Highs and lows
It’s one of the world’s most exciting new markets – and its advocates say it’s just getting started. But it’s centred around a substance that humans have been using for thousands of years – and which has previously been illegal pretty much everywhere. Welcome to the era of ‘green gold’: cannabis.
While cannabis remains illegal in most parts of the world, its status is slowly changing. Now, it is legal for both medical and recreational use in Canada and Uruguay. Eleven US states – including Colorado and Nevada – have legalised it for recreational use, with 33 states allowing its use for medical purposes. It is decriminalised in several European countries, including Belgium and Austria, and in several South and Central American countries, such as Colombia, Belize and Chile.
And many other countries are looking and learning. It’s believed that Mexico will legalise in the next few years, and New Zealand is due to hold a referendum on legalisation in 2020. A recent poll in Australia found that three-quarters of people were in favour of decriminalisation.
So, how big is the potential legal marijuana market? It’s big. A recent report from Grand View Research estimates that it will be worth a staggering $66.3 billion by the end of 2025. That figure includes both recreational use and the growing demand for medical cannabis.
The report highlights conditions including cancer, Parkinson’s disease, Alzheimer’s disease and arthritis which could all be treated using medical marijuana. Increasing awareness of the damage that synthetic opioids can cause are also forcing pharma to look elsewhere for drugs which can effectively treat pain.
Changing attitudes towards recreational use are also driving the market. While concerns remain over high-strength cannabis and its effect on mental health, there are now far more damaging drugs out there.
In 2017, American’s opioid epidemic was declared a public health emergency. In the same year more than 46,000 people died from opioid overdoses. New, strong and dangerous recreational drugs such as ‘spice’ are easy to manufacture, and heroin is making a comeback, this time laced with synthetic opioids, such as fentanyl.
Deaths from cannabis overdose, however, are virtually unknown. And new vaping technology means that you don’t even have to smoke it with tobacco.
Could the rise of cannabis disrupt big pharma? It’s certainly possible, and pharma knows it. The industry has long lobbied against the loosening of legislation, with Insys Therapeutics – a major manufacturer of opioids and products containing synthetic cannabis – donating half a million dollars to help defeat a legalization bid in Arizona.
A 2017 report, From Prescription to Recommendation: How Cannabis Could Disrupt the Pharma Industry, looked at the impact on pharma on the nine conditions most commonly treated with cannabis, including seizures, epilepsy and chemotherapy-induced nausea and vomiting.
It found that if medical cannabis was to be legalised, pharmaceutical expenditure could fall by around $18.5bn between 2016 and 2019. Thus far, there’s been little discernible impact on the value of pharma companies from legalisation. But, of course, all that could change.
“The actions of Insys in the 2016 election suggest that Big Pharma companies have an incentive to fight hard for their piece of an industry which is gaining public acceptance,” wrote Katharine Pickle in a report for Emory Law. “Big Pharma companies want botanical marijuana to remain illegal because it is financially beneficial to them, not because synthetic marijuana is decidedly better for patients.”
Could investing in the marijuana market bear fruit? Plenty of people would like you to think so: google ‘marijuana investment’ and you’ll be faced with thousands of companies offering seemingly lucrative opportunities, most of which are way too good to be true. Like bitcoin, the marijuana market is exciting, new and glamorous. But it’s also attracted plenty of scammers and chancers, and it’s still new enough to be hugely uncertain and volatile.
“While many of the first weed companies to go public made big initial gains, most tumbled as quickly too,” points out Robert Jackman in the Spectator. But he does point to two companies which have so far performed well and steadily: Canopy Growth, which supplies Canada’s cannabis industry, and GW Pharmaceuticals, a British company which specialises in producing cannabis to manufacture an anti-seizure medication.
So, while budding investors may be tempted by the cannabis market high, the message here is certainly to limit your consumption. Green gold may be all the rage, but gold itself is a far better choice. After all, it’s one investment opportunity that isn’t going to go up in smoke.
Important disclaimer: this document is not an official research report and the views expressed in it are those of the authors. The authors are not registered research analysts and there is no assurance the trends mentioned will continue or that the forecasts discussed will be realised. Gold as a commodity is not a specified investment for the purpose of giving advice under the Financial Services and Markets Act 2000, therefore, this does not give rise to rights to claim compensation under the Financial Services Compensation Scheme.