Columbia Care LLC is pursuing a license in Malta, the company announced last Thursday, becoming the first large U.S. cannabis company to openly set its sights on Europe. While the Mediterranean island is hardly a significant market, the announcement suggests Canadian LPs won’t have a free run of European and international medical markets for long.
New York-based Columbia and its Maltese partner Solea Ltd. have received preliminary approval from Malta’s foreign investment agency to operate a cannabis business in the country. The company still needs approval from several other government agencies, but Columbia’s CEO Nicholas Vita expects to be fully licensed some time next year.
"The scarcity of land compared to some of the other larger markets may not make it the best cultivation location, but in terms of genetic selective breeding programs, in terms of R&D development, in terms of manufacturing, there are a variety of approaches you could take,” Mr. Vita told Cannabis Professional.
Columbia claims to be the largest medical marijuana operator in the U.S., with clinics in 13 states. It’s in the process of going public through a Canaccord Genuity Corp.-backed special purpose acquisition company (SPAC) listed on the Canadian NEO Exchange, and recently raised US$85-million in connection with the deal (on top of US$35-million already raised by the SPAC). The deal is expected to close in the first quarter of 2019.
Over the past six months, a number of large U.S. operators have tapped Canadian public markets to build war chests for the rapidly changing market south of the border. Columbia, however, is the first of the multi-state players to publicly say it’s looking at opportunities beyond the U.S.
“Our ability to scale into new markets in the U.S. is really something that at this point is sort of a matter of fact," Mr. Vita said. “The real question for us, is how do we take intellectual property, how do we take the data, how do we take the experience and scale that we’ve built in the United States and turn that into a global business. For us, a natural place to expand was Europe, using Malta as a stepping stone for the rest of Europe.”
Malta is fast becoming a hub for the cannabis industry, despite having almost no available land and a negligible domestic market. That's due largely to government support, said George McBride, CEO of UK-based cannabis consultancy Hanway Associates.
"They just had a cannabis conference the other day and it had endorsements from the Prime Minister, it had members of government and ministers speaking. There has been a real deliberate drive to get behind this industry in Malta, which is largely driven around the idea that they think there's going to be a lot of tax revenues,” Mr. McBride said.
It’s unlikely that government support alone will make Malta a gateway through which product is imported on mass into the EU, said Mr. McBride: "It’s an expensive place to do warehousing and shipping.” But it could be somewhere to develop drugs to European standards and get IP approved for broader EU distribution, he said.
Unlike Canadian companies, Columbia won’t be able to export domestically-grown products to Europe, as cannabis is still illegal at the federal level in United States. That said, “the things that we can actually move across national lines and state lines – patient data, intellectual property – those things translate well into a market like Malta were we can create centres of excellence," Mr. Vita said.
Should Canadian companies, who have been touting European opportunities to justify their lofty valuations, be concerned about competition from sophisticated U.S. operators run, as Columbia is, by ex-Goldman Sachs bankers? Not really, said Mr. McBride.
“Competition isn’t really a limiting factor at the moment, due to the fact that supply can’t meet demand," he said. “It wouldn’t concern me if I was invested in a Canadian LP. In fact if anything it would reassure me about their international strategy, that it’s being now mimicked by U.S. counterparts.”