Connect with us

Markets and industry

What do investors look for when analysing cannabis investment opportunities?

The GCI Virtual Summit explored key factors that investors look for in cannabis businesses when analysing investment opportunities. 

Published

on

What do investors look for in cannabis investment opportunities?

A panel of experts discussed key factors for cannabis investment opportunities at the Global Cannabis Intelligence (GCI) Virtual Summit for global leaders in cannabis and psychedelics.

As the nascent cannabis industry matures and more cannabis businesses are launched, what investors look for now may differ from the early stages of the industry. Initially, licence applications may have clinched a deal, but now – management teams, exit pathways or infrastructure may top the checklist. 

The panel at the GCI Summit featured: Patrick Rea, managing director at Poseidon Asset Management; Alfredo Pascual, vice president, investment analysis at SEED Innovations; Pete Karabas, founding partner at KEY Investment Partners; and, Daniel Yazbeck, founder at Yazbeck Investment Group. The experts discussed the key aspects that they look for in investment opportunities. 

Patrick Rea highlighted the increase in entrepreneurs launching businesses into the cannabis industry, with the last six to eight months seeing more companies looking at the biosynthetic production of cannabinoids. Specifically, with interest in developing rare or minor cannabinoid products.

Read more: Exploring cannabis regulations and investment in the UK

As the world looks towards alternatives to plastics and other environmentally damaging materials, Yazbeck also highlighted the increase in hemp companies falling across investment desks. 

“There are so many creative applications that are coming across my desk and I’m very excited about this space because it’s just the beginning of the hemp industry. For its industrial applications, I don’t think we have really tapped that market so I’m looking at that space heavily.”

Karabas agreed with this sentiment highlighting how this sector is ripe for innovation, and also pointed out the attractiveness of specialty finance companies and those exploring fast onset technologies. 

“I think it’s difficult to find which ones actually work – the science is still in its infancy. So, for example, how do you take an edible and change it from an edible that has an onset of an hour to an hour and a half, to having an onset of 20 minutes in some cases. That has been an interesting area of focus.”

Pascual emphasised where these development and innovations are coming from, comparing the industry stage in the US market with European countries.

“With my focus on Europe, what I see the most are companies that want to be part of the supply chain when it comes to medical cannabis, either growing or extracting or distributing. I would say that is with maybe 90 per cent of the investment opportunities that I see in the medical cannabis industry in Europe. 

“When it comes to non-medical CBD then I would say it is mostly brands that have differentiating factors – mostly in the UK – which is one of the most advanced markets in Europe when it comes to CBD. We do not have recreational markets in Europe but there are a couple of experiments just starting, in the case of Switzerland, for example. But these are limited experiments and no sales are happening yet. There’s a lot of expectation when it comes to recreational, particularly now with the new expected German government.”

Pascual noted key areas of analysis and indicators that investors are looking for today when it comes to cannabis.

“I think that it is an expectation in North America that when you invest in a medical cannabis company, that company will be able to operate in the not-so-distant future recreational market as well. The way that I see this here in Europe – whenever I recommend an investment in medical cannabis company – I need the medical cannabis company business plan to make sense with the current regulations. I wouldn’t recommend investing in a medical cannabis company in Germany just because it may legalise recreational cannabis, for example, and that company may have an upside then. If that happens, then wonderful, but there’s absolutely no certainty. 

“The business plan needs to make sense as a medical cannabis company. For that, we look at valuations, financial projections, and historical performance.”

Rea added: “There is a difference between running a venture fund with other people’s assets, making the investments and being a high-net-worth individual in the cannabis industry and the cannabinoid industry in the United States. There’s not really any institutional capital in the traditional sense of investing in the space. So, you’re left with family offices, cannabis-focused venture funds, and high-net-worth individuals. So, as an individual, you may have the ability to just sort of place your investments where ever you like, without regard for managing to a protected return target, and we definitely see a fair bit of that.

“For us as a venture firm, we have got to be very textbook in our analysis.

“There is a lot of failure in cannabis businesses and startups in general. We are always going to talk to an entrepreneur about the exit pathway and timeline because it’s important for entrepreneurs to understand that, if you’re talking to a fund, we have a projected fund timeline – we have an eight-year fund term. So, if you’re looking to continue to run this business for 12 years, we’re not a fit. 

“Very importantly at the end, is the value of the company and exit – so, what that is based upon is either multiple revenues or multiple EBITDA, and are they coming to the table with an expectation that is reasonable, nuanced and with an understanding of what that market currently is at the exit.”

Karabas added: “We look at very similar things through slightly different lenses. The cannabis industry is really at an inflection point here, especially in the US. For the first time, I think you have a critical mass of States and it’s increasing at an exponential rate, and you’re starting to see more comparables. 

“One thing we’ve run into in the current period of time is entrepreneurs setting valuation too high. And, more often than not, you can set yourself back if you have an overvalued company at a Series A or Series B. Down the road, when you need additional capital, if you haven’t left yourself a lot of wiggle room, you can find yourself in a not-so-great situation.

“So, aside from some of the more traditional financial metrics, what we look at is also in the past. If you raised capital in the past, how have you used that capital? What kind of runway is the capital that you’re raising going to get you? 

“I think a big thing across all of the cannabis industry is certainly this idea of duration risk in properly estimating how long it it going to take this company to grow, and how much more capital are they going to need. If it takes longer – if the regulatory environment doesn’t shape up how they see, before you know it – I always say – you can have a great, successful company and end up with a bad investment because you had to raise too much capital. Now all of a sudden, you’re diluted and you might not be able to hit the growth projections.”

Yazbeck highlighted that he takes a more simple approach to analysing investment opportunities.

“I look at a company or a group of folks who are producing a specific product. I’m a cash flow investor. So, can you create a product and sell it at market value? The second is, do you have the team in place to do that? And a third point that is very important for me is, does this team have the relationships to create a market for that product, do they have the capacity to do that? 

“If you look at the state of the markets – take the medical market in Europe – it takes millions of dollars to become GMP compliant. Companies like Tilray have invested millions and millions of dollars to create facilities, and what are they after – a $200m market in Germany? The goal is when recreational kicks in.

“So, are you going to be a first mover in recreational because you have a medical? In the end, if you can produce a product at a cost of goods sold, or you have a margin, and hopefully, the margins are going down, like in California with flower, for example. Do you have the relationships to do that, then you can then continue to produce a business – it’s about cash flow for me.”

The GCI Virtual Summit is taking place 7 – 9 December. Please visit summit.gcintelligence.com/ to find out more.

Markets and industry

Panaxia to expand its Malta production plant with $6m investment

Panaxia’s investment in the country is a “milestone” for Malta’s medical cannabis industry, says Minister for the Environment, Energy and Enterprise.

Published

on

Panaxia to expand its Malta production plant with $6m investment
Home » News » Markets and industry » What do investors look for when analysing cannabis investment opportunities?

Israel-based Panaxia is set to expand its medical cannabis production facility in Malta and will export its first products to Germany in the coming weeks.

Panaxia is set to deepen its connection with Malta as it plans a further expansion to its local production plant now the company has obtained its EU-GMP licence. 

The company received an official license from the health authorities in Malta to manufacture finished medical cannabis products in May, 2022.

The news of Panaxia’s $6m (~£4.95m) investment was announced during a visit to Panaxia’s Ħal Far plant by Malta’s Minister for the Environment, Energy and Enterprise Miriam Dalli. 

Read more: Panaxia to exit cannabis activities in Israel and focus on Europe

Panaxia aims to enrich the Maltese production portfolio with products aimed for both Europe and Latin American markets. To do this, its Malta facility will diversify into an array of products ranging from the production of tablets, oil and extracts, as well as carrying out clinical trials, stability experiments and research and development.

Minister Miriam Dalli described Panaxia as an early success story for one of Malta’s newest economic niches.

Read more: Panaxia to begin medical cannabis production in Malta

Minister Dalli commented: “Malta Enterprise has been in discussions with Panaxia since the early days after the enacted legislation in 2018. Today, Panaxia is only marking the start of its actual production, but it is already planning an expansion in its facilities. 

“This is another milestone reached for our medical cannabis industry – an industry which further enriches our wider pharmaceutical sector. Malta is the ideal location for such operations, whereby specialised products are developed for the global healthcare supply chain.”

CEO of Panaxia, Dadi Segal, commented: “I am impressed with the role of Malta Enterprise in their support to our Malta team at Panaxia on various levels, not just the financial assistance but also the constant communication and facilitation. 

“We had to build this facility from scratch and the process was long but soothed through Malta Enterprise’s constant guidance.”

Panaxia also operates from locations within the United States, Canada and South Africa, and is currently in the process of registering products in Portugal, Greece, Poland and Brazil amongst others. Its range of pharmaceutical products, over 60 in all, are mainly based on cannabis plant extracts and treat a variety of ailments including nausea, anxiety and depression.

Continue Reading

Markets and industry

Cannabis extract registered in Poland by Curaleaf International

The landmark registration signifies Curaleaf’s continued expansion into Europe.

Published

on

Cannabis extract registered in Poland by Curaleaf International
Home » News » Markets and industry » What do investors look for when analysing cannabis investment opportunities?

Curaleaf International has registered its cannabis-based medical extract in Poland with local partner CanPoland SA.

Curaleaf International’s product registration in Poland will help to meet increasing demand for cannabis medicine in the country. According to Prohibition Partners, Poland is currently one of Europe’s largest medical cannabis markets by patient size. Its market is expected to reach €2bn (~£1.69bn) by 20282. 

Read more: Can4Med to wholesale medical cannabis products in Poland

The licensed product, which is 100 per cent European sourced from plant to manufacture, is part of Curaleaf International’s proprietary product range that has now launched in five key European markets, including the UK and Germany.

Curaleaf International president, Miles Worne, stated: “This licence in Poland is another sign of Curaleaf International’s strong momentum in Europe. The medical cannabis market in Europe continues to expand rapidly, as regulation opens up and access for patients improves. 

Read more: Curaleaf partnership to build platform for German recreational market

“Since the legalisation of medical cannabis in 2017, Poland has become one of the largest European importers of dried flower and is an excellent addition to Curaleaf International’s expansion, given its fast-growing patient numbers and significant addressable market.

“Curaleaf International is driving growth in existing key markets, with the UK in particular witnessing a huge increase in patient numbers, whilst continuing to drive expansion into new markets across Europe.”

Curaleaf International has also recently announced registrations of products in Malta, and was the first company to register a THC cannabis extract Active Pharmaceutical Ingredient in Italy. 

The company has stated that this news, along with the opening of the Swiss medical cannabis market and Curaleaf International’s renewing of its GDP licence in Switzerland, is an example of where the company is ideally positioned to capitalise on positive market movements across Europe.

Continue Reading

Markets and industry

Medcolcanna signs European medical cannabis sales agreements

The company has entered into sales agreements with German company, Greenstein, and Cantourage.

Published

on

Medcolcanna signs European medical cannabis sales agreements
Home » News » Markets and industry » What do investors look for when analysing cannabis investment opportunities?

Canada-based globally integrated medicinal cannabis company with operations in Colombia, Medcolcanna, has signed two EU sales agreements for EU-GMP and CUMS-IMC certified dried flower.

Medcolcanna has signed agreements with German-based Greenstein, as well as Berlin-based Cantourage.

The sales agreement with German-based Greenstein has a three-year term, with the possibility of extension, and establishes a minimum purchase of 1200 kg during the first year, 2000 kg during the second year and 2,500 kgs during the third year.

Its sales agreement with Cantourage for Germany and the UK has a five-year term, with the possibility of extension. The initial forecast presented by Cantourage establishes approximately 800 – 1000 Kgs for the first year.

Read more: Ugandan-grown medical cannabis reaches UK market

Cantourage will distribute the flower through its proprietary clinics and distribution in the UK and through its network of pharmacies in Germany. Medcolcanna has developed a new brand for distribution with Cantourage in UK and Germany, followed by Poland within the next few months.

Six Medcolcanna proprietary strains have been already registered with the German Narcotics agency, and the production will be based on supply from the Medcolcanna farm located near Bogota. Additionally, THC quotas have been granted by the Colombian Government and are in place with the first exports expected by October to November 2022.

CEO Felipe de la Vega commented: “It has being a long and difficult journey since we created the company. A market that we were trying to understand and anticipate but that was being created. Therefore, making decisions was more complex. 

“CBD market for extracts and isolates became very competitive with the US hemp farm bill affecting projections. The market for THC extracts is highly regulated, requires multiple certifications and a lot of investment, and still is a very small market compared with flower. 

“Now the approval of flower export has allowed us to really gain traction in Colombia supply, as a high quality, low-cost producer, and the result of it is the multiple contracts we have now in place and we continue to negotiate. Starting November 2022, we expect recurrent revenue with high margins and good profitability.

“This combined with internal decisions that have helped us to reduce our G&A and cash burn makes our company a sustainable and profitable target for investors and we are pretty confident that before the end of the year we will be in a completely different situation.

“We continue supplying internally medical formulations currently approximately 300 per month and growing at 15 per cent per month. Now we are really getting to an interesting point for the company, with a very clear path forward and the possibility to generate profits for our investors.”

Continue Reading
Sign up for the Cannabis Wealth newsletter

Recent Posts

[class^="wpforms-"]
[class^="wpforms-"]