Shattering Preconceptions: 5 Things You Thought You Knew About Medical Cannabis

Cannabis has become one of the most socially disruptive phenomena of our time. It is a topic that has polarised and while the medical community has shown ample evidence to confirm the plant’s therapeutic potential, some people and groups of people seem unable to shake the image of the proverbial stoner. However, with the seal of approval from the U.S. Food and Drug Administration (FDA) for the world’s first cannabis-derived medication, this is now finally changing, and it is changing for the good. In this piece, we look at the 5 major preconceptions we hear most frequently from those with an interest in investing in medical cannabis. In addition, we also look at how we believe cannabis can be a force for good, and how investors have an opportunity to align their values in this way.

1) Medical cannabis is a North American story only

Not true. Medical cannabis is actually very much a UK story. Indeed, British company GW Pharma has in recent years set the benchmark for the industry. Their trail-blazing drug, Epidiolex, which is today approved by both the FDA and the European Medicines Agency to treat two rare forms of childhood epilepsy (Dravet syndrome and Lennox-Gastaut syndrome), has served to validate the medical use case of cannabinoids (specifically, Cannabidiol or CBD).[1] It has also led to a phenomenal rally in the company’s share price, as it has grown revenues from USD 16 million in 2018 to over USD 300 million in 2019.[2] This positive industry momentum has instigated a wave of innovation across the pharmaceutical value-chain. The table below illustrates.

2) We must be years away from cannabis-derived pharmaceuticals being made available

Not at all. While the list above highlights drugs that are currently in development, there are live drugs on the market already. There is of course Epidiolex, as mentioned, but there are also others like Marinol and Syndros for anorexia, and Cesamet for neuropathic/chronic pain, all of which leverage either a plant-derived or synthetic form of cannabinoid or cannabinoids.

3) Cannabis is a fad, it’s not a structural theme underpinned by structural tailwinds

Absolutely not. According to research from Reports and Data, the global medical cannabis market is expected to be worth USD 148.35 billion by 2026.[3] We believe this figure to be conservative. Not just because we’ve barely scratched the surface in terms of the therapeutic potential of cannabinoids like Cannabidiol (CBD) and Tetrahydrocannabinol (THC), but also because there is so much to still understand. Recently, we’ve learned about lesser-known cannabinoids like Cannabigerol (CBG), Cannabinol (CBN) and Cannabichromene (CBC). To put further perspective around this, the cannabis plant contains over 100 different cannabinoids.

4) Can investing in medical cannabis be a force for good?

Oh yes, it most certainly can. Medical cannabis offers the only viable, scalable solution to the global opioid crisis. The most common use for opioids is chronic pain, and this is also the most common use for medical cannabis. According to the U.S. Centre of Disease Control and Prevention, the total economic cost for opioid abuse is estimated at USD 78.5 billion per year. They also estimate that 130 people die from opioid abuse daily, 40% of which are as a result of prescription opioid-based drugs. Cannabis has the potential to bring positive change to these statistics.[4]

Other ways in which cannabis can be a force for good include the industry’s ability to create jobs (and that too with diversity and inclusion in mind), generate tax revenue for states (Colorado alone generated approximately USD 1 billion in cannabis-related tax revenue last year), as well as reduce incarceration rates and prison populations.

5) There is no way to get pure-play exposure to this market

Yes, there is. Investors have an opportunity today to participate in the growth of the medical cannabis opportunity set only. With our ETF, we have built a custom-built portfolios of companies that best embody this opportunity set. These are companies that poise to ride the tailwinds of the global medical cannabis theme. Even more important perhaps is the way investors can align their values. Investing in medical cannabis companies offers investors a way to support the companies working to bring new-form, cannabis-derived medication to patients who – in many cases – do not have any viable alternatives. Patients who are currently suffering from illnesses for which currently available treatments are ineffective. For this reason, we believe that investing in medical cannabis has the potential to create meaningful impact.

Related ETF

FLWR: The Rize Medical Cannabis and Life Sciences UCITS ETF

References:

[1] Motley Fool, “GW Pharmaceuticals Is Picking Up Steam in 2020”, June 2020. Available at: https://www.fool.com/investing/2020/06/05/gw-pharmaceuticals-is-picking-up-steam-in-2020.aspx

[2] Market Beat, “GW Pharmaceuticals”, June 2020. Available at: https://www.marketbeat.com/stocks/NASDAQ/GWPH/

[3] Reports and Data, “Medical Marijuana Market to Reach USD 148.35 Billion by 2026 | Reports and Data”, May 2019. Available at: http://www.globenewswire.com/news-release/2019/05/20/1829108/0/en/Medical-Marijuana-Market-To-Reach-USD-148-35-Billion-By-2026-Reports-And-Data.html

[4] Health Europa, “How medical cannabis can help fight against the US opioid crisis”, March 2020. Available at: https://www.healtheuropa.eu/how-medical-cannabis-can-help-fight-against-the-us-opioid-crisis/98482/