UK Market-listed cannabis business Kanabo is now generating its first revenues following the successful launch of its flagship VapePod product.
The medical cannabis vapes were launched in the UK in late August, following the launch of its CBD VapePods in the UK, Germany, Canada, France, Italy and Poland in July.
While Kanabo is yet to release any sales figures for the newly launched product, its CEO Avihu Tamir is confident it will enable the company to reverse the multi-million-pound loss it reported in its most recent financial figures, as well as its stock price decline.
“We’re just starting to generate value, so for us we’re very comfortable,” Mr Tamir told BusinessCann.
“We know that the share price will go up. People will see the significant revenues and profits that are going to come, and definitely it’s going to go up. I think it’s probably we’re in our low share price right now.”
Share Price Plummet
Kanabo became the second cannabis company to list on the London Stock Exchange in February this year, following closely in the footsteps of MGC Pharma.
Since skyrocketing over 300% immediately after listing, Kanabo’s stock, much like its peers, has halved since then seeing £57m wiped off its market capitalisation.
In the six months to June 30, 2021, when Kanabo was still pre-revenue, it reported a total loss of £2.4m attributing much of this to one-off costs associated with the reverse acquisition of Spinnaker which facilitated its listing.
Mr Tamir believes the collective underperformance of LSE-listed cannabis stocks over the past six months is largely due to inflated expectations from investors during the cannabis ‘hype’ earlier this year.
“So I think that we need to understand that most of the investors on the public market right now in the UK are retail investors, that means no institutional money and that means that they’re short term investors,” he explained.
“And so they went in because there’s a hype and there is excitement from cannabis’ first listed company. So obviously, there’s a lot of interest and they expected, the share price to go up and up like it’s Bitcoin or something.
“It didn’t go up into $1, $2, $3. And those that are investing for the short term, obviously, they were less happy.”
Materia Acquisition & Unicorn Status
Kanabo’s introduction to the retail market was aided by its upcoming acquisition of Canada-based cannabis producer and distributor Materia, announced in July.
As well as providing an in-road into Europe’s largest medical cannabis market Germany with its pharmaceutical wholesale operation, it allowed Kanabo to launch its vape products in the UK through HandPicked, a UK CBD marketplace owned by Materia.
Though it provided Kanabo with a foot in the door, Mr Tamir said it will not be limited to selling its products through Materia’s platforms.
“We are discussing with several retailers, we’re discussing with significant strategic players online as well, so it’s definitely not going to be solely for HandPicked.
“There is Materia Germany as well, that’s going to be another launch and beyond just the vape product. So Kanabo will grow into additional verticals.”
Mr Tamir remains bullish about the potential scalability of Kanabo following the deal. He told BusinessCann Kanabo’s product development operation in Israel, combined with Materia’s production facility in Malta and distribution networks in Germany put it in a strong position to become one of the ‘two or three’ European cannabis unicorn companies in the near future.
“Our merger will put Kanabo in a different category, instead of a small cap, suddenly the company will be worth north of £100m as a combined company. So I think that that will differentiate Kanabo from the rest of the small cap cannabis companies,” he said.
“Kanabo is unique because we have the capability of product development with our lab in Israel that can do research and trials with cannabis.
“That’s something that is quite challenging in many European countries. And now, there’s distribution and production, the cannabis team can focus more on product development, commercialising them through the production facility in Malta and distribution channels in Germany.”
While its Materia tie-up is the biggest among the numerous acquisitions and partnerships announced since its IPO, including a production deal with PharmaCann Polska in March, a supply partnership with Hellenic Dynamics in May and a further partnership with Medocann in March, it is unlikely to be the last.
“Unorganic growth is going to be a key feature as well because there are huge opportunities. There are some good companies out there that don’t have the access to cash.
“And as we learned from North America, if you want to be the biggest and you want to be the one that is winning, you have to reach a certain size. It’s an economy of scale.”
Opportunities In The European Market
Kanabo’s ambition to cement itself as one of Europe’s few billion-pound cannabis companies is also based on Mr Tamir’s confidence in the explosive growth potential of the European market, which he believes is on track to overtake Canada.
“When I’m talking about Canada, or NASDAQ, there is no difference,” Mr Tamir said.
“Europe is just behind the height that you have in North America. But the direction where this industry is going is very clear… I’m expecting that in the next two, three years, Europe will become a market that is bigger than what Canada is today.”
Mr Tamir believes that the medical cannabis space, where Kanabo is squarely focused, is set to be the major driver of growth across Europe over the next few years, drawing comparisons to the mobile phone boom of the late 90s and early 2000s.
“Taking Germany as an example, without a shift in regulations, we see it growing between 30% to 40% a year. I think the only market we saw growing like this, were when you had cell phones, the growth is quite quick.”
“In the UK year-on-year there is a 300% growth in patients that use medical cannabis. Overall there are not a lot of patients receiving cannabis today in the UK, but the growth is massive.”
The expansion of medical cannabis across the EU is also expected to see a shift in the way people take cannabis away from flowers, towards alternative methods like vaping and tinctures.
Flowers are understood to account for roughly 80% of consumption currently, but this will drop to between 50% and 60% over the next two years as new medical devices become available, Mr Tamir predicted.
Vaping will grow considerably in the near to mid-future, accounting for around 25% to 30% of all cannabis sales, while sublingual consumption will also rise as the market will need to provide a ‘pragmatic solution’ for patients who have never smoked or vaped.
