Three months stand between the UK finally leaving the European Union, yet many Australian medical cannabis companies see the UK as the logical choice for their first overseas venture.

Companies such as Bod Australia and Emerald Clinics believe the UK’s size and regulatory similarities open a large, familiar market when global medical cannabis competition is rising.

However Brexit, and surging Covid-19 infections, are pushing medical cannabis down the UK government’s list of priorities.

“Certainly before the last election the Johnson government was talking about a more expansive medicinal cannabis program. In true government fashion, it was a bit skinny on detail and heavy on motherhood statements,” Cann Group COO Shane Duncan told Cannabiz.

Cann Group COO Shane Duncan: not expecting big shifts in UK government policy in 2020.

“It would seem post the election it’s not really important to them anymore, probably because they’ve got much bigger fish to fry. We’re not anticipating massive shifts [in policy].”

The UK cannabis market is divided into two: medical products, delivered through the National Health Service (NHS) for three conditions and for a wider range of indications via private clinics; and cannabidiol-only (CBD) products which are classified as ‘novel foods’.

Keeping the cannabis trade open

Brexit, the UK’s withdrawal from the European Union, took place on January 31 this year and the transition period to thrash out a final exit agreement lasts until the end of 2020.

By mid-September, with talks deadlocked, the British government was threatening a “no deal” Brexit, where the UK leaves without an agreement on how to treat cross-border commerce and is immediately removed from all trade deals struck by the EU.

Immediate border delays is an issue Michael Clark, EMEA general manager at Bod Australia, is taking seriously, with contingency plans afoot.

“There are challenges associated with the supply chain for medicinal cannabis as it is an unlicensed medicine,” he told Cannabiz.

“Because of the UK leaving the EU, there is predicted to be a supply chain issue for imported medicines entering the UK at the start of next year, despite the stockpiling that is currently going on. This, and the associated amount of additional work to import medicines, may have a further impact on the ability to import medicinal cannabis.”

The biggest trade unknown for Australian companies is how medical cannabis and CBD will be treated in any future free trade agreement (FTA).

This is a far-off prospect however. Talks between the two countries began in June. Australia’s most recently signed FTA, with Indonesia, took 15 years to complete.

London feels like home

There aren’t any other big medical cannabis-first countries in the world that are so similar to Australia.

“There’s only a small number of countries in the world where [medical cannabis] is legal,” said veteran investor Harry Karelis, chairman of Gemelli Group.

He said the UK is two years behind Australia in terms of doctor education and patient acceptance, given medical cannabis was only legalised there in November 2018.

But it is an English-speaking country with a similar medical and regulatory system.

Gemelli Group chair Harry Karelis:
UK market will be a slow burn.

“It will be a slow burn then rapidly accelerate, but with a population of 65 million [compared] to Australia’s 25 million,” he said.

The trick will be getting in early to build brand recognition and wearing losses for “at least” three years before medical cannabis becomes mainstream.

Cann Group, for example, is expecting 60 per cent of revenue to come from exports to Germany and the UK in the next two years, but most from the former.

And while Brexit may end large companies using the UK as a stepping stone into Europe, smaller Australian businesses are already treating the two as separate regions, due to linguistic, cultural, legal and regulatory differences.

Slow going

Brexit and the Covid-19 pandemic are likely to put the brakes on medical cannabis expanding into the NHS.

“If you’d asked me pre-pandemic, I’d have said there is significant potential there [for growth],” said Sir John Tooke, a UK government advisor and director of Australian company Emerald Clinics.

This is in spite of a government commitment to support the country’s GBP74bn (A$131.4bn) life sciences sector, a sector that is 30 per cent bigger in terms of revenue than Australia’s biggest export, iron ore.

“There is growth potential in the private market, but the holy grail has to be getting into the NHS,” Tooke told Cannabiz.

Medical cannabis use by NHS doctors is limited by the very conservative approach taken by the National Institute for Health and Care Excellence (NICE), which provides guidance on all NHS treatments and care. NICE requires a high level of data to support expanding the use of medical cannabis outside severe forms of epilepsy, chemotherapy-induced vomiting or nausea, and Multiple Sclerosis-related spasticity.

“There is growth potential in the private market, but the holy grail has to be getting into the NHS,”

Wider use of medical cannabis within the NHS would be broadly equivalent to Australia’s Medicare Benefits Scheme opening funding for these drugs.

“I’ve been discussing with the NHS how you could use the data and experience gathered in private clinics… To be frank, that is going to take quite a long time, given all the pressure on the NHS which has only been enhanced by Covid-19,” Tooke said.

“I don’t think [medical cannabis] will find its place as fast as it would have done 12 months ago.”

What the UK does have is the largest medical cannabis data and patient registry in Europe: Project21, a database sourcing real-world evidence from private patients.

It intends to recruit 20,000 people by the end of next year from private clinics who will share data about their medical cannabis use.

Regulators unaffected

What Brexit isn’t expected to significantly affect is the UK medical regulatory system.

The Medicines and Healthcare products Regulatory Agency (MHRA) is one of the top global regulatory agencies, and was a backbone of the European Medicines Agency (EMA).

That reputation attracted Medlab Clinical to the UK to find sites for its cancer-induced bone pain Phase 3 clinical trial. Medlab Clinical CEO Dr Sean Hall said Brexit may slow the paperwork side of getting import and ethics approvals, but little else.

And without having to “constantly support” the EMA, it may even have more time to focus on domestic issues, according to Bod’s Clark.

Indeed, the UK is already diverging from European policies towards cannabis-derived products.

The UK’s Food Standard Agency sidestepped tortuous deliberations in the EU over whether CBD is a narcotic: last year it required all products to obtain a novel food classification by March 31 next year, or be banned from sale.

Australian companies are banking on the UK becoming an enormous medical and CBD market – eventually. But with the double-punch of Brexit and Covid-19, that is likely to take a little longer than originally anticipated.

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