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UK’s Cannaray raises £7.8m Series A in major European CBD gambit

September 9, 2019

British medical marijuana and CBD company Cannaray has just closed a £7.8 million ($9.6 million) Series A funding round, simultaneously revealing its purchase of Therismos, a drug distributor and importer that operates across Europe.

The company did not disclose the value of the Therismos purchase but hinted they paid single-digit millions. The team didn’t give much away about the funding provenance of its own Series A either; they disclosed it was a private grouping of investors, 40% UK, 60% US.

(The legality of investing in cannabis in the UK is a bit dubious, according to a BBC Radio 4 report last week.)

Cannaray’s two announcements are sure to promote the company’s standing in the European medical cannabis as well as cannabidiol scene. Cannabidiol, known as CBD, is a key chemical present in plants like cannabis and hemp. (Don’t confuse CBD with THC! That’s the chemical in cannabis with the psychoactive effects. Instead, CBD is fast garnering a reputation in the medical world as a potentially soothing treatment for conditions like arthritis, epilepsy, mental stress, or muscle pain, even as for certain forms of cancer.)

Bankers turning to cannabis

Scott Maguire, a former healthcare and biotech investment banker, is CEO of Cannaray. And he has brought an impressive line-up of senior former banking colleagues onto the board. Surely this is a sign of the times as talent continues to wave farewell to the conventional banking world in search of more fruitful, meaningful and perhaps rewarding careers; non-executive board members include Chris Sullivan, ex-deputy group CEO of RBS and ex CEO corporate banking of Santander, Sir Nigel Knowles, ex global co-chairman of DLA Piper and now chairman of DWF Group, the largest global listed legal business, Michael Freedman, CEO of Alchemy Media and an entrepreneur in the USA cannabis sector, and E. Stanton McLean, a former managing director of JP Morgan. Food industry veteran Clive Sharpe is serving as executive chairman.

Brexit-proof Cannaray

The London-based company proudly describes its plans as “Brexit-proof,” having set up a subsidiary in the Republic of Ireland as it presses ahead with establishing distribution and manufacturing capabilities within the UK. To do this, the management team has formed what it calls “an exclusive alliance” with Newey, the largest horticultural company in the UK with 4 million square feet of greenhouse space. In a phone interview on Monday with AFN, CEO Scott Maguire discussed how Newey was allocating Cannaray space for cannabis growth, subject to licensing; the company would be the third in the UK to secure a permit for growing cannabis, he says. Equally, Newey would be providing lab space, Maguire said.

Maguire says its focus on the already soaring medical marijuana market in Germany — the “main thrust of the business” — is also helping Brexit-proof the business, with potential growth points charted out in Poland too.

The company plans to hit the market with CBD products in the next few months with various “novel formulations”; one could be a form of CBD pet food, in honor of Maguire’s dog, who Maguire claims survived seemingly terminal cancer as a result of being treated with CBD.

“The real epiphany came with my dog,” McGuire said. After his dog’s recovery, he started taking medical wonder stories circulating about marijuana seriously, and began treating his own arthritis with CBD. He says it had a good effect on his golf, both as a pain reliever and a way to keep stress low. Leading golfers like Phil Mickleson, he added, endorse this approach.

“I also started looking at the US,” he said. There, companies “were going from zero to being worth billions of dollars, and I started wondering if that could happen in Europe.”

No Guarantees

The global legal marijuana market size is expected to reach 66.3 billion by the end of 2025, according to a report released by Grand View Research, Inc. It is anticipated to expand at a growth rate of 23.9% during the forecast period. Increasing legalization and use of marijuana in medical as well as recreational applications is expected to promote growth.

(To get a sense of what this growth potential looks like in Asia, check out my colleague Joe Gan’s “mini-guide.” For the US, see this special report on “Hemp Week” from AFN’s Lauren Manning.)

With adoption, Europe is rather different to Asia or the US Swift growth here is by no means guaranteed, considering regulations being what they are. Still, Maguire reckons patient advocacy, combined with a growing chorus of scientific experts, will be enough to shift the regulatory environment towards acceptance and adoption. Currently, cannabis use in the UK is still illegal, except for four uses. They are to relieve chemotherapy-induced nausea and vomiting, epilepsy, multiple sclerosis, and chronic pain.

Strong science

Cannaray claims to be the only UK-based medical cannabis and CBD business with a Scientific Advisory Board comprised of specialists covering the four approved uses of medical cannabis in the UK:  There is pain specialist Dr Benjamin Thomas; general neurologist Dr David Moorhouse; neurologist Dr Tom Jenkins; palliative medicine Dr Emily Collins, intensive care and anesthesiologist Dr Andrew Aswani; drug delivery scientific expert Dr Peter Laing, pharmacist Simon Tallett, and pharmaceutical distribution expert Richard Davey.

There is also the success story of Canada that might hasten adoption of laws and practices which suit companies like Cannaray. Media attention, such as a recent report in the Evening Standard, shows a high interest in such a change of tack, as well as opinion polls swinging in favor that might help nudge politicians otherwise distracted by other issues. After all, as the Standard notes, there is a “green rush” for cannabis which is “setting stock markets alight.”

“The Canadian Securities Exchange (CSE), newly dubbed the Canadian Pot Exchange, lists more than 175 cannabis companies, accounting for a whopping 80% of its 25 billion Canadian dollars (£15 billion) value.

In addition, the blue-chip Toronto stock exchange (TSX), the ninth-largest in the world, has more than 50 Canadian cannabis stocks worth C$60 billion (£37 billion), including weed farmers, health and beauty companies and nutrition groups.”

London has no interest in missing that boat.

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