Cannabis practice

2020

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Cannabis markets
According to UN estimates, the global cannabis market is currently
worth approximately USD150 billion annually.
At present, much of this market is illegal, but what is most interesting is the rate at which new products
are being developed for the growing sections of the medicinal and recreational market that are legal
(or anticipated to be authorised in the near future).
Many companies, from industries as diverse as beverages, food, pharmaceuticals, cosmetics and
tobacco, are actively investing in this market which, in recent research, Barclays suggests could almost
double to USD272bn by 2028.

We advised Imperial Brands Ventures Ltd, a subsidiary of Imperial Brands PLC on its equity
stake in Oxford Cannabinoid Technologies (OCT). OCT is a biopharmaceutical company
focused on researching, developing, and licensing cannabinoid-based compounds and therapies.
Its activities are licensed for operation by the UK Home Office. Imperial is just one of the
companies making a mark in the sector by taking stakes in innovative companies. A number
of joint venture and collaborations are also happening – for example Novartis’ strategic
alliance between its subsidiary Sandoz and Tilray, a Canadian company developing
cannabis-based medications.

Allen & Overy LLP’s ‘top tier’ multidisciplinary team is ‘responsive, extremely
knowledgeable about the healthcare industry, the client’s needs and the relevant technolog y’
Legal 500 EMEA, Health and Life Sciences 2017

Strong European offering with noted expertise in IP and patent litigation

matters. Well regarded for its impressive client portfolio, which spans the
pharmaceutical, biotechechnolog y, medtech, diagnostics and healthcare industries.
Chambers Global guide 2018 Global-wide: Life Sciences

Allen & Overy LLP covers the full spectrum of advice on

governance, regulatory compliance and risk management issues
Legal 500 UK 2019 Corporate Governance

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Why the shift?

The main reason for greater activity in this market is the softening regulatory
environment worldwide.
Cannabis is now authorised for medicinal use in more than 25 countries, including Canada,
Israel, Germany and the UK.

Cannabis is proven to be effective in a number of areas of unmet clinical need including

the treatment of chronic pain – a market currently experiencing significant challenges as
governments, lawmakers and healthcare practitioners respond to the epidemic of abuse and
addiction associated with opioids. Another significant treatment area is anxiety, depression and
sleep disorders.

Cannabis-based products have also been used to treat the nausea and vomiting associated
with chemotherapy and a wide range of conditions associated with inflammation (eg eczema).
One of the most high profile areas is the treatment of epilepsy (indeed in June 2018, the FDA
approved GW Pharma’s Epidiolex – the first approved drug to contain CBD and one of a
category of antiepileptic drugs targeting early onset of the condition).

On 17 October 2018, Canada also became the first G7 country to legalise cannabis for
recreational use. Interestingly, few traditional players seem interested in exploring commercial
production of “joints” or cannabis cigarettes. The most active part of the market so far is for
edibles such as ice-cream, sweets, and cookies. There is also growing interest in the potential
for products which are infused with cannabis including beverages and beauty and skin-care.
Vaporisers are another active segment of the market.

Advises on many of the most significant transactions of the day. Draws on its international
footprint to handle work in multiple jurisdictions including the emerging markets.
Chambers UK Guide 2019: UK: Life Sciences

Heavyweight corporate and M&A practice that boasts an

exceptional coverage across Europe.
Chambers Europe-Wide 2018 Corporate/ M&A Department

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Why does this matter?

As the cannabis market opens up, it signals both opportunity and disruption for our clients – for example,
if the recreational marijuana market liberalises, will this impact the size of the alcoholic beverage market?
However, one of the key risks for new market entrants is the changing regulatory landscape.
Our regulatory team has particular expertise in understanding the nuances of regulation in different
markets and helping our clients to assess how their products may be affected. Our team is actively
monitoring the changing status of regulations of products containing cannabinoids around the globe and
thinking about the impacts this will have on our clients’ businesses. Our experience includes advising key
industry players, on:
– national regulations related to hemp-based ingredients (such as cannabidiol/CBD), when included in
regulated products such as food supplements, cosmetics, vaping and medicinal products;
– agreements for the supply and licencing of cannabis for medical use;
– sale of cannabis-based products on e-commerce platforms;
– legal opinions to support investment strategy;
– working with industry bodies and liaising with regulators to shape the definition of the law; and
– securities and reporting requirements for companies involved in the manufacture, distribution or sale of
cannabis-based products.
Alongside our regulatory and compliance lawyers, we have built a multidisciplinary group focused on the
cannabis market and offering expertise in key areas including investment, M&A and commercial alliances;
intellectual property (brands, patents and trade secrets); distribution and licencing; marketing and
advertising; employment; and crime among other areas. We can offer strategic and practical legal advice
from practitioners who understand the specific sector and the particular challenges it may bring
(including reputational issues).

Tier 1: Pharmaceuticals
and biotechnolog y Tier 1: Commercial litigation
Legal 500 UK 2019
Legal 500 UK 2019

Allen & Overy LLP is ‘top of the game’

Legal 500 EMEA Healthcare and Life Sciences

They are excellent; it was a proper partnership.

Chambers Global, Life Sciences 2017

Top multidisciplinary firm recognised for its expertise in life sciences.

Chambers Europe, Life Sciences 2016

© Allen & Overy LLP 2020

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Case study: Acquisition of HemPoland

by The Green Organic Dutchman
Allen & Overy advised Green Organic Dutchman Holdings
Ltd., a Canadian cannabis research & development company,
(TGOD) on its USD 15.5 million acquisition of 100% of
shares in HemPoland sp. z o.o., (HemPoland), a leading
European manufacturer and marketer of premium organic
CBD oils. The acquisition provides access to HemPoland’s
vast distribution network, premium Cannabigold brand,
state-of-the-art hemp oil extraction technologies, and
provides a strategic pathway into the European market
for TGOD’s medical & recreational products and
licensing deals.
Founded in 2014, HemPoland was the first company in
Poland to obtain a state licence allowing the company
to grow hemp and manufacture CBD oil products.
HemPoland’s management is comprised of experts in
cultivation, oil extraction, and marketing of high-quality
organic CBD oil. The company is vertically integrated,
with over 1,250 acres of cultivation leveraging third parties,
multiple commercial scale extraction units, local distributors
in Poland, Austria, Netherlands, Germany, United Kingdom,
Italy, Switzerland, Portugal, Ireland, Czech Republic,
Slovenia, Lithuania, and Estonia, and e-commerce
platform and product sales in over 700 locations. In 2017,
the company produced over 32,000 kgs of organic dried
flower and 310 kgs of organic CBD oils.
Our involvement in the transaction included the due
diligence of the target, negotiations of the transaction
documentation and the assessment of the regulatory regime
in the EU and more than 13 EU jurisdictions governing
the production and sale of HemPoland’s products
(ie CBD-derived products) in the EU. The transaction
was required to be cleared before the Toronto Stock
Exchange and the process included providing to TGOD: (i)
an overview of the regulatory framework; and (ii) opinions
confirming the legality of marketing and distributing
HemPoland’s products for each jurisdiction to which
HemPoland exports its products. We also advised TGOD
on the EU regulatory framework relating to sales of CBD
products across the EU, and our opinion was instrumental
in having the deal cleared. Projects of this nature
demonstrate the unique strength and capabilities of our
network; and the depth of our knowledge in this area.

Definitions
– Cannabis: a broad term used to describe organic products (eg cannabinoids, marijuana, hemp) derived from the
Cannabis genus of plants.
– Cannabinoids: a class of diverse chemical compounds that act on cannabinoid receptors in cells that alter
neurotransmitter release in the brain, spinal cord and peripheral nerves. Cannabinoids can be naturally derived
from the cannabis plant, or manufactured. Non–psychoactive examples include cannabinol and cannabidiols.

Source: Report reviewing the current evidence on of the medicinal benefits of cannabis–based products by the Chief Medical Advisor to the UK Government, June 2018

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Other relevant expertise

Licensing of cannabis for
medical use
We have assisted several pharmaceutical
companies with the drafting and negotiating
of supply and licence agreements for the
supply and licencing of cannabis for
medical use.
Patient access to CBD
based medicines
We have provided general advice on issues
related to patient access to cannabis based
medicines, and the interpretation of ECHR
case law in this respect.
Review of the regulatory
status of CBD in EU
We have reviewed the regulatory status of
CBD in food, cosmetics and medicinal
products in the EU and several EU
Member States.

Seizure of hemp products

Advertising related to cannabis
We have provided a legal risk assessment
on cannabis related advertising and claims
(eg use of the slogan “keep calm and”
together with a cannabis leaf) as well as
sponsorship restrictions under EU member
state law.
(> 0.2% THC)
We have assisted a client with respect to the
seizure of hemp tea (containing more than
0.2% THC) by the customs authorities, and
the related potential classification of hemp as
a narcotic under EU and local law.
Regulatory cannabis monitoring
We regularly monitor evolutions with respect
to the regulations regarding cannabis based
products in Europe, the U.S., and Canada,
for different clients.

Sale and cultivation of hemp seeds Legal highs monitoring

We have advised on the legality of the sale We regularly monitor evolutions with respect
of cannabis/hemp seeds for (i) food/feed to “legal highs” for some of our clients.
purposes and (ii) cultivation purposes; as well
as the actual cultivation of those seeds in
several EU jurisdictions.

Global reach and cross-border approach

We are one of the few firms able to put at our clients disposal a truly global and “one firm”
cohesive network now spanning over 40 offices worldwide from Europe, Asia Pacific, the Middle East
and Africa to the Americas, as well as selecting a network of leading regulatory specialists in places where
we do not currently have a physical presence or the specific expertise which our clients require. This unified
approach enables us to offer a “one-stop-shop” mechanism, where our clients have one main point of contact
able to coordinate regulatory advice across multiple jurisdictions.
Our firm is regularly acknowledged as market leader for life sciences (eg in Chambers & Partners and Legal 500).

5,400 550 40+

People Partners Offices worldwide

© Allen & Overy LLP 2020

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A&O Life Sciences Hub

A blog where experts from Allen & Overy analyse the latest EU and
national legal and regulatory developments in the life sciences sector.
For relevant news, visit us here.

Cannabis Legal & Regulatory Update

Our monthly selection of handpicked news and legal developments.
For relevant news, visit us here.
Subscribe here to our dedicated Cannabis newsletter.

KEY CONTACTS

Cannabis Sector Lead M&A & Investments IP (Patents) IP (Brands)

Eveline Van Keymeulen William Samengo-Turner Marc Doring David Stone

Head of the Life Sciences Partner – Corporate Partner – IP Partner – Litigation/IP
Regulatory Practice Tel +44 20 3088 4415 Tel +44 20 3088 4197 Tel +44 20 3088 2920
Tel +33 1 40 065 566 william.samengo-turner@allenovery.com marc.doring@allenovery.com david.stone@allenovery.com
eveline.vankeymeulen@allenovery.com

Commercial Disputes & Investigations

Jim Ford Hippolyte Marquetty Hayley Humphries

Partner – Corporate Partner – Litigation/Corporate Associate – Litigation
Tel +44 20 3088 4797 Tel +33 1 40 06 53 98 Tel +44 203 088 5126
jim.ford@allenovery.com hippolyte.marquetty@allenovery.com hayley.humphries@allenovery.com

Trade & Regulatory

Matthew Townsend Jodi Norman Isabella Kelly

Partner – Corporate Partner – Banking Associate (admitted in Victoria-Australia) – Corporate
Tel +44 20 3088 3174 Tel +44 20 3088 4259 Tel +44 20 3088 1717
matthew.townsend@allenovery.com jodi.norman@allenovery.com isabella.kelly@allenovery.com

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