Over the last five years experienced UK entrepreneur James Short has invested around £40m creating one of the country’s first medical cannabis production facilities.
The investment is now bearing fruit with Celadon Pharmaceuticals’ current and future harvests pre-sold, and its recently-announced partnership with a Danish cultivator helping it deliver a £40m-plus order book.
Speaking to Business of Cannabis, the Midlands-based businessman – with a successful track record in construction and energy – said Celadon is on a rapid growth trajectory as the European and UK sectors take-off.
“Phase one (of its facility) is fully operational and contracted. We have sold everything to two clients for the next three years.
“That will deliver revenues of £1m to £1.5m a year and we have started to get paid for that, now.”
Phase two of the development of its 100,000 sq ft facility is on schedule for completion next year and can deliver annual revenues of up to £30m, said CEO Mr Short.
There will then be the final, and third phase, which Celadon hopes to complete in 2026 which it says will help it deliver a cumulative nine tonnes of product, and potential annual revenues of £90m.
Zero Debt To Date
Its performance to date, and it projections going forward, mean the business is now confident of securing debt from the capital markets, which it will use to complete the next two phases.
He continued: “We have a number of debt investors we have been talking to for some time, and they are very interested…they get our vision, they know we can do it, they know we have a licence but they wanted to see that we have buyers for the product before they’ll lend us the money.
“But, now that phase one is on-line and we have so much demand for our products – its outstripped what we thought – we have been able to demonstrate to these debt investors that the demand is there.
“We have zero debt, to date, and we would like to think we can now access debt to complete phase two.”
Patients First
Mr Short’s interest in cannabis was piqued by a close family member five years ago, and, after shunning in the CBD industry due to its regulatory uncertainty, he opted for the medical route.
This involved travelling to Canada to observe its progress, speaking to UK politicians, and bankers – the most sceptical parties, he reckons – and patients.
“The lightbulb came on when I spoke to patients, although I’m told that in our world I should call them customers!
“To me they’re patients. I don’t like calling them customers. We focus on the disease first and foremost…then we look at the delivery mechanism then education, then business as the day-to-day stuff.
“I saw a cannabinoid for the right disease doing some good. I thought bloody hell what a business! I can produce something, help people and make money out of it,” he said.
Regulatory High Bar
Celadon’s facility – the size of three football pitches – is tucked away in a corner of the UK’s second largest city in Birmingham. It cost £30m to build and was originally earmarked as a data centre.
Initially investing his own own capital Mr Short later tapped into his established network and then from investors, outside his network, to raise £7m in convertible loans.
Its first commercial harvest marked the culmination of a torturous process which led to the creation of the first protocols for the UK medical cannabis cultivation industry.
He said: “When the the UK government first legalised medical cannabis in 2018 there were so many people applying for licences to the Home Office that they shut the website down and told applications they had to get GMP (Good Manufacturing Practice) from the MHRA (Medicines and Healthcare products Regulatory Agency).
“This then led to the issue of the legality of the growth as, how could it be possible to get GMP to prove a product is OK, if it was to be grown illegally!”
This saw Celadon work hand-in-hand with the MHRA to draft the UK’s first protocol for growing medical cannabis which has become known colloquially as the ‘chicken and egg’ regulation – see here.
GMP imposes strict conditions in the replicability of the cultivation which generally involves delivering three harvests with a strict variation tolerance.
“To get GMP is super difficult. Its the hardest thing I’ve done in my career, and I’ve done some business.”
Celadon ended up with seven harvests – all of which had be destroyed – but in doing so it allowed it to develop crop genetics and IP that is now in demand as witnessed by its recent Danish partnership.
Danish Deal Lifts Orders Book To £40m
In September, Celadon announced the launch of a partnership with Danish cultivator Valeos, a pharmaceutical company and licensed producer of medical cannabis.
Celadon has agreed to licence some of its genetics for cultivation by Valeos allowing it entry into the European market with an initial annual upside of potentially £1.5m-plus a year.
“At the moment all of our products are sold in the UK, and we will shortly be supplying a German company through our Danish partnership.
“Our vision is not to ship class one narcotics across borders – when borders have seen 80 years of not shipping the product! It is to get a partnering company, licence our IP, and then get a revenue stream from each country,” he said
By the end of 2025 Celadon hopes to be in profit, although Mr Short says the completion of Phase 2 of its facility is key to this.
Early last month it also announced it had secured a five year sales contract with a minimum order quantity value of up to £10.5m.
In a AIM market statement it said: “This contract win takes the potential order book for Celadon up to c.£40.7m when combined with the Group’s £26m European contract announced in November 2023, and the two UK contracts worth £4.2m announced in May and September 2023.”
Massive Market Opportunity
As well as the cultivation Celadon manufactures cannabinoid APIs and undertakes clinical trials.
It has a 20% stake in Kingdom Therapeutics which is developing a gel-type capsule and undertaking clinical trials into cannabinoid treatments for autism. Celadon also owns LVL Health which is undertaking dried cannabis trials for patients with autism.
Celadon itself employs over 20 full time staff and he expects this to double when the second phase comes on line.
The company is currently in talks with UK vacuum maker and indoor cultivation pioneers Dyson over deploying its emerging robot technology to support Celadon’s growing operations.
Mr Short thinks it may well be some time before institutional investors enter the cannabis space in Europe as their ‘minimum investment tends to be $50m’.
Nevertheless he is bullish at the prospects of the UK market which he says ‘could be huge’.
“The market is beginning to mature….we became the first company to licence products, and the first to sell.
“When we are fully operational, we can produce for 60,000 patients delivering revenues of £90m. It’s a massive opportunity and there are three million people with chronic pain eligible for a cannabinoid treatment. You can see the scale of it.”
