The easiest and safest way to invest in the cannabis industry is through medical marijuana companies. I talked about the medical marijuana industry in my last article. Here are some of the most important points:
- The cannabis market is $5.4 billion in the US (ArcView Market Research), most of it from medical marijuana sales
- The market grew last year by 17% (ArcView)
- The market is expected to grow by another 25% this year (Arcview)
- 24 states allow the use of medical marijuana
- Merrill Lynch believes the medical marijuana industry will at least double if the other states legalize it
Cannabis in medicine can be used to treat a variety of conditions. The primary benefits of marijuana typically are centered on pain reduction and stress relief. For example, cannabis is useful for treating side effects from chemotherapy, seizures from epilepsy, and post-traumatic stress disorder (among many other uses).
In the first article on this topic, I covered one of the biggest players in the medical marijuana space, GW Pharmaceuticals (GWPH). The company has a slight advantage over its peers by having multiple drugs at or near the approval stage. In this article, we’ll look at three more companies in the medical marijuana space listed on major exchanges.
First off, there’s INSYS Therapeutics (INSY). INSYS already has an opioid-based painkiller called Subsys in production that could produce $240 million a year in annual revenue. In addition, the company is working on reformulating a marijuana-based medicine, Syndros, which can treat nausea in patients undergoing chemotherapy and restore appetite in AIDS patients. If Syndros gets approved by the FDA this summer, it could generate another $200 million in sales annually.
Another company worth taking a look at is Cara Therapeutics (CARA). Unlike GWPH and INSY, CARA is a clinical-stage biopharmaceutical company. Because of the developmental nature of the business, the company is quite a bit smaller than the first two we’ve looked at. Like its peers, CARA is developing drugs that help reduce pain. However, the company’s drugs are focused on targeting the body’s peripheral nervous system, and it has a first mover advantage in this space.
The last company we’ll cover is AbbVie (ABBV). ABBV is a major drug manufacturer with $24 billion in annual sales and a market cap over $100 billion. However, the company does have exposure to the cannabis industry through the drug Marinol. FDA-approved Marinol treats nausea and vomiting from chemo and is derived from synthetic cannabinoids. Marinol is not one of ABBV’s major cash generators, so you’ll only be indirectly investing in medical marijuana through this company. Yet, it’s still a safe alternative to get some exposure to the space.
In terms of easy, safe investments in medical marijuana, those four companies are the way to go (including GWPH). There are of course, several other medical marijuana companies out there, with more popping up all the time. The vast majority of these companies are listed on the OTC markets, which means they are going to be riskier investments and will take a lot more research by the investor.
That being said, OTC companies can still offer high upside investment opportunities. I’ll talk more about how to identify OTC medical marijuana companies worth taking a risk on in the next article. After that, we’ll start to look at other non-medical marijuana companies, as they’re all pretty much OTC-listed from here on out.
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