EMMAC Executive Chairman Lorne Abony
By Jarrett Banks
EMMAC Life Sciences, Europe’s largest cannabis company, will go public through a merger with Andina Acquistion Corp. III, giving U.S. investors access to the white-hot medical cannabis sector in Europe. EMMAC signed a letter of intent to combine with the special purpose acquisition company, or SPAC, to publicly trade on the NASDAQ.
In an interview with IPO Edge, EMMAC Executive Chairman Lorne Abony and Andina Chairman Luke Weil described how this transaction will open up additional opportunities across Europe. An all-time high 45 SPAC debuts have raised more than $13.5 billion this year, according to data compiled by Bloomberg. Frothy market or not, companies can’t deny the unique optionality that opens up a window to capital markets and retail investors have a level playing field. Wellness market indeed.
IPO Edge: Can you talk about why this is a unique opportunity for U.S. investors to get into the fast-growing European cannabis market?
The largest opportunity in cannabis currently is Europe, predicted to be worth in excess of $13 billion by 2023 and larger than the European alcohol and tobacco markets combined at maturity. We believe there is no company better positioned to capitalize on this opportunity than EMMAC. One of only five actively licensed cultivators, EMMAC has the largest fully-vertically integrated pan-European footprint, and the lowest cost of production.
The unique platform we’ve created, which leverages our huge cost advantages in production and pharma-based distribution, is unmatched and exceedingly difficult to replicate. With a best-in-class management team that has delivered a proven track record of success in highly regulated industries, we believe EMMAC is uniquely positioned to capitalize on the opportunities presented by this high-growth market, led by rapid regulatory change and the increasing demand for access to premium quality cannabis. And our execution already, in building this business, bears all of this out.
IPO Edge: How primed is the European cannabis market for medical use and how is this market different from the US?
In Europe medical cannabis is legal in almost all countries in the EU, as such it is basically one large market. By contrast, the U.S. is not federally legal and is a state-by-state market that prohibits scale economies, interstate commerce and other similar opportunities that would flow from a fully legal market. So EMMAC’s ability to scale and deliver across Europe is incredibly powerful, and cannot be matched. With estimates in Europe of medical cannabis growing from $320 million in 2019 to an estimated $8 billion in 2023, the future is happening now.
With a fully vertically integrated business with cultivation, distribution, processing and R&D, EMMAC is able to produce high quality cannabis at the lowest price – which is significant: compared to the Canada average cost per gram of $2.14, EMMAC has a cost per gram of $0.36. That’s not a mistake – we do it differently and better and know how to make the highest quality at a fraction of the cost.
IPO Edge: How would this deal help your goals of controlling cultivation, manufacturing, R&D, imports, distribution and branding?
As the largest independent European cannabis company, this deal will meaningfully enhance our ability to take advantage of every opportunity in Europe and solidify our leading position. In addition, it will support our global ambitions by providing us the capital to be able to explore other markets for expansion, including the U.S.
We have made great efforts to build strength across the value chain, and this transaction will help unlock additional capacity to pursue opportunities with the European cannabis market, and possibly beyond.
IPO Edge: How significant is the flow of capital to the European medical cannabis sector?
To date, we have raised more capital than any other cannabis company in Europe. With the market growing rapidly, we are poised to continue being the leader.
IPO Edge: How have you dealt with the challenge of COVID-19?
Medical cannabis has been deemed essential across all the countries in which we operate in Europe. This has meant that the business has continued to thrive despite the challenging times, and in fact, it has exceeded our expectations. Our pharmaceutical lab in Spain is also involved in a COVID-19 related clinical trial.
IPO Edge: Where do you see the European medical cannabis market in 5 years?
All expectations are that Europe’s growth will look much like the Canadian and Australian market growth trajectories. The medical cannabis market is expected to explode approximately 25 times to $8 billion and CBD wellness market is expected to grow more than 6 times up to $5 billion. And being the only vertically integrated multi-national player today, we feel very good about our position in the market.
IPO Edge: To what do you attribute the changing attitudes toward medical cannabis?
The secular trend toward acceptance has been developing for a long time. We have seen that particularly among younger age groups there is acceptance and that many fewer people have concerns about cannabis as a treatment.
There is also a growing body of evidence in medical literature that cannabis-based medicinal products are effective in the management of a range of therapeutic areas. EMMAC believes that the growth of the medical cannabis sector has to be supported by the most robust science, and is on the forefront of clinical trials with world-leading research institutions such as Imperial College, London. We are seeking to further research and provide data on what we consider to be a significant potential market with enormous public health benefits for patients and clinicians.
IPO Edge: What else do you have in the pipeline after the success of the muscle gel carried by Boots in the UK?
Walgreens Alliance Boots, the world’s biggest pharmacy wholesaler, is one of the partners we supply with our premium wellness products. We have multiple partnerships in various countries and large retailers and brands trust the quality standards we apply across our supply chain. We are well positioned to distribute the wellness products we are developing in multiple categories, such as nutraceuticals, functional cosmetics and hemp-based food products.
Andina Chairman Luke Weil
IPO Edge: Can you talk about COVID-specific advantages to marketing SPACs vs regular IPOs?
I think the flexibility of the SPAC structure certainly has advantages over the traditional IPO structure, and likely allows for a more diverse set of companies to come together with investors in the US equity markets. During COVID-times as well, the increased ability to communicate and broadly market the combination is beneficial.
IPO Edge: Can you talk about the synergies you see with Emmac?
I think certainly as a third-time SPAC issuer, our extensive experience with the process and structure should facilitate a smooth the journey for EMMAC through closing and to being a publicly-traded company. Our team also brings considerable financial and business experience which will be at EMMAC’s disposal post-transaction.
IPO Edge: SPAC listings have reached an all-time high, with more than $17.7 billion raised in the US. Can you talk about where you see the SPAC market heading?
As long as I’ve been around SPACs – almost a decade now – this time feels different. It feels like the structure has crossed an important point to being mainstream, and a true alternative to a traditional IPO and other forms of capital raising.