Attitudes are changing fast on cannabis, and investors are taking note.
With the birth of legal recreational markets in places like California and a growing appreciation for the medical applications of cannabinoids such as CBD, the floodgates are open for companies to pursue new and groundbreaking opportunities in the sector.
Unlike other fields where medical research has been mainstream for many decades, the work behind cannabis – an incredibly complex plant – is only getting started.
Today’s infographic comes from InMed Pharmaceuticals and it explains the medical potential behind the 90+ cannabinoids that we have yet to fully understand.
It also details a scientific process known as biosynthesis, which helped revolutionize the production of insulin for diabetics. A process such as this may be a key in unlocking the medical potential of understudied cannabinoids.
The medical benefits of cannabis are many, and scientific research is being conducted to explore the application of the plant in several disease categories, including multiple sclerosis, seizures, glaucoma, cancer, Alzheimer’s, and migraines.
However, this is just the tip of the iceberg. To understand the full potential of the cannabis plant, you need to know what cannabinoids are, and how they work.
The Human Endocannabinoid System
Like all mammals, the human body is loaded with natural cannabinoid receptors.
These receptors interact with cannabinoids, which occur naturally in the human body, but also in the cannabis plant.
|Type of Cannabinoid||Description|
|Endocannabinoids||Made in the human body|
|Plant cannabinoids||Found in the cannabis plant|
|Synthetic cannabinoids||Manufactured artificially to mimic natural cannabinoids|
|Biosynthesized cannabinoids||Biofermentation process using E. Coli-based system, which creates cannabinoids identical to those found in nature|
Some cannabinoids you may know include THC and CBD – and they have a wide variety of applications. They also make up the majority of cannabinoids (by volume) that can be easily extracted from the plant.
However, there are actually 90+ other cannabinoids that have potential medical benefits as well, and they make up less than 0.1% of total biomass. Because they are so difficult to isolate, they remain understudied in medicinal science.
A Problem of Volume
With only a tiny portion of the cannabis plant having medicinal value (the cannabinoids), a large degree of biomass must be harvested to extract even small amounts of medicine.
For example, 3 lbs (1.36 kg) of hig-CBD flowers may only yield 50 grams of pharmaceutical-grade compounds.
But this ratio is even more strenuous for the 90+ rare cannabinoids that make up less than 0.1% of the plant. With costs in the millions of dollars-per-gram range, it is extremely cost prohibitive to be researching these cannabinoids in any in-depth capacity.
Biosynthesis for Cannabinoids?
The process of biosynthesis could be a clue to maximizing the potential of these understudied cannabinoids.
In fact, this innovation has already helped democratize access to insulin, which originally was an extremely rare and expensive compound. To get just eight ounces of insulin, over 5,000 pig pancreases had to be harvested and processed. With biosynthesis, that is no longer the case.
Biosynthesis is a process that can occur by genetically modifying an organism to produce a pharmaceutically bioactive compounds that it normally would not make. Biosynthesis could thus be used to produce rare cannabinoids that are biologically identical to those produced by the cannabis plant itself.
Here’s how it works:
1) A biosynthetic cluster is inserted into a DNA vector.
2) DNA is inserted into E. Coli bacteria, where it provides instructions to produce cannabinoid compound(s)
3) The process is conducted at a large scale, resulting in materials that can be further processed into purified cannabinoids
The Potential of Biosynthesis
The world’s largest cannabis biotech company, GW Pharmaceuticals, has signed a contract with British Sugar to grow 18 hectares of cannabis for its CBD epilepsy drug, Epidiolex™.
Equivalent to approximately 23 football fields of greenhouse space, this represents a considerable amount of resources and investment needed to grow enough crops to treat 40,000 children with the disease.
If biosynthesis can produce similar quantities of cannabinoids from a much smaller space, it would be disruptive to the industry. Further, it may also make getting other understudied cannabinoids more economic – helping to possibly unleash the full medicinal potential of the cannabis plant.
The Dramatic Rise and Fall of Cannabis Company Stocks
The Dramatic Rise and Fall of Cannabis Company Stocks
The unprecedented expansion of cannabis across North America took the investment world by storm, as investors raced to cash in on the “green rush”.
Yet, even as changing regulations unlock new opportunities, it seems as though the cannabis stock bubble has already burst — at least temporarily.
Today’s visualization dives into the roller coaster of cannabis company stock valuations over the past few years, and which companies remain standing in this hazy market.
A Wild Ride for Cannabis Stocks
The North American Marijuana Index tracks the equally-weighted stocks of leading companies operating in the legal cannabis industry in U.S. and Canada. Companies listed on the index must have at least 50% of their business strategy focused on the legal industry, including ancillary operations that support companies and consumers.
At the tail-end of 2017, the promise of upcoming legalization in two immense markets—California state and Canada—had investors all fired up. The index’s low (105.31 on June 27th, 2017) shot up almost three times to 358.93 by January 8th, 2018.
Things took a sharp turn in the second quarter of 2019, as the expectations for cannabis company stocks encountered a harsh reality post-legalization.
|Index||North America||🇺🇸 U.S.||🇨🇦 Canada|
Note: 52-week period data captures Dec 9th 2018-Dec 9th 2019.
What are the reasons behind such a nosedive? Could the cannabis industry still make a comeback in 2020? We look at some opposing perspectives to answer these questions.
So Much For the Green Rush
The cannabis industry is experiencing significant challenges. In the U.S., legal cannabis faces high taxes—come the new year, consumers in California will see an 80% mark-up on their cannabis at checkout, up from 60%.
North of the border, federal legalization led to immense consumer demand for Canadian cannabis—but supply can’t keep up. To make matters worse, retail stores are slow to roll out, which means Canada is feeling the crunch.
Steep prices, and difficulty purchasing products post-legalization, allow the black market to thrive. It’s clear many cannabis companies have taken a big hit as a result.
According to the Marijuana Index, here are the 10 biggest companies in the space now:
|Company||Symbol||Market Cap (US$)||Country|
|Canopy Growth Corp.||NYSE: CGC||$5.6B||🇨🇦 Canada|
|Curaleaf Holdings||CNSX: CURA||$3.67B||🇺🇸 United States|
|GW Pharmaceuticals PLC||NASDAQ: GWPH||$2.98B||🇬🇧 United Kingdom|
|Aurora Cannabis Inc.||TSE: ACB||$2.85B||🇨🇦 Canada|
|Green Thumb Industries Inc.||CNSX: GTII||$2.42B||🇺🇸 United States|
|Cronos Group inc.||TSE: CRON||$1.83B||🇨🇦 Canada|
|Trulieve Cannabis Corp||CNSX: TRUL||$1.91B||🇺🇸 United States|
|Tilray Inc.||NASDAQ: TLRY||$1.46B||🇨🇦 Canada|
|Aphria Inc.||TSE: APHA||$0.96B||🇨🇦 Canada|
|Harvest Health & Recreation Inc.||CNSX: HARV||$0.94B||🇺🇸 United States|
Note: Companies listed on a Canadian index have had their market cap converted from CAD$ to US$. Top 10 companies are based on those listed on the North American Marijuana Index. All values as of Dec 9th, 2019.
Only one company outside of North America—and even the cannabis sector—lands on this list. The UK-based Big Pharma company GW Pharmaceuticals is steadily growing its industry presence, as it currently holds 41 cannabis patents in the U.S. and Canada combined.
Still, even these big players have seen their valuations drop since the industry was at its peak. Unless the aforementioned issues are ironed out, investors may continue to pull their dollars from the cannabis industry.
A psychological shift has taken place from everyone wanting to own (cannabis) to everyone involved now feeling burned. I think many investors are now over it.
—Chris Kerlow, portfolio manager at Richardson GMP
On the flip side, some investors aren’t calling it quits quite yet.
Long-Term Prospects Are High
While cannabis seems plagued with issues, some argue that these are simply short-term growing pains and will be solved as the industry matures.
Particularly in the U.S., experts predict that cannabis sales could reach immense heights in the next decade:
- $30 billion by 2025 (New Frontier Data)
- $50 billion by 2029 (Jefferies Group LLC)
- $75 billion by 2030 (Cowen Inc.)
- $100 billion by 2029 (Stifel Financial Corp)
Compared to a benchmark of $13.6 billion today, these numbers may seem ambitious—but they’re backed by major industry trends. 2020 could well be the year the market stabilizes, as consumers explore an array of retail options and vote with their wallets.
What’s more, key players in consumer industries—from alcohol and tobacco to beauty and fitness—are making big bets in cannabis and CBD-infused products. A higher number of partnerships could spark the next uptick for the industry’s potential.
The marijuana business is not for the faint of heart. But this is a big long-term game.
——Mark Zekulin, CEO of Canopy Growth Corp.
An Eye on What’s to Come
It’s clear there are differing viewpoints on the future of cannabis companies and their respective investors. As this snapshot of cannabis stocks unfolds and transforms in 2020 and beyond, could companies potentially buck the current trend and bounce back? Or will stocks continue to go up in smoke?
The Big Pharma Takeover of Medical Cannabis
The Big Pharma industry is entering the cannabis space, by swapping patients for patents. But what are the impacts of such a takeover?
The Big Pharma Takeover of Medical Cannabis
As evidence of cannabis’ many benefits mounts, so does the interest from the global pharmaceutical industry, known as Big Pharma. The entrance of such behemoths will radically transform the cannabis industry—once heavily stigmatized, it is now a potentially game-changing source of growth for countless companies.
Today’s infographic comes to us from CB2 Insights, and explores how and why the notorious Big Pharma are interested in the nascent cannabis industry.
Who are “Big Pharma”?
The term refers to some of the largest pharmaceutical companies in the world, considered especially influential as a group. To give a sense of their sheer size, the market cap of the top 10 Big Pharma companies is $1.7 trillion—Johnson & Johnson being the largest, with a market capitalization of $374 billion.
So far, Big Pharma has watched the cannabis industry from the sidelines, deterred by regulatory concerns. What we are seeing now is the sleeping giant’s takeover slowly intensifying as more patents, partnerships, and sponsored clinical trials come to fruition.
Could Cannabis be Sold Over the Counter?
The cannabis plant has been used in medicine for 6,000 years. However, there is still considerable debate around the role it plays in healthcare today. There are currently almost 400 active and completed clinical trials worldwide surrounding cannabidiol (CBD), a type of cannabinoid that makes up 40% of the cannabis plant’s extract.
Cannabis relies on CBD’s therapeutic properties, and recent studies suggest it may be useful in combating a variety of health conditions, such as:
- Multiple sclerosis
- Cancer side effects
As of 2019, 33 states and the District of Columbia have legalized cannabis for medical use. Its potential for pain management has led some experts to recommend it as an alternative to addictive painkillers, with one study of 13 states showing opiate-related deaths decreasing by over 33% in the six years since medical cannabis was legalized.
As the industry evolves, data is becoming increasingly important in understanding the potential of cannabis—both as a viable medical treatment, and as a recreational product. The shift away from anecdotal evidence towards big data will inform future policies, and give rise to a new era of consumer education.
Big Pharma’s Foray into Cannabis
Further legalization of cannabis will challenge Big Pharma’s bottom line, and poach more than $4 billion from pharma sales annually. In fact, medical cannabis sales are projected to reach $5.9 billion in 2019, from an estimated 24 million patients.
Seven of Canada’s top 10 cannabis patent holders are major multinational pharmaceutical companies, a trend that is not unique to Canada.
|Company Rank||🇨🇦 Canadian Patents||Company Rank||🇺🇸 U.S. Patents|
|1. Novartis||21||1. Abbvie||59|
|2. Pfizer||14||2. Sanofie||39|
|3. GW Pharmaceuticals||13||3. Merck||35|
|4. Ericsson||13||4. Bristol-Myers Squibb||34|
|5. Merck||11||5. GW Pharmaceuticals||28|
|6. Solvay Pharmaceuticals||7||6. Pfizer||25|
|7. Kao Corporation||7||7. Hebrew University of Jerusalem||19|
|8. Ogeda SA||7||8. Roche||17|
|9. Sanofi||6||9. University of Connecticut||16|
|10. University of Connecticut||6||10. U.S. Health and Human Services||13|
It comes as no surprise that many pharmaceutical giants have already formed strong partnerships with cannabis companies, such as Novartis and Tilray, who will develop and distribute medical cannabis together in legal jurisdictions around the world.
Data is the Missing Link
While the body of knowledge about the many uses of cannabis continue to grow, clinical evidence is key for widespread adoption.
Products backed by data will be a defining criteria for major companies to come into the market en masse. And ultimately, Big Pharma’s entry could accelerate public understanding and confidence in cannabis as a viable option for a range of ailments, and mark the next major milestone for the industry.
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