Medical Cannabis Industry

Industry overview

A. Medical Cannabis history

Cannabis, also known as marijuana, a family of plants called Cannabaceae. There are over 700 varieties of cannabis that have been described to date. Based on characteristics such as shape, colour, height, smell, etc., usually recognised by two main types: Cannabis Sativa, which originated in the Western hemisphere and Cannabis Indica, which originated in Central and South Asia.

Cannabis as a medicine can be found in the oldest Chinese tradition few thousand years ago, indications showed different therapeutics use such as for malaria, rheumatic pain, constipation, disorders of reproductive system and many others.

Medical cannabis, refers to cannabis and its component cannabinoids, such as tetrahydrocannabinol (THC) and cannabidiol (CBD), to be used as medical therapy to treat diseases or alleviate symptoms of these diseases.

There are more than 70 psychoactive compounds called “cannabinoids” that have been identified in cannabis, four among which Δ9- tetrahydrocannabinol (THC) accounts for the psychological and physical effects, and its content is used as a measure of strength.

From research done in the field it was concluded that the THC acts on 2 types of cannabinoid receptors: CB1 and CB2. CB1 receptors are mainly found in the brain, peripheral nerves, and nervous system, whereas CB2 are found both in the neurons and immune cells.

Evidence suggests that THC helps alleviate symptoms suffered both by AIDS patients and by cancer patients undergoing chemotherapy, by increasing appetite and decreasing nausea.

The other main ingredient is CBD, a non-psychoactive component of cannabis which accounts for more than 50% of the known therapeutic applications. CBD is considered to have a wider scope of medical applications. A range of clinical studies indicated that CBD appears to relieve convulsion, inflammation, anxiety, nausea and short term memory loss.

B. Medical Indications and Benefits

Based on clinical, research and other medical literature the following are only part of the indications that cannabis has therapeutics benefits:

table

C. Current Regulation

USA

The legalisation of medical marijuana is the key driving force behind the increasing attractiveness of the US market affecting also the rest of the world. Currently, the use of medical marijuana is legal in 23 states, of which California, with over half a million MC patients, is the largest. 12 states have passed, or are about to pass CBD only medical cannabis regulations.

These numbers are expected to rise towards 40 states by 2020 as pending legislation in a number of states is expected to be put into practice in the next several years. However, medical marijuana is still not legal at the federal level. Recently, new Senate legislation have passed  shielding medical marijuana patients, from federal prosecution in states that have legalised marijuana for medical purposes. Other pending legislation is calling to  reclassify marijuana from a Schedule I drug, which has no medical benefit and includes recreational drugs (like LSD and heroin), to a Schedule II drug, which has an accepted medical use.

Canada

The Marijuana for Medical Purposes Regulations (MMPR) regulation took effect in April 2014 and essentially overhauled the existing regulations around medical marijuana. In essence, the MMPR facilitates production of marijuana by commercial producers who must comply with strict safety and quality demands. It also streamlines the application process for patients who now need a prescription from a health care practitioner. 23 licenses have been issued to commercial producers that supply patients directly. More licenses will be issued in the near future to satisfy demand. Health Canada have predicted the number of patients using medical cannabis will grow from roughly 50,000 currently to approximately 450,000 by 2024.

Europe

Europe is a small market but growing. It is served primarily by the Dutch company Bedrocan and imported by individual patients from across Europe. The Czech Republic is about to launch a national medical cannabis program with a number of local growers. Italy is joining the trend and the military has taken the role to grow in secured location. The estimated compounded annual growth rate through 2018 is approximately 15% for the European market as a whole.

Patients require prescriptions, in some cases from neurologists rather than GP’s, while distribution is conducted through pharmacies or other types of regulated dispensaries.

Australia

The use of medical Cannabis is currently illegal, but current legislation is not actively enforced where terminally ill patients in possession of marijuana are concerned. New South Wales has announced several trials to start in 2016 including epilepsy in children and pain relief in adults. Additionally, in a process to be completed by the end of 2015, Victoria aims to become the first state to legalise medical marijuana in Australia. In 2015 the Company testified to the Australian committee on LEGAL AND CONSTITUTIONAL AFFAIRS  i.e. public hearing inquiry into the Regulator of Medicinal Cannabis Bill 2014.

Israel

The 3rd country  to have set up a medical cannabis program on a national scale, Israel has a well-developed and well-regulated cannabis growing sector. Furthermore, Israel is at the forefront of research around medical cannabis. PhytoTech Therapeutics Limited is a subsidiary of MMJ PhytoTech Limited that have a license agreement with Yissum Research Development Company and research cooperation with Hadassah University Hospital in Jerusalem, these place the company at that forefront of medical cannabis R&D worldwide.

D. Global Markets

USA

The legalisation of medical cannabis is the key force behind the increasing attractiveness of the US market and also with direct influence on the global markets.

The current size of the medical cannabis market is approximately USD 2bn (2014-15), while the recreational market in states that have regulated recreational cannabis  is estimated at  USD 1bn.
For the market potential indication only, unofficially, the size of the US black market for marijuana is estimated USD 50-65bn.

Research by Green Wave Advisors shows that on the back of this increasing number of states where the use of medical cannabis is legal, the market can grow to USD 10- 15bn by 2020, implying a CAGR of at least 30%. Additionally, the market for recreational use is expected to grow to USD 5-10bn.

730,000 patients have received medical recommendations to use cannabis to date, with the reported total over one million registered patients.

Canada

The market for medicinal use is estimated at $144 million in 2014, rising to $380 Million by 2018 and expected to grow by 23% a year to $1.3 Billion in the next 10 years.  Official forecasts predict that approved patients will grow to 1.2% of the total population in 10 years. Industry predicted to grow at CAGR of 25%-28% to more than 400,000 patients and $1.4bn market in 2024

Europe

Medical cannabis is currently imported (in small quantities) from the Netherlands and used by patients in 10 European countries. The largest markets are: France, Italy, Netherland and Romania.

Global view – Cannabis acceptance globally

E. Medical Cannabis Delivery systems

Method of consumption – general overview

Cannabis for medical purposes is consumed currently in different ways, the following are the main common methods:

  • Smoking- typically involves inhaling vaporised cannabinoids (smoke) from cigarette and other items. Not recommended as in all other smoking plant materials.
  • Vaporiser- using a mechanical device that heats any form of cannabis (165–190°C) causing the active ingredients to evaporate into a vapour without burning the plant material. Absorbed faster through the lining of the lungs, higher medical value and effect.
  • Edibles- where cannabis is added as an ingredient to one of a variety of foods and liquid and tea. Typically takes longer for the drug to take effect in a patient (30-60 minutes), making it difficult to monitor dosage and increasing the risk of overdose.
  • Oil and Cream – topical application
  • Pills and patches (not common, yet available)

F. Agro Medical Business / Growing operations

Marijuana can be grown outdoors, indoors and in greenhouses. However greenhouse and especially indoor facility operations offer a controlled environment and more harvests per year, though equipment and other costs are higher. Plants can be grown from seed, with male and female plants separated after germination, or from cuttings, also known as clones. Using clones ensures all plants will be female, and helps preserve the particular characteristics of a specific strain. Once unfertilized flowers reach the required size, they are harvested for processing.

There are two main types, or classifications, that make up the majority of all cannabis strains that appear on the market; Cannabis Sativa and Cannabis Indica. Unlike Sativa, which grow tall and lanky, Indica grow short and stout in composure, produce less of a yield, and are typically more potent flowers (~18% THC) than cannabis sativa. They are typically what growers choose for indoor growing and flower between 8-12 weeks.

Supplying genetically stabilised “Medical Grade” strains under GMP regulation and standards are a major differential factor in the growing industry. These high quality products have strong demand and higher prices by leading dispensaries and pharmacies across the regulated markets in the US, Canada and Europe. 

MMJ PhytoTech’s growing operation in Canada will serve the company as the main platform for the medical strain development bank of stable genetic GMP production.

G. Future Trend in the Space

Global momentum around Medical Cannabis is improving strongly especially in the US. Almost without exception, legislation globally is developing in favour of medical cannabis. Not to mention the use of recreational marijuana for that matter.

Additionally, increasing pressure is put on governments to relax legislation in countries where medical cannabis legislation is still relatively restricted as well as further pressure in countries where legislation is already relaxed to take additional steps.  Currently, the use of medical cannabis is legal in 23 states, of which California, is the largest.  12 states have passed, or are about to pass CBD only medical cannabis regulations. These numbers are expected to rise towards 40 states by 2020 as pending legislation in a number of states is expected to be put into practice in the next few years.

As a result of a favoured market and increasing opportunities in the field, a strong demand for investment and new business opportunities in the medical cannabis market place can be recognised globally.

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