UK cannabis companies and shares to watch

Best British marijuana stocks to watch

Although there are plenty of hurdles for cannabis companies to overcome, several cannabis-related businesses have listed in the UK. Most of the ‘cannabis companies’ listed on the London Stock Exchange (LSE) and the Alternative Investment Market (AIM) are not pure plays, meaning they have other activities outside of marijuana.

The following five companies are well-known UK companies which are associated with the cannabis market.

1. AB Foods
2. Futura Medical
3. Celadon Pharmaceuticals
4. Kanabo
5. Cel AI

AB Foods (LSE:ABF)

AB Foods is a £15.63 billion FTSE 100 market titan, which is perhaps best known as the parent of discount clothing retailer Primark. The company also owns many popular food brands, including Kingsmill, Patak’s, Billington’s and Blue Dragon cooking sauces.

The company is also one of the largest licensed cannabis cultivators in the UK. Subsidiary British Sugar signed a deal with GW Pharmaceuticals in 2019 to supply medical grade M250 marijuana for drug development purposes.

M250 is a specific strain of cannabis which contains a much higher concentration of tetrahydrocannabinol than in standard cannabis — which is the active ingredient within the plant. However, M250 also does not produce a psychoactive effect, making it perfect for medical use due to the lack of unwanted side effects.

AB Foods has converted 45 acres of its greenhouse space — formerly used to grow tomatoes — to grow hemp plants and is perfectly placed to expand to future demand or legislative change. The company may be a popular choice for risk-averse investors looking for exposure to the cannabis sector within a highly diversified company.

In its full year results, the company saw revenue rise by 0.5% year-over-year at constant currency rates to £6.7 billion, though most of this cash came from non-cannabis activities.

Our analysts have given the stock a hold rating with an average price target of 2095p in the next 12-month period.

Market capitalisation: £15.63 billion

Futura Medical (LSE: FUM)

Futura Medical remains an early-stage company which is focusing on the development of sexual health and pain relief using its DermaSys platform.

This allows active ingredients to be placed inside a gel, ready to be absorbed directly through the skin, making it a perfect platform to combine with tetrahydrocannabinol. This product, named CBD100, developed with CBDerma Technology, could be used to help manage localised pain — though it is in the early trial stages.

The company’s flagship erectile dysfunction drug Eroxon is now available on prescription and over the counter in the US, England and Wales. Recent funding from its partnership with Haleon should help Futura Medical grow this product worldwide. This success could be followed by further success with CBD100.

On top of this, Futura Medical have recently announced 2 new products in the early stages of production which address sexual dysfunction. If successful, this could positively impact profit margins.

Our analysts have given the stock a buy rating with an average price target of 140p, up 1352% from its current price.

Market capitalisation: £27.41 million

Celadon Pharmaceuticals (LSE: CEL)

Celadon’s Home Office licence has been successfully updated to allow the commercial sale of its high 9-tetrahydrocannabinol product, following the company’s recent registration as a Good Manufacturing Practices manufacturer by the UK MHRA.

This has allowed Celadon to commence commercially supplying its cannabis-based medical product to third parties, the first registration of a UK pharmaceutical facility for high THC cannabis active pharmaceutical ingredient since Theresa May’s legislation in 2018.

The company signed an inaugural £3 million contract for product to be delivered in Q4 2023, with the same offtake partner signing a letter of intent for an annual £7 million of product on an ongoing basis.

Celadon has also received approval from the NHS Research Ethics Committee to roll out a novel non-cancer chronic pain trial for up to 5,000 patients. For context, there is currently no NHS-approved cannabis-based pain relief treatment available for prescription.

The company’s strategic partnership with Danish company Valeos Pharma will help Celadon to expand its reach across Europe and is expected to bring in an extra $8 million each year.

Market capitalisation: £ 4.81 million

Kanabo (LSE: KNB)

Founded in 2016, Kanabo became the second medical cannabis company to list on the LSE’s main market in February 2021.

Kanabo develops medical treatment products such as its 'VapePod' vaporiser, the first medically certified cannabis vaporiser in the world, and a range of non-smoking consumption solutions. The company maintains a strong focus on research and development, and it is in scale-up mode, with plans to become Europe’s largest public cannabis company.

The VapePod uses cannabis oil cartridges to deliver high precision dosage to patients. This controlled method allows patients to medicate with medical marijuana to help with chronic pain, sleeping disorders or anxiety attacks.

The company haslso made significant progress in developing its digital health services and has introduced an AI chat-to-prescription service to help streamline prescriptions. On top of this, its upgraded e-Script system has enabled prescriptions to be filled out in any pharmacy.

Going forward, Kanabo are looking to grow its digital services and expand its offerings in the German market once the vape has been certified.

Market capitalisation: £1.86 million

Cel AI

Previously referred to as Cellular Goods, Cel AI is a wellness company which specialise in cannabidiol products. Its three main products include a de-aging skin care mask, a roll-on athletic gel to help with muscle recovery and a newly launched collection of sleeping tablets.

Unlike most CBD manufacturers who extract CBD from hemp plants, Cellular Goods use a synthetic form of CBD which is produced in a lab. Not only is this approach more sustainable but it means the company is less susceptible to disruptions in farming.

The company’s most recent interim results reported a revenue drop of 42% to £18k as unfavourable market conditions have resulted in reduced demand. But on a more positive note, net losses reduced by 67% to £604k.

Market capitalisation: 1.10 million

How to invest in UK cannabis stocks

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Cannabis in the UK: what you need to know

The UK’s attitude toward marijuana has changed dramatically over the last decade. Even though the UK has become the world’s largest legal medical cannabis producer, the drug is still illegal for recreational use.

According to a 2024 report by the Crime Survey for England and Wales (CSEW), around 2.3 million people had taken the drug over a one-year period – that is around 7% of the UK’s population.

Meanwhile, the UK’s CBD market is currently estimated to be worth around £800 million and over the next few years it’s expected to surpass £1 billion.

There has been a surge of public support for the legalisation of medical marijuana, and there are signs that the UK government is softening its approach towards cannabis production and distribution. In December 2021, a bill was introduced in the House of Commons which – if passed – would make it legal for general practitioners (GPs) to prescribe medical cannabis for a range of uses in England and Wales.

But the war on drugs is likely to continue to be a complex political battleground.

A guide to the cannabis industry: all you need to know

Marijuana regulation in the UK

The UK’s regulatory stance toward cannabis is complex and, in some cases, contradictory. Medicinal cannabis was legalised in November 2018, following several high-profile cases about children with severe forms of epilepsy being unable to access potentially life-changing cannabis-based treatment.

Yet, access to legal medicinal marijuana remains extremely limited. It cannot be prescribed by your average general practitioner (GP), only by those listed on the Specialist Register of the General Medical Council. However, this may soon change, if the Medical Cannabis Access Bill becomes law.

Public perception is improving and although the number of doctors able to prescribe medicinal cannabis is growing, they are not being encouraged to give it to patients.

The response from the medical community has been underwhelming. Institutions like the Royal College of Physicians and the British Paediatric Neurology Association have said cannabis should only be prescribed as a last resort, while the UK National Institute for Health and Care Excellence – which effectively chooses what drugs can be funded on the National Health Service (NHS) – have also imposed strict guidelines for prescriptions.

There is only a handful of conditions that doctors will consider treating with cannabis, including multiple sclerosis, epilepsy and to help alleviate the effects of chemotherapy treatment. And when someone is suffering from one of these conditions, doctors are effectively directed to try every other possible treatment before prescribing cannabis.

Recreational cannabis is still illegal in the UK under all circumstances.

UK cannabis exports

While the government’s tone implies it does not have great belief in the medicinal applications of marijuana, a few select firms are allowed to legally grow and produce cannabis. In fact, the UK is currently the largest producer and exporter of legal medicinal cannabis.

The UK government doesn’t disclose the list of companies that can legally produce marijuana on British soil, but we do know that only three pharmaceutical cannabis products are licensed in the country. Sativex and Epidyolex are produced by GW Pharmaceuticals (acquired by Jazz Phamaceticals in May 2021) and Nabilone is produced by Eli Lilly & Co (All Sessions).

Outside of the medical applications, the UK has also relaxed its rules on CBD and hemp oil. Again, these must contain less than 0.2% THC. These oils can be bought legally in the UK, but they have been banned from making any medical claims without obtaining a medical licence, which is expensive to obtain.

This means the majority of those offering CBD or hemp oil can’t claim the products offer any medicinal benefits. This has created a further grey area in the market and has forced many producers to rely on informal marketing techniques, such as word of mouth, to flog their oils.

UK’s indecisiveness on marijuana

It’s clear that the UK government remains undecided when it comes to legalising cannabis. It is quite happy to profit from the vast amounts of legal medicinal cannabis being produced legally by a small handful of companies.

While medicinal cannabis is exported to other countries, it’s still very difficult for UK patients to gain access to the handful of legal treatments available. This highlights contradictions in the government’s policy, which could cause further problems for an industry still in its infancy.

A potential consequence could be inadvertently creating a monopoly among the handful of licensed producers.

The stringent rules, high costs and complex regulations mean there are high barriers to entry. This could lead to new start-ups setting up shop elsewhere, in more favourable jurisdictions, like Canada. For example, there has been a debate over how UK-based investors can gain exposure to legal cannabis firms at home or abroad, and not fall foul of anti-money laundering laws when receiving dividends or income.

This is also causing companies to delay going public because they fear operating in a grey area of regulation. Likewise, some investors are wary of backing operations that might be illegal.

What is the future for cannabis in the UK?

The UK’s approach to medicinal cannabis is more complex than in other nations. While the UK produces and sells medicinal cannabis to other countries, it’s not easily accessible in the UK. The country has taken a tentative step toward legalisation – for now, it has only legalised medicinal cannabis in name.

Easier access to the drug is still being discussed and changes in legislation are always possible, but in the near future this seems unlikely.

While the UK has established a large production base, it has concentrated it among a handful of businesses, meaning other countries could become manufacturing hubs for the European market. Germany offers both a domestic market and the potential to export, while the UK only offers the latter in addition to the far and few between prescriptions.

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