One of the hottest areas in investing right now is the Marijuana space. Medical marijuana is currently legal (with a prescription) in 30 U.S. states and in several countries across the world, including Canada and Germany. In addition, some nine U.S. states have legalised recreational marijuana, including California and Colorado. And adding even more fuel to the fire is Canada – who on 17 October 2018 legalised the use of recreational marijuana. More will follow.
Major players in the marijuana industry
So who are the major players? Well they basically fall into two categories – growers and biotechnology companies developing cannabis-based drugs. Most are Canadian based but trade on the NYSE, NASDAQ, and the Toronto Stock Exchange.
The largest growers with a market capitalisation of over US$1 billion and reasonable liquidity include:
- Canopy Growth Corporation (TSE: WEED / NYSE: CGC)
- Aurora Cannabis (TSE: ACB)
- Tilray (NASDAQ: TLRY)
- Aphria (TSE: APH)
- MedMen Enterprises (CNSX: MMEN)
- Cronos Group (TSE: CRON)
- The Green Organic Dutchman (TSE: TGOD)
Most of these stocks trade on both U.S. and Canadian exchanges.
The major biotechs (market capitalisation above $US100 million) with cannabis-based therapies are:
- GW Pharmaceuticals (NASDAQ: GWPH)
- Cara Therapeutics (NASDAQ: CARA)
- Insys Therapeutics (NASDAQ: INSY)
- 22nd Century Group (NYSEAMERICAN: XXII)
- Corbus Pharmaceuticals (NASDAQ: CRBP)
There also two Exchange Traded Funds (ETFs) on offer so far:
- Horizons Marijuana Life Sciences ETF (OTCMKTS: HMLSF)
- ETFMG Alternative Harvest ETF (NYSE: MJ)
Outlook for the marijuana industry
Needless to say, most of these stocks (particularly the growers) have seen significant gains over recent months, and it’s no wonder given the size and scope of the opportunity. Estimates vary but the global legal marijuana market is expected to reach USD 146.4 billion by the end of 2025 as more countries and U.S. states follow suit, according to a report by Grand View Research.
That’s a big number when you consider that spending on cannabis was only $9.5 billion in 2017, according to ArcView Market Research and BDS Analytics. That represents a compound annual growth rate (CAGR) of over 40% per annum.
Cannabis company snapshots
Canada based Canopy Growth is the first marijuana stock to list on the NYSE and the largest with a market capitalisation of US$12.2 billion. It is truly the “800-pound gorilla” of marijuana stocks.
The company has an experienced management team and a huge production capacity, with 10 facilities containing some 2.4 million square feet of growing space. Its main focus is medical marijuana but is likely to expand into the recreational space.
The main reason it stands out is a recent US$4 billion investment by U.S. drinks giant Constellation Brands (market cap US$43 billion). Constellation now owns 38% of Canopy.
Canopy said it will use the proceeds to expand internationally and gain exposure to the nearly 30 countries likely to approve medical marijuana as well as develop consumer focused cannabis products.
GW Pharmaceuticals (NASDAQ: GWPH)
U.K.-based GW Pharmaceuticals PLC has been working to develop and sell cannabinoid medications for over 20 years and is now the first biotech to win FDA approval for a marijuana plant-based drug – Epidiolex - which successfully treats two severe forms of childhood onset epilepsy. GW expects to launch Epidiolex in the U.S. by early fall.
GW Pharmaceuticals is run by an experienced team of pharmaceutical veterans and has successfully launched new products such as GW's multiple sclerosis drug Sativex, which has approval in more than 25 countries outside the U.S.
GW Pharmaceuticals also has other products in clinical trials (some are cannabinoid based) for autism spectrum disorders, the aggressive cancer glioblastoma, and schizophrenia.
GW Pharmaceuticals trades in the U.S. on the NYSE and has a market capitalisation of US4.2 BN.
Although both these companies are growing revenues strongly, neither are profitable. This is not unusual in fast growing early stage companies.
How to invest in cannabis
In order to invest in this nascent and high-growth industry, Australian investors must look overseas.
For clients wishing to invest in these companies directly, Macrovue provides Australian investors access to over 20,000 securities and 23 stock exchanges from around the world – including Toronto and New York stock exchanges, and the NASDAQ.
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