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How Brexit could halt Canopy Growth’s foray into the UK

Canopy Growth Corporation (TSX:WEED) (NYSE:CGC) updated investors on Monday with news of their expansions on the European front. On top of completing their first shipment to Poland, the company kicked off the week by launching a brand new company in the U.K.

Spectrum Biomedical UK is the newest company and the latest joint venture for Canopy Growth, combining the Canadian cannabis company with British research firm Beckley Canopy Therapeutics.

Beckley Therapeutics originally became a part of the family when Canopy Growth partnered with The Beckley Foundation, a British think tank founded by Amanda Fielding. Fielding is a well-known drug policy reformer in the U.K., and she founded Beckley in 1998 to support research into the health benefits of psychedelic drugs, as well as cannabis.

Spectrum Biomedical UK will act as an educator for physicians and doctors while ushering in their brand of medical marijuana products in England.

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Dr. Mark Ware, Canopy’s Chief Medical Officer, stated that “Spectrum UK has the expertise and ambition to simplify the U.K. medicinal cannabis landscape.” Ware is not wrong, necessarily. Current medical marijuana regulations in the UK are stricter than they are in most medical markets across the pond. Even the country’s National Health Service states that only a small number of patients will likely get a prescription.

But Brexit could further complicate matters in such a way that is completely out Canopy Growth’s mentoring hands, especially if the nation leaves the EU with no deal or strategy.

What does a hard or no-deal Brexit mean for Canopy and the rest of the cannabis industry?

The sensitive nature of the Brexit debate in Europe creates a very complex environment for both medical patients and cannabis investors alike.

For example, should the U.K. commit to a hard or no-deal Brexit, it could temporarily halt trade between Britain and Europe. This would make medical imports nearly impossible. British Health Secretary Matt Hancock warned drug companies in December to stockpile medicine in case supply chains were disrupted, but there is no mention of medical cannabis or whether or not it will be included in this preemptive stockpiling of medicine and medical supplies.

Further, the Brexit debates delayed the long-term funding plan for the U.K. National Health Service. Since the NHS is directly responsible for controlling the use and prescription of medical cannabis, this funding is extremely important to investors and patients waiting on the launch of new cannabis products. The original funding plans called for a 3.4 percent annual increase, prompting Prime Minister Theresa May to ask the NHS for a long-term plan.

May further delayed the plans when she argued that extra funding for the NHS “will come from using the money we will no longer spend on our annual membership subscription to the European Union” once Brexit becomes a reality. But this reality is hard to imagine when Brexit could ultimately cost the country £15 billion ($19.3 billion). It could be more if the U.K. leaves without a deal in place to soften the blow, meaning funds for medical marijuana and other health markets may rely on higher taxes instead.

Launching a new company in the U.K. now, months before Brexit is supposed to happen officially, will put Canopy Growth front and center for one of the biggest political and economic shows in Western Europe. Could Canopy’s front row seat could prove to be a risk that pays off? Perhaps.

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Fallout is on the mind’s of many amidst the Brexit deadline, but being in the thick of it could give Canopy a real opportunity to put their mentorship to the test. Their presence in the U.K. and their reputation for research and education could give their brand more of an influence over Britain’s markets when new borders are drawn, and trade laws change.

Though, without locally growing or stockpiling medical cannabis, Canopy Growth might just fall victim to import restrictions if a no-deal Brexit occurs. If that is the case, cannabis investors are better off focusing on the pot stock’s other European and Latin American endeavors, at least for now.

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