Money in the Pot The impact of deregulation on cannabinoids innovation - By Mark Markley and Ed White - Clarivate Analytics
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Money in the Pot The impact of deregulation on cannabinoids innovation By Mark Markley and Ed White
2 Clarivate Analytics
The shifting innovation landscape.
In this paper we explore the patent landscape surrounding cannabinoids, the active
ingredients extracted from cannabis, their innovative use, and commercialization
in the context of progressive global deregulation and the impact of regulation on
cannabinoid innovation.
Recognizing that cannabis is still deemed a controlled substance in most legal
jurisdictions, we see a clear trend towards the exploration of cannabis and cannabis
compounds for both therapeutic and recreational applications.
Money in the Pot 3
The first innovation sition 215, setting a precedent and a viable pathway
– through the ballot – to decriminalization in the US. In
Human ingestion of strange tasting, fermented fruit
2018, Vermont became the first state to legalize through
with a pleasant mind-altering effect was an early
legislation. As of November 2018, cannabis usage has
indulgence. Imbibing other plants with similar results
been approved for recreational use in 10 states and the
seems a natural extension. These early experiments in
District of Columbia, and for medicinal use in an addi-
psychoactive substances likely represent some of the
tional 23 states, although still illegal at the federal level.
earliest experiments in our history with cannabis.
The trend towards decriminalization and legalization
Cannabis use has been documented by archeologists
is not limited to the US. Four countries have now legal-
in prehistoric societies throughout the world, and agri-
ized recreational use of cannabis, and another 11 have
cultural advancements have supported its recreation-
legalized medicinal use.
al, medicinal and textile use for thousands of years.
In June 2018, the UK Home Secretary announced a
review of the medicinal use of cannabis,3 prompted
The trend towards deregulation
by the case of Billy Caldwell, a 12-year-old boy treated
Cannabis use in the United States was largely unre- with cannabis oil for epileptic seizures. As a result of
stricted prior to the 1930s, when it became regulated this review, on July 26, the Home Office announced
as a drug in every US state. In 1937, the Marijuana Tax that medical cannabis would be made available by
Act effectively made possession or transfer illegal1 prescription.4 On September 18, South Africa became
unless a tax stamp, a costly and legally complicated the first African nation to decriminalize via a ruling in
process, was obtained. its Constitutional Court. Most recently, on October 17,
2018, recreational use of cannabis was legalized in
The American Medical Association (AMA) opposed this
Canada. Clearly, there is a trend.
act due to its impact on cannabis prescriptions by physi-
cians, retail pharmaceutical sales, and medical cannabis
cultivation or manufacturing. The AMA proposed instead
that cannabis be added to the Harrison Narcotics Tax As of November 2018, cannabis
Act; however, the bill was passed despite objections. has been approved for
Dr. William Creighton Woodward, legislative counsel
for the AMA, appealed the decision, claiming that the
recreational use in 10 states and the
bill had been prepared in secret without proper time District of Columbia, and for medicinal
to prepare an opposition. He also expressed doubts
regarding allegations of marijuana addiction, violence, use in an additional 23 states, although
and overdosage, and asserted that the use of the word
“marijuana” itself was misleading, as the medical
still illegal at the federal level.
profession did not realize they were losing the more
commonly termed “cannabis.”
“Marijuana is not the correct term,” Woodward argued, Old is new
“yet the burden of this bill is placed heavily on the
In June 2018, the FDA approved the first canna-
doctors and pharmacists of this country.”
bis-based drug for sale in the US. GW Pharmaceuticals’
Fast-forward 33 years to 1970, when cannabis was epilepsy treatment Epidolex makes use of one of
officially outlawed by the Controlled Substances Act hundreds of molecules found in the marijuana plant,
and regulated as a Schedule 1 drug. This classified it cannabidiol (CBD). While Epidolex may be considered
as a substance with “a high potential for abuse and no first-to-market today, the history of cannabis in US
accepted medical use.”2 pharmaceutical innovation dates back centuries.
In the decades since, there have been many efforts to Prior to cannabis regulation in the US, it represented a
roll back this regulation. In 1998, medicinal cannabis tremendously innovative field. The earliest example of
was approved in California by the passage of Propo- a US patent describing cannabis was US patent 82,541,
1. https://definitions.uslegal.com/m/marijuana-tax-act%20/
2. https://www.dea.gov/controlled-substances-act
3. https://www.gov.uk/government/news/home-office-launches-review-into-medical-use-of-cannabis
4. https://www.independent.co.uk/news/health/medical-cannabis-uk-prescription-legal-epilepsy-pain-relief-home-office-moj-nhs-a8464766.html
4 Clarivate Analytics
“Patent rights are a
trade. Inventors gain
ownership over the
technology, but in
return they must tell
the world what it is and
how others can use it.”
issued September 29, 1868 to George Mohler of Illinois. Tracking the ideas
Mr Mohler’s somewhat alarming mixture of cannabis, In this paper, we explore the patent landscape sur-
licorice, peppers, quassia and sarsaparilla plants, and rounding active ingredients extracted from cannabis,
potassium carbonate was aimed at treating a variety of their innovative use, and commercialization in the
nineteenth century ailments. context of progressive global deregulation. We were
interested in seeing if changes in regulation would
Similar inspiration led to John Pemberton’s “French
have an impact on innovation in this space.
Wine Coca” in 1886, which after 132 years, significant
recipe change and removal of its cocaine content is Recognizing that cannabis is still deemed a controlled
now better known as Coca-Cola®. substance in most legal jurisdictions, we see a clear
trend towards exploration of cannabis and cannabis
The lack of early legal restriction in the US provided a
compounds for both therapeutic and recreational
creative forum for invention. To bring this story full circle,
applications.
on September 17, 2018, Coca-Cola (now a $35 billion cor-
poration) announced plans to introduce drinks infused We wanted to see what we could uncover using the Der-
with cannabidiol as part of a collaboration with Canada’s went World Patents Index6 from Clarivate Analytics and
Aurora Cannabis Inc. Like Mr Pemberton’s “French Wine the frameworks developed and used by our Patent Ana-
Coca” more than a century before, the new drinks are lytics team. We created search queries on terms around
intended to ease inflammation, pain and cramping.5 cannabinoids and cannabinoid receptors, focused on
5. https://www.reuters.com/article/us-coca-cola-jointventure-aurora-cannabi/coke-aurora-in-talks-to-make-cannabis-infused-drinks-bnn-bloomberg-
idUSKCN1LX17K
6. https://clarivate.com/products/derwent-world-patents-index/
Money in the Pot 5
inventions from 2005 onwards and aimed our models at
the inventions and ideas identified.
Tracking patent activity, or more specifically, patented
ideas, gives a detailed picture. This is because the patent
right is a trade. Inventors (and their employers) get
ownership and exclusivity of the technology, but in return
they must tell the world what the invention was and how
others can use it. This provides a unique data source that
links the worlds of commerce and innovation together.
Our experts track trends for our clientele every day.
Generally, interest in patent data goes hand in hand
with emerging or growing innovation sectors. It is not
often that we see a patent timeline like the one in
cannabinoids, with a sharp downturn followed by an
equally sharp recovery (Figure 1).
Figure 1. Cannabinoids patent landscape timeline.
In the timeline of global cannabis innovation, 2012
is a pivot point. What occurred around that time that
could explain such a turnaround in activity? Simple –
the electorates of US states Colorado and Washington Global patent activity, regardless of technical content,
voted in favor of the legalization of cannabis. Seven generally increases year on year (depicted by the green
US states and the District of Columbia followed with line in Figure 1) due to increases in:
similar measures over the next four years.
• emerging country innovation, particularly in China;
Notable is the lack of patents • economic activity globally; and
of territories in which cannabis • STEM-educated professionals, who naturally pro-
duce more patentable ideas.
remains illegal. Instead, we see US deregulation has allowed the cannabinoids market
Canada and Israel, where regulation to join this global, all-tech trend. A major question for
this study surrounds the nature of invention pre- and
is becoming less tight. post-2012. Does it differ? We explore this question later
in the paper.
6 Clarivate Analytics
Another question concerns the location of inventions.
This question can be answered by reviewing the
addresses of patent inventors (Figure 1). Inventor
address information is used as a proxy measurement
for the physical, geographic location of the innovating
entity. As inventors tend to reside in the same coun-
try as their place of business, it is a good indicator of
company location. At a simple level, the number of
residents of a country listed as inventors on patents or
patent applications can provide a useful assessment
of the “inventiveness” of that country.
Confirming our thesis that US deregulation is driving
cannabinoid research, we find that 50% of inventors
list the US as their place of residence (Figure 2). The
UK and Germany also show activity, but not to the
scale of the US.
Figure 3. Protection locations.
Figure 2. Sources of innovation.
Equally notable are low patent numbers in regions
where cannabis or its derivatives remain illegal, includ-
ing for therapeutic use – for example China (usually
Figure 4. Sources of innovation timeline.
a high-volume source of patents), Japan and South
Korea. In place of these innovation giants, we see
Canada, Spain, Israel and Switzerland – all countries in
When reviewing innovation source trends (Figure 4),
which regulation is becoming less tight.
the US leads again, followed by Israel and Canada – lo-
We arrive at similar findings when we look at where cations where a similarly easing regulatory framework
inventions are registered for protection. Figure 3 has empowered innovation to thrive.
contrasts the typical distribution of protection loca-
As shown in Figure 5, the cannabinoids sector is dom-
tions with our cannabinoids dataset (in white). The
inated by corporate entities with small patent portfo-
filing comparison again reflects unusual activity, with
lios, illustrating an early “wild west” market – highly
under-representation in China, Japan and Korea, and
competitive and not yet settled. This model may also
significant over-representation in Canada and Australia.
suggest that cannabinoid innovation is resulting in the
While the US is currently the most prominent market development of new companies, as new markets in
for this technology, other above-average levels of this space are opened and explored.
filing suggest markets where entities are planning for
commercialization.
Money in the Pot 7
Figure 5. Entity dynamics. Figure 6. Entity dynamics timeline.
Strength is important In addition, the Derwent Strength Index also models
the value of inventions over time. The DSI is scored
Growth in cannabinoids innovation is coming from
across individual inventions, then aggregated across
smaller entities and corporations (Figure 6). This may
entities and technologies.
be a result of the decline in larger, traditional pharma
companies in recent years, as the traditional combina- The strongest cannabinoids portfolios (Figure 7) are
torial chemistry approach of developing new synthetic held by pharmaceutical majors Roche, Boehringer,
compounds is supplanted by new start-up companies and Abbvie.
relying on endogenous cannabinoid compounds.
Measuring the number of patented inventions is useful
but it does not tell the whole story. The quality and
strength of intellectual assets that the patenting process
produces are equally important and can provide us with
useful information on where the sector is headed next.
The Derwent Strength Index is a metric that assesses
several desirable characteristics a single invention has
gathered to date. It is aggregated across technologies
and entities to identify trends and direction. The DSI
assesses:
• The frequency of downstream citation to an inven-
tion – a well known metric of impact and impor-
tance
• The breadth of geographic filing, which correlates
very closely to the level of cost and investment in
patent protection
Figure 7. Competitive dynamics model.
• Existence and location of granted, issued patent
rights, a proxy for validity as well as commitment by
the patent applicant This trend can be better understood by examining in-
dividual entities. Most entities, including big pharmas
• The invention’s technical breadth, correlating to the
like Sanofi, Merck, Abbott, Astra Zeneca and Boehring-
range of industry which the invention maps on –
er Ingelheim, displayed higher distribution of filing
essentially, how “big” the invention is
prior to 2009, and less activity in more recent years.
8 Clarivate Analytics
“Measuring the number of
inventions is useful but does not
tell the whole story.
Measuring the
quality and strength
of the patents is
equally important.”
GW Pharma, Roche, Pfizer, Otsuka, Yissum and Almirall
show more recent activity, suggesting renewed inter-
est in this space. Large entities such as Merck Sharp &
Dohm show a strong decline and likely, a sharp drop-
off in research and investment.
We need to go a little deeper to understand the before
and after of the US deregulation phenomenon.
From medicinal to recreational use?
Table 1 shows a detailed breakdown of what has been
patented in the cannabinoids space, exploring individ-
ual inventions by therapeutic target and type of active
cannabinoid.
Grouping innovation approaches together by therapy,
compounds, and delivery devices (Figure 8) provides
additional information and a useful summary.
Through this analysis, we find that pre-2012 cannabi-
noid patent activity is therapy-centered, while post-
2012 research is all about the active ingredient and
how to make it ingestible. An eyebrow-raising conclu- Table 1. Timeline of technical categories, as % per year.
sion could be that pre-2012 patenting was medicinal,
and post-2012 is recreational. Certainly, the data
points in that direction.
Money in the Pot 9
Pre-2012 activity looks
medicinal while post-2012
looks recreational. Certainly,
the data points in that direction.
Figure 8. Timeline of major innovation directions.
Landscaping cannabinoid innovation Patent analysis techniques deploy data mining software
and domain expertise to structure the millions of tech-
Patent data is a major, if often overlooked or misunder-
nical solutions mentioned in public patent data, making
stood, data source for assessing future market trends.
it ready for interpretation and indeed exploitation.
Patents are typically 20+ page documents full of text
One such technique is to mine the data for technical
describing what the invention is, how it works and how it
themes, industrial uses or, in this case, compounds
can be used. Indeed, for a patent to be valid it must pro-
and therapies. Figure 9 shows the results of this data
vide this detail. This is because providing a state-spon-
mining exercise.
sored monopoly comes with the “cost” of full disclosure.
This taxonomy was developed by extracting terms
That personal or corporate cost is every other innova-
from the Derwent World Patents Index abstract, vari-
tor’s gain, as it contributes to an intelligence source on
ous patent classification and indexing schemes as well
the world’s best solutions to technical problems large
as the original text of the patent documents them-
and small.
selves. The result is a data structure that reflects the
broad uses and concepts employed by cannabinoid
innovators.
Individual innovations often fall into more than one
category. For example, it is common in pharmaceuti-
cal patents to list several possible conditions a com-
pound may be used to treat.
We see that several compounds are experiencing
growth, particularly CBD and THC. CBD shows the
highest growth rate in the categorization, demonstrat-
ing a high degree of recent interest.
Our taxonomy breaks the cannabinoid space into 22
technical approaches. In Figure 10, green represents
cannabinoid compounds; grey, devices; and white, dis-
ease or condition indications. The classifcaiton “other
cannabinoids” represents a mix of phytocannabinoids,
endocannabinoids and synthetic cannabinoids.
Figure 9. Technical categorization distribution.
10 Clarivate Analytics
“Tetrahydrocannabinol (THC), the
main psychoactive compound
derived from cannabis, is the
most common derivative
explored in the patent
landscape, followed by
cannabinadiol (CBD).”
Figure 10. Technical approach in recent 3-year trends. Figure 11. Technical dynamics.
Tetrahydrocannabinol (THC), the main psychoactive those recent trends in context – applying a degree of
compound derived from cannabis, is the most com- commercial importance to the research alongside
mon cannabinoid compound mentioned, followed by volumetric trends.
cannabinadiol (CBD).
Using our dynamic measurement of where innovation
The strength verses recency model we earlier ap- is strongest right now – depicted in the top right quad-
plied to organizations to understand the competitive rant – we see focus on Cannabidiol (CBD), Cannabi-
dynamic in the field can also be applied to measure noid devices and long-standing therapeutic areas of
technical dynamics (Figure 11). The model puts pain and inflammation treatment.Money in the Pot 11
“The commercial
heart of cannabis
innovation today
is cannabidiol and
delivery devices,
alongside pain and
inflammation therapy.”
This model reveals the focus areas of cannabinoid in- Conclusions: From patent data to real-world
novation and the commercial heart of the cannabinoid implication
industry: CBD and devices, and pain and inflammation
Innovation in the cannabinoid sector is undergoing
treatment.
significant change. Early ideation in the mid-2000s
The relatively low level of device activity, despite its came from large, established pharmaceutical entities
location in the model, strongly identifies it as the key predominantly developing synthetic compounds
emerging technology in the sector. There is more to intended to modulate cannabinoid receptors. Howev-
come from this technology, and it appears likely that er, this early activity experienced a significant downward
CBD will be the compound delivered by these future trend and declining commercial opportunity.
devices to patients and recreational users.
All that changed when individual states in the US
This model also provides more information on the piv- began deregulating cannabis for recreational use, kick-
ot described earlier in the paper from therapy centered ing off a flurry of research and innovation. That new
innovation to compound and delivery. research has mostly concerned novel synthesis and
delivery of cannabinoids, leaving behind most medic-
Most of the therapeutic targets (asthma, anxiety,
inal uses with the exception of pain and inflammation
neurological or psychological conditions etc.) are
treatment. The impetus for new ideas in cannabinoids
clustered in the older, weaker quadrant at lower left.
has largely stemmed from changes in the US, evi-
This placement implies that these applications are
denced both by the timing of renewed innovation as
no longer pursued to the same degree as in previous
well as by the field’s dominance by US innovators, who
years, and even when they were pursued, they did not
represent more than half of all innovators in the sector.
produce strong intellectual property assets.12 Clarivate Analytics
governments.7 The regulatory environment is struggling
to keep up with black market synthesis of ever-more
powerful, abuse-centered and harmful variants of
Everything changed cannabinoids – mirroring the trend seen in the 19th and
early 20th centuries that ended in legislative bans.
when individual states Research, development, testing and regulation pro-
in the US began deregulating. In vide a sensible approach to addressing this detrimen-
tal trend – encouraging a safer environment for users
doing so, they kicked off a flurry of of these compounds, and reducing or eliminating the
need for a black market.
innovation.
In most of the world, cannabinoids remain illegal.
Our research into patented innovation shows that
deregulation has the effect of stimulating research and
However, patent data also highlights recent dereg- commercialization.
ulation trends in Canada, Australia and other coun-
Filing for patents is expensive; the research that goes
tries, providing a direct link between regulatory and
into patented ideas even more so. The world’s bio-
research environments.
chemists can only make that investment in locations
We can’t say with certainty how regulations around where legal, safe market opportunities are available
cannabis and cannabinoids will change and further ef- for them to explore safer usage and the easing of
fect the innovation landscape. As governments around suffering.
the world continue to re-assess cannabis and can-
Analyzing the unique data source that is public patent
nabinoids for therapeutic use and global acceptance
data provides a powerful viewpoint into innovation
similarly grows for recreational use, we can predict
trends. We predict much more to come, so let’s see
that any further deregulation will act as a catalyst for
what happens next.
research and new ideas, new applications and new
commercial activity.
Conversely, synthetic cannabinoid compounds devel- 7. https://www.economist.com/britain/2018/09/29/spice-is-throwing-up-
oped and sold illegally are growing concerns for many problems-not-seen-with-other-drugsMoney in the Pot 13
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About Derwent
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and services including Derwent Innovation, Derwent World Patent Index, Derwent Patent Citation Index and Derwent
Data Analyzer. We build solutions for inventors, patent attorneys and licensing specialists at start-ups and the
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at more than 40 patent offices. Our solutions are used to monitor technology trends and competitive landscapes,
inform FTO opinions, prosecute patents, monetize and license assets and support litigation activities.
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