The UK medical marijuana company backed by Snoop Dogg’s venture firm is targeting Big Pharma in its latest fundraising round and said drugmakers getting involved in cannabis would help validate the burgeoning European industry.
Oxford Cannabinoid Technologies Ltd. is working on breaking cannabis extractions down to their constituent parts then investigating potential uses in immunology, oncology, neurology, and pain relief, OCT Chairman Neil Mahapatra said. The firm is seeking about $50 million, which should be enough to finance its work until about 2024, he said. For now, no public stock offering is planned until around that time, although a listing could come earlier.
When it raised money in 2018, OCT scored investments from the venture arm of tobacco giant Imperial Brands Plc and from Casa Verde Capital LLC, the West Hollywood, California-based venture firm that counts rapper Snoop Dogg among its partners.
This time around, major pharmaceutical companies are also on the call list and if they get involved, that “can only be good for the industry,” Mahapatra said in an interview. Big Pharma would bring deep pockets and help to legitimize the medical potential of cannabis, he said.
Drugmakers understand the long-term grind of bringing medicines to market, he said. This would help ease any short-term pressures to deliver returns put on cannabis firms following the boom in recreational weed in Canada.
The pharma industry has been dipping a toe into cannabis via licensing deals with GW Pharmaceuticals Plc, the UK company that makes cannabis-derived multiple sclerosis medicine Sativex and childhood epilepsy treatment Epidiolex. A unit of Switzerland’s Novartis AG also signed a partnership with Canadian pot company Tilray Inc. last year in a sign of the growing appetite, but pharma companies have yet to really tap into the market in a substantial way.
The size of the opportunity could be huge. Bank of America Merrill Lynch estimates the European legal cannabis market could be worth around $60 billion a year by 2026, while UK broker Cenkos Securities Plc sees the medical market at $75 billion a year by 2030. Legalization efforts are under way in most large European countries, albeit at differing stages.
Mahapatra says he “kind of fell into cannabis.” He majored in biology at Oxford University, ran private equity and venture investments for financier Jacob Rothschild, and then left to found London-based private equity outfit Kingsley Capital Partners LLP, where he is still managing partner. OCT is a joint venture between Kingsley and the university, sparked by a meeting Mahapatra had with an old biology teacher.
An interest in the weed market was piqued by two events: the boom in North America and Mahapatra’s mother being diagnosed with lung cancer. The latter spurred him to read anecdotal stories about people who claimed their tumors had vanished after starting to smoke weed.
“Not even close to enough research has been done to really tap the medical potential of cannabis,” Mahapatra said. In Europe, identifying investments was also tough, which is why Kingsley created OCT. “You can probably count on one hand” the organizations in the sector that have professional management teams with good experience outside weed, Mahapatra said.
Casa Verde has been one of the more active investors in the North American pot boom. It has invested in cannabis delivery start-up Dutchie Inc., weed tracking firm Metrc LLC, and vape device maker Green Tank Technologies Corp. Managing Partner Karan Wadhera said his firm invested in OCT in part because of the management team but also because it too believes more clinical research is needed on the medical effects of cannabis.
Plus, Europe is a very attractive weed market. “There is a wave of cannabis legalization sweeping the continent,” Wadhera said via e-mail. “Also, the market’s similarities to the U.S. create excellent opportunities for companies and investors to gain a competitive advantage by employing lessons learned from the U.S. over the past few years.”
Mahapatra says a key lesson to learn is separating those companies operating for the long term and those looking to cash in on the Canadian bubble to make a quick buck. “We’re not in it for the quick flip,” Mahapatra said.