Big pharma has so far been cautious of diving headfirst into the cannabis industry, despite the growing body of evidence surrounding its medical benefits.
Pharmaceutical cannabis sales are set to top $1.11bn this year, with the world’s largest and most lucrative pharmaceutical market, the US, representing around $800m of that.
However, the burgeoning pipeline of cannabis companies building preclinical and early clinical data will soon represent an attractive proposition for the cash-rich, but risk-averse, pharmaceutical giants.
As Prohibition Partners’ upcoming Pharmaceutical Cannabis Report: 3rd Edition details, merger and acquisition activity in the pharmaceutical cannabis sector has been building steadily over the past two years.
M&A Activity
Since 2021, the pharmaceutical cannabis industry has seen a number of significant transactions, including two major multi-billion-dollar acquisitions.
The first remains the benchmark by which many companies and investors continue to evaluate the financial potential of the industry, Jazz Pharmaceuticals’ $7.2bn acquisition of GW Pharmaceuticals.
The acquisition in 2021 of the manufacturer of Epidyolex, which according to Prohibition Partners is set to represent 76% of all pharmaceutical cannabis sales this year, remains the largest acquisition to date in the industry.
Furthermore, this landmark deal marked the start of a growing pharmaceutical interest in the cannabis space, seeing over a dozen similar transactions take place ever since.
In 2021 alone, following GW’s buyout in June, three further transactions were made, including German operator SynBiotic’s acquisition of GECA Pharma, and KD Pharma Group’s purchase of a 51% stake in Austrian CBD API manufacturer Trigal Pharma in October.
These represented the first in a string of consolidation deals focused around Germany and Austria, as ‘domestic and international players seek to hold a firm grip on regional and European distribution channels’.
READ MORE: Pharmaceutical Cannabis Industry Sales to Grow 20% to $1.37bn by 2027, According to New Report
While the US still represents the biggest market for pharmaceutical cannabis sales by some margin, in Europe, Germany represents the ‘lion’s share’ of sales.
In early 2022, Dermapharm Holding SE purchased the market leader in dronabinol sales in Germany and Austria, C3 Cannabinoid Compound Company, from Canopy Growth in a deal worth around €80 million.
Through this acquisition, Dermapharm also acquired all of C3’s German subsidiaries, which include Spectrum Therapeutics GmbH, based in Neumarkt, and THC Pharm GmbH The Health Concept.
This deal was followed closely by Khiron Life Sciences Corp, which purchased Germany’s Pharmadrug Production for $1.31m in March, giving Khiron direct access to German pharmacies via the latter’s EU-GMP certified manufacturing and distribution hub.
Later that year, US cannabis giant Flora Growth Corp followed suit with a deal to purchase Franchise Global Health for $32m.
Franchise Global Health has a presence in 1,200 pharmacies in Germany, and 28 countries in Europe, enabling Flora to establish a significant foothold in the market, and expand its medical cannabis model through Franchise’s European distribution channels.
North American Interest
While Flora’s acquisition is representative of the growing opportunities Europe represents for North American cannabis and pharmaceutical companies, interest in the space has also been growing across the Atlantic.
Conversely, this includes European firms using M&As to try to break into the market, as seen with Israeli firm Isracann Biosciences’ acquisition of Canadian Praesidio Health for $3.14m in April 2022.
In the US and Canada, the industry has also seen strategic acquisitions by players that aim to increase their patent portfolios, product pipelines and clinical trials.
One of the largest deals in the sector to date was Incannex Healthcare’s takeover of APIRx Pharmaceuticals for $93.3m, seeing the former acquire 22 new clinical and preclinical research projects, giving it one of the largest portfolios of patented medicinal cannabinoid formulations globally.
Most notably, however, was Pfizer’s $6.7bn entrance in the pharmaceutical cannabis market through its acquisition of US biotech and cannabinoid therapy developer Arena Pharmaceuticals.
The deal saw Pfizer, the world’s largest pharmaceutical company by revenue, acquire a cannabinoid-type therapeutics-focused pipeline, specifically Olorinab, a drug which is currently being investigated for a number of indications, including visceral pain associated with gastrointestinal disorders.
According to Prohibition Partners, due to Pfizer’s ‘considerable amount of funds for the R&D of novel therapies’, we could soon see ‘significant developments in new cannabinoid therapies by the company’.
“These major acquisitions of large non-cannabis-specific pharmaceutical players highlight the growing interest and the overall approval of cannabinoids as viable treatments within the industry.
“In the near future, it is possible that there will be an increase of acquisitions in the sector by large pharmaceutical players, as more information, research and clinical trials confirm the medicinal properties and marketability of cannabinoid-based therapies.”
The full report is due to be published in August 2023. Pre-order your copy of the full report here and get 15% off
