Momentum grows at Celadon Pharma

As of April, 38 US states now permit the medical use of cannabis products. It’s a different story here in the UK – where Aim-listed Celadon Pharmaceuticals (CEL) believes it’s one of only two firms with the necessary licences to grow and distribute pharmaceutical-grade cannabis. 

In March, the Home Office gave the firm the legal permissions it needs to sell its cannabis oil to a select number of private clinics, as well as to universities and other drug companies conducting research. It was previously able to manufacture the oil, but could not distribute it.

Shares jumped by roughly 25 per cent following the government approval – and they’re up 225 per cent in the year to date. Encouraging as this is, Celadon is still very much an early-stage outfit: it has yet to turn a profit, and while revenues surged last year, pre-tax losses more than trebled.

However, management is confident that momentum is building behind medical cannabis in the UK, largely because there is significant unmet need in certain patient groups. There are an estimated 8mn people in the country with moderate to severe chronic pain – one of the conditions Celadon believes is a good target for cannabis-based treatments. 

There are presently very few UK studies that support the use of cannabis as a pain reliever, though Celadon hopes it will be able to open up the market by conducting clinical trials and establishing a domestic supply chain.

The size and strength of the US market should give investors reason to be hopeful. But we’d like to see greater evidence of policy support here. Hold.