toward making medical marijuana a mainstream product, Costanzo said.
Then it intends to build a business that controls cultivation, manufacturing, research and development, imports, distribution and branding of its cannabis products.
The main focus is on creating regulated, licensed medicines that use cannabis active ingredients and also tapping into the booming wellness market via Blossom, a Swiss brand the firm has acquired that makes oils, balms and hemp teas. It plans to make Portugal its cultivation and production hub and has bought a licensed firm to do that. It has secured a license in Malta to make that its distribution base for moving product within and out of Europe.
EMMAC also owns the majority of Medalchemy, a pharma ingredients manufacturer in Spain which this week secured a medical cannabis import license. And it has made investments in the U.K., Germany, Spain, France, Switzerland and Italy to position for those countries’ medical marijuana markets opening up.
EMMAC is part of a wave of companies that are looking to grab a piece of the nascent European cannabis market, inspired by the explosion of marijuana companies in Canada and the U.S. that resulted from the trend toward legalization there. Investor interest in Europe is growing and investment banks are positioning themselves to capitalize once public listings emerge.
For now, EMMAC is one of the leaders, with a valuation that’s more than double the size of London’s largest listed vehicle, Sativa Investments Plc.
U.K.-listed venture capital firm FastForward Innovations Ltd. was among investors taking part in EMMAC’s fundraising, pumping in 2 million pounds and taking a 2.6 percent stake in EMMAC, according to a stock exchange filing. FastForward had been an investor in Nuuvera Inc., a Canadian pot firm sold to Aphria Inc. for about $670 million last year and where Costanzo used to be head of international development.
Costanzo declined to name other investors in the recent funding rounds but said they included institutions, a group thus far all but absent from retail-dominated shareholder registers for companies that have already listed, like Sativa and Ananda Developments Plc.
He added the placing was bigger than it initially planned for, so the firm is in no hurry to go back to markets to raise more. A public listing remains an option but will be assessed “when the time comes” given the firm now has more cash than anticipated.
The European medical cannabis market alone will be worth 58 billion euros a year by 2028, according to London-based cannabis industry market intelligence firm Prohibition Partners. It reckons the total legal market in Europe will be worth 123 billion euros by then.
Investment bank Canaccord Genuity Inc. said in January that the money made last year in cannabidiol, a cannabis extract known as CBD, and medical marijuana in Europe was bigger than expected as popularity and public acceptance grew.
“We shouldn’t forget, this product was totally illegal for 70 years” and is now going through a similar process of acceptance and legalization that alcohol did after prohibition ended in the 1930s, Costanzo said. As regulation evolves, “we’ll see more and more investors coming into the space,” he said. In particular, if there is a positive change to regulation in a bigger potential market like the U.K., Germany or France, that would attract “a lot more investors very quickly.”
©2019 Bloomberg L.P.