POT LUCK FOR CELEBRITIES

Cannabis Grower Made Fortunes For Early Supporters But Others Feel Let Down.

A champion jockey, a 1970s pop star and a roll-call of expert advocates for
the legalisation of soft drugs were among the private backers of GW
Pharmaceuticals, the firm developing drugs from cannabis.

According to documents filed at Companies House, GW was supported prior to
its UKP 175m flotation in June by a list of prominent people, many of whom
saw the value of their investments surge five-fold in the public offering.

GW's flotation infuriated analysts and fund managers, who claim the
offering was hyped and over-priced.

Immediately after the flotation, shares in GW went into freefall as
investors dumped stock. The price has dropped 44%, triggering accusations
that the public offering was poorly handled.

GW is Britain's biggest legal grower of cannabis, with more than 40,000
plants under guard at a secret location in the south of England. Although
its flotation was six times over-subscribed, the firm has received a
mauling in the City since. One analyst described GW as "an incredibly
over-priced greenhouse".

Among GW's biggest backers was Colin Blackbourn, a trader at Shore Capital
who is known in the City as the Black Prince for his ability to pick small
investments. Mr Blackbourn invested UKP 147,000 in GW early last year, then
saw his shares valued at UKP 765,000 on flotation.

John Francome, winner of seven National Hunt titles, was another
beneficiary, investing about UKP 20,000 in GW prior to flotation. Now a
television commentator, he was introduced to GW by a young jockey whose
family had an interest in the business.

(b)'It's cheap at the moment'(/b)

"I wouldn't know a drug if it was sitting in front of me," Mr Francome
says. "But I think GW's a great idea. If you can help people who are ill,
that's a good thing."

Unusually, GW had almost no institutional backing before going public. Most
of the shares were held by individuals. David Dundas, best known for his
1970s hit Jeans On, had 39,984 shares on flotation, worth UKP 72,000. He
paid less than UKP 25,000 for the stock in a private fundraising by GW last
November.

The son of the Marquess of Zetland, Dundas's work includes composing the
four-note jingle used to introduce Channel Four programmes. He says: "I
just heard through a friend of the things GW was doing. I liked the company
and, long term, I think it's going to be a good one."

Under licence from the Home Office, GW began trials of a cannabis-based
mouthspray last year. The company's admirers say that if clinical trials
are successful the commercial potential could be vast. Garry Waanders, an
analyst at stockbroker Peel, Hunt, believes sales of GW's cannabis-based
treatment for multiple sclerosis could reach UKP 250m by 2004, and he
values the business at UKP 400m. "I think it's very cheap at the moment."

But a recent move towards wholesale decriminalisation of cannabis has
damaged the investment case, raising the possibility that patients could
simply grow their own. GW rejects this, insisting that smoking cannabis is
much less effective than its purified form of cannabinoids, the active
ingredient inside the drug.

GW's founder, former hospital doctor Geoffrey Guy, has lobbied the
government hard to permit prescriptions of cannabis-based drugs. He says
the Home Office has pledged that if GW's clinical trials are successful
ministers will reschedule cannabis to permit its use in pharmaceuticals.

Other private backers include Lady Angela Chadwyck-Healey, a noted art
collector. She paid UKP 98,000 in spring 2000 for shares which were valued
in June's flotation at UKP 509,000.

Philip Robson, a psychiatrist at Chilton Clinic, Oxford, is on the
shareholder register alongside his colleague George Hibbert. Dr Robson, an
advocate of decriminalisation, is the author of "Forbidden drugs:
understanding drugs and why people take them", a respected work on the
subject. Another investor is Arnold Cragg of market research firm Cragg
Ross Dawson, which analyses the government's anti-drugs messages.

City names include David and Guy Mace, the brothers who used to run leisure
firm Vardon, which owned the London Dungeon and the Sea Life centre.

Venture capitalists Peter Mountford and Adrian Bradshaw of Bradmount
Investments, which backed the Aim-listed firm Internet Direct, are big
personal backers. Mr Mountford and his family had 480,000 shares on
flotation, worth UKP 873,000, while Mr Bradshaw had 240,000 shares, worth
UKP 435,000. They bought their stakes for UKP 300,000 and UKP 150,000
respectively in November.

Stephen Noar, the entrepreneur who purchased Geoffrey Robinson's Lutyens
mansion in Hampshire for about UKP 5m last year, was another investor in
GW's November fundraising. His family paid UKP 525,000 for shares which
were valued on flotation eight months later at UKP 1.5m.

The huge paper profits made by these pre-float investors will frustrate
those who bought shares in the public offering, only to see an immediate
slump in the price.

GW blames misinterpretation of a report in the British Medical Journal
which questioned the effectiveness of cannabis in treating pain. The
company says this had few implications for its cannabinoids.

Others suggest that the price has fallen because private investors were not
locked in after flotation. There has been criticism, too, of the small
number of shares handed out to each institutional investor on flotation by
broker Collins Stewart. Some fund managers, it is alleged, were left with
such small parcels that they decided the equity was not worth hanging on to.

One analyst said: "People were promised that it would be over-subscribed,
and it would double on its first day. That's the only reason why a lot of
them took it."

Jonathan Kwok, a biotechnology analyst at Old Mutual Securities, said: "The
shares were definitely overpriced when the company went to the market."

GW's management declined to discuss the flotation yesterday. A spokesman
said the big profits made by private investors were "not atypical of
pre-float finance", and only a small number of early backers had sold after
the offering."Clearly, the performance of the stock post-flotation has been
disappointing and the company shares that disappointment."

Andrew Richmond of Collins Stewart rejects the idea that the flotation was
hyped, maintaining that it was handled no differently from any other offering.

GW's shares rose 0.5p to 103.5p yesterday, against a flotation price of
182p. The share price has been sluggish despite news this week that the
firm has begun trials of its cannabis spray in Canada, where medicinal use
of the drug has just been legalised. Chief executive Geoffrey Guy has
little to smile about following the share price fall: the value of his
personal stake has dropped from UKP 47m to UKP 26m.

On September 7, the firm expects to announce detailed results of its latest
clinical trials. As far as investors are concerned, they had better be
stunningly good.