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The second quarter in Europe far outpaced the first quarter in market movements regarding legislative country news and Merger & Acquisition (M&A) transactions. Europe is currently moving faster than the United States did in 2004 and will likely pick up the pace dramatically as 2023 looks like a boom year for revenues and access. The theme permeating the European Union cannabis community in 2022 is increased access for patients as it becomes more apparent the therapeutic needs cannabis addresses are becoming increasingly sought-after. A secondary theme is tackling the robust illicit market for patients unable to procure cannabis via their country’s programs.

2nd Quarter Cannabis EU Legislative Moves

The major legislative movers and shakers in the EU last quarter were Germany, Spain, and Switzerland. 

The biggest shot heard across the EU health community was from the German Health Minister, whose conservative opinion changed by stating that the harms of not legalizing far outweighed the disadvantages of legalizing. Every health minister in each EU country heard this declaration. This seachange sent German politicians into overdrive and even pushed the health minister further by demanding a regulatory framework by the end of the year or risk a budget cut if incomplete. Simultaneously, Germany launched a multi-round panel of discussions to shape regulations. The consensus thus far is that German market entrants will follow the quality standard of pharmaceutical GMP while pharmacies will have greater capability to dispense cannabis products. There may be a social aspect included in the framework, like the cannabis clubs in Amsterdam, Barcelona, Switzerland, Malta, and even stand-alone stores. 

Spain also just announced they intend to pursue a medical cannabis framework, which is expected by the end of the year. Impending legislation is very positive news, as Spain was one of the last major countries to announce its acceptance of the medical benefits of cannabis for its population. Most likely, Spain will follow a similar road as Germany did in 2019, allowing more freedom for doctors to prescribe cannabis and more products to be registered. 

One day after Spain’s announcement, Switzerland stated the country would no longer require that doctors seek federal approval before prescribing cannabis to patients, enabling medical providers to treat patients as they see fit with cannabis therapies. Switzerland is already doing a pilot program on adult-use cannabis with a limited number of consumers, and Zurich is hosting another pilot for ten cannabis clubs. 

To round it off, Portugal re-introduced a plan to legalize cannabis for the third time (Some will argue this is the fourth attempt because, at the end of last year, they made another push that fizzled). Portugal is already the largest cannabis country in the EU, with 19 licensed facilities.

EU Cannabis M&As Stays Hot this Summer

On the investment and M&A front, the EU has defied the Canadian and U.S. public markets bloodbath with increased private equity investments. 

Cannabis Distribution Companies Win Big in European Market

Many deals rotated around distribution companies, begging the question of when mainstream distributors will enter this market as the canna-world attracts high valuations. 

Canify, a Denmark-based cultivator and producer, merged with a German distributor in a 50/50 deal to form one of eight fully vertical operations in the EU and is expected to go public around the summer of 2023. Khiron Life Science Corp (KHRN), a public company based out of Columbia with German cannabis distribution, completed a 4.6 million Canadian dollar raise through Canaccord Genuity Corp. Additionally, Khiron purchased PharmaDrug Production GmbH, a German drug wholesaler and API seller. Lyphe Group, a London-based telemedicine group, closed a 5.8 million euro round led by Leafy Tunnel and Sharp Capital Advisors. Other deals announced include Franchise Global Health (FGH), a Canadian public company that announced a LOI to acquire a German distributor in May for 18 million euros.

Don’t Overlook High-Performing EU Cannabis Producers

Producers also got a shot in the arm in Q2 2022. Extracted cannabis products have been one of the hottest growing segments since the turn of the year. Although the numbers are delayed one to two quarters, Austria had 100% of sales in 2021 in extracts; Germany’s reimbursed sales for Q4 2021 were 46% extracts; In May 2022 the United Kingdom saw 30% extracts; The Netherlands 2021 prescriptions were 45% extracts; And in Czechia sales were 83% cannabis-based capsules. Altitude Investments with Artemis Funds and Enexis A/B added 11.8 million euros into Vitalis, a Denmark extractor concentrated on bulk THC API and white labeling of those distillates. Akanda (AKAN), a Nasdaq-listed South African medical cultivator, bought the Portuguese cultivator Holigen from Flowr Corp (FLWR) in a deal valued at 35 million Canadian dollars. In the CBD wellness space, Greenrise Global Brands (XCX), a public Canadian CBD company, acquired a 51% interest in CannaCare to strengthen its CBD offering.

Can the EU Build its Cannabis Economy Quickly? Time Will Tell

It is clear patient access via legislation and continued business growth will continue into 2023 and 2024. With a small group of registered cultivators and producers numbering between 35 and 40, there is a growing fear that there simply won’t be enough pharmaceutical-grade products available to service the demand. And with Germany sucking up all the product they can get, countries like Italy and Poland, plus all the new countries opening access, are fighting to get products. The light asset distributors are showing good revenues compared to the investment for now, but shortage remains the conversation which may flip the script. Merger fever is in the air, and Europe looks poised for a bull run while other markets like Canada and the U.S. remain bogged down in old legislation and political gridlock. For many years, investment has far exceeded the demand, but that looks like it is changing quickly.

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