If you're nervous, recreational marijuana companies could be subject to a crackdown because marijuana remains illegal in the United States at the federal level, so marijuana stocks for medical purposes could be a best investment option. Most countries still prohibit the use of marijuana for recreational purposes, but laws allowing the use of marijuana for medical purposes are becoming more commonplace. For example, markets for medical marijuana are booming in Canada and Germany, and in the United States, 33 states have laws that support marijuana for medical purposes.

Marijuana for medical purposes may not be as important an opportunity as marijuana for recreational purposes, but it could still be worth tens of billions of dollars a year for major titles. Here's how investors can take advantage of marijuana as a medicine.

Source of the image: Getty Images.

The use of marijuana as a drug is not new. Its use dates back thousands of years in China, Egypt and elsewhere in the treatment of various diseases:

Its documented history of medical use in western countries is more recent, but a study of fossil pollen conducted by the University of Vermont suggests that cannabis was grown in Europe as early as 4400 BC. Cannabis may have been grown for industrial purposes, especially for the manufacture of ropes, but migration and commercial routes could have also made known its medicinal properties in Europe.

In modern times, the use of marijuana for medical purposes in the West is attributed mainly to the colonization of India by England. It is there that Dr. William Brooke O. Shaughnessy studied cannabis as a treatment for muscle spasms, stomach cramps and pain in general. O. Shaughnessy's writings on cannabis use for medical purposes in the 1840s helped to establish use in Europe and, possibly, in America, where cannabis became readily available in pharmacies in Canada. the late nineteenth century.

The medicinal properties of cannabis arise from the impact of its chemical cannabinoids on the endocannabinoid system receptors, particularly CB1 receptors of the central nervous system and CB2 receptors of the immune system. The two most common of the more than 100 cannabinoids found in marijuana are tetrahydrocannabinol (THC) and cannabidiol (CBD). The interaction of THC with CB1 receptors is at the origin of the psychoactive effects of marijuana, while the indirect interaction of CBD with CB1 and CB2 receptors would contribute to its medicinal effects.

Source of the image: Getty Images.

Legalization of medical marijuana

<p class = "canvas-atom web-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Marijuana is banned in the United States since the tax on the Marijuana Act of 1937, and it is a controlled substance of Schedule 1 in the United States since the enactment of the Controlled Substances Act in 1970. & nbsp;& nbsp; & nbsp;& nbsp; "data-reactid =" 70 "> Marijuana has been banned in the United States since the Marijuana Tax Act of 1937 and has been a Schedule 1 controlled substance in the United States since the passing of the Substance Act. controlled in 1970.

Despite the federal ban, anecdotal evidence of medical benefits from marijuana allowed California voters to approve the first US medical marijuana laws in 1996, which paved the way for its use for treatment cancer pain, anorexia, AIDS, chronic pain, arthritis, glaucoma. and other ailments, on recommendation of a doctor.

The California marijuana market for medical purposes really took off after the adoption of Bill 420 by the Senate in 2003. This bill created an identity card system for patients and patients. allowed non-profit management companies to operate as marijuana clinics. Since then, more than 100,000 identity cards have been issued and hundreds of medical marijuana dispensaries have opened. As a result, industry observers estimate that marijuana sales for medical purposes in California exceed $ 1 billion annually.

Since California's pioneering decision in the late 1990s, more than half of all US states have followed suit. Voters from Washington, Oregon, Alaska and Nevada legalized marijuana for medical purposes in 1998 and today, 33 states have enacted comprehensive marijuana laws for medical purposes and 13 others have adopted legislation authorizing the use of CBD-based products. At the time of writing these lines, only four states had no law on marijuana for medical purposes.

Marijuana use for medical purposes is not limited to the United States either. In fact, some countries, including Canada and Germany, have passed laws creating domestic markets for marijuana for medical purposes.

The Canadian market for medical marijuana has grown significantly since rules were introduced in 2014 to allow patients, producers and clinics. Marijuana sales for medical purposes now reach hundreds of millions of dollars a year.

The German medical marijuana market came into operation in 2017 and, according to data from the German National Health Insurance Association, insurers reimbursed 80,000 prescriptions during the first half of the year. of 2018. Germany currently imports medical-grade cannabis from Canada and the Netherlands, but plans to license companies to grow cannabis on its German territory in 2019.

Marijuana leaves on a $ 100 bill.

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How to invest in marijuana stocks for medical purposes

<p class = "web-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Investors can get exposure to marijuana for purposes by investing in individual stocks or & nbsp;exchange-traded funds Data-reactid = "99"> Investors can gain exposure to marijuana for medical purposes by investing in individual stocks or exchange-traded funds (ETFs) pooling assets of many people to invest in many Marijuana stocks.

Unlike mutual funds, which are priced once daily at the closing market price, an ETF can be purchased or sold at any time during the trading day. You decide how much you want to invest in an ETF, but because they trade like stocks, you risk paying a commission each time you make an investment. In addition, since ETFs have important behind-the-scenes activities that allow for the pooling and investment of many people in many companies, they charge annual fees, such as a mutual fund, and these fees may affect yields.

Investors interested in holding individual marijuana stocks operating in the United States have limited options. Since marijuana use is illegal in the United States, medical marijuana companies often belong to private companies and not to publicly traded companies, and publicly traded companies are traded on the open market. slightly regulated, rather than a major market like the NYSE.

OTC shares do not have to meet strict registration requirements. As a result, companies trading in this market may expose investors to a higher risk of fraud. In addition, share prices may vary significantly from OTC shares as there is no central exchange and liquidity is questionable, which may complicate matters.

The situation is different in Canada. Because it is legal at the national level, medical cannabis companies can register on major Canadian stock exchanges, including the Toronto Stock Exchange. However, foreign stocks have their own disadvantages. Fees and transaction fees are generally higher and investors must accept the risks associated with converting US dollars into foreign currencies (and vice versa). Depending on the stock, liquidity can also be a problem for foreign stocks.

Fortunately, five of Canada's largest cannabis companies have been authorized to list on the New York Stock Exchange or NASDAQ in 2018. These companies are exposed to marijuana for medical purposes. through their operations in Canada, but beyond shipments for medical research, they are prohibited operating in the United States under Canadian rules.

Before looking at individual marijuana stocks for medical purposes, here are the different types of marijuana stocks for medical purposes.

Farmers

These companies grow cannabis in fields, greenhouses or indoor facilities. Fields produce cannabis cheaply, but greenhouses and indoor facilities allow producers to better control environmental factors, such as weather, pests and nutrients, which reduce waste and enhance consistency – important factors for the cultivation of medical grade cannabis.

Extraction

Once cannabis is harvested, it is often treated with solvents to extract chemical cannabinoids to produce oils and concentrates for use in other products, including beverages. Most medical marijuana growers also operate extraction facilities, as these processed products can result in higher prices and better margins.

Drug Developers

Cannabis has a long history of medical use, but prohibition has made it difficult to conduct scientifically controlled trials in humans to determine whether this use is safe and effective. It changes, however. Companies are investing more and more money into research to develop test strains for regulatory approval that eliminates the federal ban.

Distribution and clinics

Once marijuana products are packaged, they must cross the supply chain to get to the retailers before selling them to consumers. Medical marijuana growers can operate vertically, controlling all aspects, from culture to retail, or by contracting with distribution companies that help them market their products to marijuana clinics at the same time. medical purposes.

Suppliers of the industry

From hydroponics (supply of nutrients to plants through water rather than soil), tamper-proof packaging, inventory and retail software, marijuana growers rely on vendors specialized in cannabis to help reduce production costs through automation, increase yields and comply with regulatory standards.

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Major producers of marijuana for medical purposes

Leading Producers of Marijuana for Medical Purposes Canopy Growth (NYSE: CGC) $ 16.6 Billion $ 70.5 Million Aurora Cannabis (NYSE: ACB) $ 6.7 Billion $ 57.6 Million

Data source: Yahoo! Finance as of January 25, 2019. TTM = last 12 months.

<p class = "web-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Canadian marijuana companies are the largest and most mature medical sector marijuana companies around the world, and& nbsp; Cannabis Aurora (NYSE: ACB) and Cover growth (NYSE: CGC) are the two main players in the country. & nbsp; Each of them generates significant revenues for medical marijuana in Canada and Germany, and both establish footprints in other markets, including Australia. "data-reactid =" 141 "> Canadian marijuana companies are the largest and most mature medical marijuana companies in the world, and Aurora Cannabis (NYSE: ACB) and Cover growth (NYSE: CGC) are the two main players in the country. Each of them generates significant revenues for medical marijuana in Canada and Germany, and both establish footprints in other markets, including Australia.

Canopy Growth is working with 84,400 active enrolled patients (as of September 2018) and its market share of medical marijuana exceeds 30% in Canada. In addition, about 10% of its revenue comes from medical marijuana exports in Germany.

To maintain its leading position in the medical marijuana sector, the company was among the first producers to plan scientifically controlled clinical trials to prove the effectiveness of cannabis as a medical treatment. Fifteen trials were planned or underway by 2019, including a Phase 2b study on cannabis for the treatment of insomnia, which began in 2018.

In addition, there are 39 provisional patent applications in the United States for the medical use of marijuana cannabinoids, and management has also launched Canopy Animal Health, a subsidiary dedicated to the demonstration of cannabis efficacy in the US. pet health. For example, this subsidiary has received approval to evaluate marijuana as an anxiety treatment for some animals in 2018.

Virtually all Canopy Growth sales were from medical marijuana in the past, but medical marijuana sales as a percentage of revenues are expected to decline as Canada's recreation market matures. In terms of leisure, sales could exceed Can $ 4 billion in 2019, while medical marijuana sales could total only Can $ 700 million, according to Deloitte.

The situation is similar at Aurora Cannabis. Its acquisitions of CannaMed and MedReleaf in 2018 have significantly increased the number of registered active patients. In September 2018, Aurora Cannabis was working with 67,484 active registered patients, up 250% from the previous year.

These acquisitions also added to Aurora Cannabis's portfolio of clinical trials for cannabis. He has completed or is completing 40 clinical trials or case studies. In addition, seven preclinical trials are underway by 2019. Its various indications are pain, cancer, epilepsy, PTSD, anxiety, opioid use and neurodegenerative diseases.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Aurora Cannabis also claims to be the largest distributor It has two cannabis production facilities that meet production and quality requirements for pharmaceutical-grade manufacturing, which has earned it the European Union's GMP (Good Manufacturing Practice) certification, as well as an GMP Certified Distribution System at & nbsp;Germany. & Nbsp;"data-reactid =" 148 "> Aurora Cannabis also claims to be the largest medical cannabis distributor in Europe with two cannabis production facilities that meet production and quality requirements for the manufacture of pharmaceuticals. which has resulted in good manufacturing practices from the European Union (GMP) and has a GMP-certified distribution facility in Germany.

Like Canopy Growth, Aurora Cannabis will be a major player in the Canadian adult recreational market, but medical marijuana will continue to be an important factor in the future of this company. will make Canopy Growth the two leading producers that any medical marijuana investor should consider.

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Marijuana drug developers

Best Medical Marijuana Drug Developer Market Capital of TTM Sales GW Pharmaceuticals (NASDAQ: GWPH) $ 4.48 billion $ 12.7 million

Data source: Yahoo! Finance as of January 25, 2019. TTM = last 12 months.

Although the US Drug Enforcement Agency makes it easier for Canadian manufacturers to ship their marijuana extracts for medical purposes for research purposes, these shipments remain limited. As a result, investors interested in exposure to the US medical marijuana market may consider buying shares of drug makers developing marijuana-based drugs that can be approved by the Food and Drug Administration and avoid the barriers by the federal ban on marijuana.

Historically, medical marijuana research in the United States has been paralyzed by the fact that the DEA only allowed the University of Mississippi to cultivate a limited amount of marijuana for study purposes. Because of this, the only major drug of marijuana to win an FDA OK until 2018 is Marinol, a THC drug approved in 1985 for the treatment of nausea and vomiting in cancer patients and for Anorexia in AIDS patients. At its peak, Marinol's sales exceeded $ 200 million a year. However, the drug has since lost its patent exclusivity and most of its sales are spread among several generic drug companies, making it less intriguing for medical marijuana investors.

<p class = "canvas-atom web-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "However, in 2018, the FDA has approved GW Pharmaceuticals& # 39; (NASDAQ: GWPH) Epidiolex, a drug based on CBD against epilepsy, turning the company into a drug developer for cannabis, investors may consider becoming a homeowner. & Nbsp; A UK-based company, & GW Pharmaceuticals has been researching marijuana for medical purposes since the 1990s. In the EU, it markets Sativex, a THC-derived drug for the spasticity of multiple sclerosis. plates. "Data-reactid =" 177 "> However, in 2018, the FDA has approved GW Pharmaceuticals& # 39; (NASDAQ: GWPH) Epidiolex, a medicine against epilepsy using CBD, by making the company a drug developer for drug development, marijuana can be purchased by investors. A UK-based company, GW Pharmaceuticals, has been conducting research on marijuana for medical purposes since the 1990s. In the EU, it markets Sativex, a THC-derived drug for the treatment of spasticity of multiple sclerosis. plates.

Sativex sales have never taken off, but the Epidiolex business opportunity in the US could be significant as epilepsy is a billion dollar indicator a year. Epidiolex has been approved only for the treatment of Dravet syndrome and Lennox-Gastaut syndrome, two rare types of epilepsy, but could become a standard treatment in these indications. It is estimated that 30,000 to 35,000 patients in the United States have both of these types of epilepsy and, unfortunately, most of them do not respond to traditional antiepileptic drugs. Epidiolex reduced seizures compared to baseline in these indications by 40-50% in clinical trials. Since prescription drugs are available, patients can take them in all 50 states, regardless of federal or national marijuana laws. Given Epidiolex's catalog price of $ 32,500 per year and an addressable patient population of several tens of thousands, Epidiolex could generate hundreds of millions of dollars worth of sales annually.

The opportunity of GW Pharmaceuticals might not be limited to Epidiolex either. He also evaluates marijuana cannabinoids for other indications, including schizophrenia and autism. If cannabis could safely treat these indications, it could represent billions of dollars in potential revenue for the company.

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Top Marijuana Dispensary Stocks

The best marijuana growers, including Aurora Cannabis and Canopy Growth, open stores and associate with retailers in Canada, but if you are interested in medical marijuana retailers in the United States, you have few options because many dispensaries are private rather than public companies. traded.

Major stocks in TTM Market Marijuana Clinic Sales Medmen Enterprises (NASDAQOTH: MMNFF) 1.6 billion USD 59.44 million USD Green Thumb Industries (NASDAQOTH: GTBIF) 2 billion USD 47.9 million USD

Data source: Yahoo! Finance as of January 25, 2019. TTM = last 12 months.

<p class = "canvas-atom-text-canvas Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "One of the exceptions is Medmen, a 16 store the company's marijuana that became listed on the OTC market in 2018. Medmen's & nbsp;nine stores in California, the largest market for marijuana for medical purposes in the United States, accounts for more than 90% of its turnover. "data-reactid =" 206 "> One of the exceptions is Medmen, a company of 16 marijuana stores that has been listed on the 2018 over-the-counter market. The nine Medmen stores in California, the largest marijuana market in medical purposes in the United States, account for more than 90% of its income.

Medmen has big plans for expansion. The company has entered into an agreement to purchase a competitor, PharmaCann, and once it does, it will obtain licenses to operate up to 76 stores in 12 states. The agreement also increases the number of Medmen stores to 29. In total, management claims that its existing licenses give it access to states accounting for about half of the estimated $ 75 billion marijuana retail market. dollars in 2030.

Green Thumb is another option for investors. It operates 13 clinics under the RISE brand in eight states and holds licenses to open up to 72 retail outlets in nine US markets. Concentrating on highly regulated markets that limit licenses could mean less competition, higher margins and a larger market share than other retailers.

Best sellers in the industry

Leading suppliers of marijuana Scotts Miracle-Gro TTM business (NYSE: SMG) 3.8 billion USD 2.66 billion USD KushCo Holdings (NASDAQOTH: KSHB) 439 million USD 68.6 million USD

Data source: Yahoo! Finance as of January 25, 2019. TTM = last 12 months.

If you are interested in companies likely to thrive from the fast growing sales of marijuana companies, providers could be a perfect investment alternative. Since these companies work with many cannabis companies, they are somewhat isolated from the risk of a single cannabis company going bankrupt.

Hawthorne, the largest supplier of marijuana, is a greenhouse solutions provider, including hydroponics, owned by Scotts Miracle-Gro. Hawthorne has acquired smaller suppliers in recent years to develop its product line and create more cross-selling opportunities. In the fourth quarter of 2018, acquisitions enabled Hawthorne's sales to increase by 65% ​​over the previous year to $ 152 million, despite recent headwinds.

Although Hawthorne is a major supplier that is likely to benefit from growing demand as more states legalize marijuana, it is significantly exposed to producers, which means that sales can fluctuate significantly due to price. underlying products of the dried marijuana flower. Last year, overproduction in maturing markets, including those in Colorado, Washington, and Oregon, resulted in falling prices for marijuana products, reducing demand and therefore sales to Hawthorne.

Nevertheless, Hawthorne has established itself as a leader in hydroponics, nutrients and other solutions used by growers. Its breadth and distribution experience suggests that it will benefit from the long-term upward trend in sales resulting from legalization.

<p class = "canvas-atom web-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "KushCo Holdings operates in a different market from Hawthorne, In addition He acquired a brand marketing company last year that sells solvents and other solutions needed to extract chemical cannabinoids from marijuana, as well as its organic growth. $ 52 million& nbsp; in fiscal year 2018, up 177% over last year, and increased by 186% end of one year to more than $ 25 million for the quarter ending in November 2018. For fiscal year 2019, KushCo Holdings believes that the sales of packaging, solvents and d & # 39; Other products will generate sales of about $ 115 million. & data; react-data = "217"> KushCo Holdings operates in a different market than Hawthorne and focuses primarily on packaging solutions, including bottles, cans and vapes. brand marketing and sells solvents and other solutions necessary for the extraction of chemical cannabinoids from marijuana. Acquisitions and organic growth generated sales of $ 52 million in fiscal 2018, up 177% over the prior year. Sales rose 186% over the prior year, reaching more than $ 25 million in the quarter ending November 2018. For the 2019 fiscal year, KushCo Holdings has the solvents and sales of other products will result in sales of about $ 115 million.

The company provides more than 5,000 cannabis-producing companies and future growth could come from new recreational marijuana dispensaries in California, the East Coast and Canada. This is important because California is the largest legal market for recreational marijuana in terms of population and sales. As an indication, quarterly sales in California increased 211% year-over-year to $ 13.9 million in the quarter ending November 2019.

A person holding a placard reads reads legalize marijuana.

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The risks of investing in medical marijuana

The marijuana market for medical purposes is more mature than that of recreation and adults, but that does not mean that investing in marijuana stocks for medical purposes poses no risk. Most of these companies have limited operating histories and their growth prospects are dependent on the fact that marijuana prohibition remains in abeyance. Si l&#39;interdiction du pot reprend son élan, la valeur de ces stocks pourrait chuter, à moins qu&#39;ils ne puissent pivoter et obtenir l&#39;approbation de la FDA qui contourne les mesures d&#39;exécution.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Rien ne garantit également que les futurs essais menés par des Les entreprises de marijuana prouveront que la marijuana est aussi sûre et efficace qu&#39;on le croit actuellement. Nous avons déjà vu des preuves de ce risque. En 2015, des essais de GW Pharmaceuticals évaluent un médicament à base de THC chez des patients souffrant de cancer et de douleurs liées au cancer. failed data-reactid = "243"> Rien ne garantit non plus que de futurs essais menés par des entreprises de traitement de la marijuana à des fins médicales prouveront que la marijuana est aussi sûre et efficace qu&#39;on le croit actuellement. Nous avons déjà vu des preuves de En 2015, les essais de GW Pharmaceuticals évaluant un médicament à base de THC chez des patients souffrant de douleur cancéreuse n’avaient pas surperformé un placebo.

Globalement, les marchés légaux de la marijuana en sont à leurs balbutiements et d&#39;innombrables entreprises cherchent à conquérir une part de cet énorme marché. Cependant, bon nombre d&#39;entre elles échoueront, ce qui rend l&#39;investissement dans les stocks de marijuana dangereux. Il y a de grandes chances pour que vous perdiez beaucoup d&#39;argent si vous ne faites pas attention, il est donc essentiel de faire vos devoirs et de comprendre ces entreprises avant d&#39;acheter.

Quelle est la prochaine pour ces stocks

Selon les Nations Unies, plus de 150 milliards de dollars sont consacrés à la marijuana chaque année dans le monde. Etant donné que la plupart de ces activités sont encore effectuées sur le marché noir, les bénéfices de la légalisation pourraient rivaliser avec ceux des marchés du tabac et de l&#39;alcool. les investissements les plus intéressants pour les investisseurs axés sur la croissance.

En outre, les dépenses consacrées à la marijuana à des fins médicales pourraient monter en flèche dans les années à venir, car les entreprises de production de marijuana investissent des sommes considérables pour mener des essais scientifiques validant l&#39;utilisation de leurs souches dans diverses indications à impact élevé. Si ces essais permettent aux entreprises de différencier leur marijuana de celle de leurs concurrents, cela pourrait fournir un pouvoir de fixation des prix favorable pour les marges, qui enrichira les investisseurs dans les décennies à venir.

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<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Todd Campbell détient des actions de KushCo Holdings. Ses clients peuvent occuper des postes dans les entreprises mentionnées. Le Motley Fool recommande KushCo Holdings. The Motley Fool has a disclosure policy."data-reactid =" 256 ">Todd Campbell détient des actions de KushCo Holdings. Ses clients peuvent occuper des postes dans les entreprises mentionnées. Le Motley Fool recommande KushCo Holdings. Motley Fool has a disclosure policy.