Get ready to go green.
In the coming months, Canada will make history by becoming the very first major industrialized nation to legalize marijuana for recreational use nationwide.
If everything goes the way experts are expecting, this September, Canadian lawmakers will be fully decriminalizing the sticky stuff for millions of happy customers in one of the biggest cannabis-consuming nations in the world.
While California remains the biggest single market for cannabis worldwide, the United States is showing no signs of legalization or even decriminalization on a federal level, making the inner workings of the industry logistically fraught with complications and legislative snares.
But now, Canada’s move towards legal weed will change everything for the country’s economy, with a projected cannabis market of as much as $8 billion.
If consumption patterns in U.S. states where marijuana has been legalized teach us anything, it’s that demand is sure to grow beyond current estimation thanks to the availability of edible cannabis products, which account for nearly 30 percent of sales in California, Colorado, Oregon, and Washington.
Meanwhile, the most conservative estimates are projecting that the U.S. market could reach $25 billion by 2020, but if recreational use continues to skyrocket thanks to legalized markets like California and Colorado, high demand could send the market soaring as high as $50 billion by 2026.
These numbers, while impressive, are only telling half the story. The demand is high and getting higher (no pun intended) - but what about supply?
In Canada, current production can meet only a fraction of overall domestic demand for a medical marijuana community of just 300,000 people. What’s more, demand is expected to outpace supply until 2021.
This summer, when the market opens up to recreational consumers for the first time, the market could be in desperate need of new investment to keep up with the booming demand. Here lies the golden opportunity for companies ready to get in on the ground floor in what is guaranteed to be a hefty return on investment.
In such a young and popular industry, there are endless opportunities for growth and innovation. Here are 5 companies that we are expecting to play a major role in the rush to meet demand in the coming cannabis revolution:
#1 Scotts Miracle-Gro (NYSE:SMG)
Scotts Miracle-Gro offers everything that up-and-coming growers are going to need in large quantity: seeds, pest deterrents, in-demand hydroponic equipment, and other grow-op essentials.
A huge segment of cannabis growers utilize hydroponics, the artful science of growing plants without soil. Scotts Miracle-Gro’s subsidiary Hawthorne Gardening Company has an entire division devoted to hydroponics which currently accounts for 10 percent of their overall sales, a number that they are expecting to explode come July.
The company has been quite busy making $1 billion worth of acquisitions for their hydroponics sector through Hawthorne Gardening Company, and their largest acquisition yet, $450 million for Vancouver’s Sunlight Supply Inc. is slated to close on June 1st. Now, the company is focusing on slashing overhead and duplicate jobs for a savings of $35 million per year after 2019.
Thanks to ever-improving technologies and steadily growing demand, hydroponics has been reliably growing by 20 percent each year, and that rate is poised to rise significantly. Scotts Miracle-Gro, thanks to their proactive approach and aggressive acquisition strategy, is in the perfect position to supply the needed equipment for the cannabis growers that are going to find themselves rushing to keep up with demand in the coming years.
Cannabis Wheaton has a lot of competition amongst the hordes of Canadian marijuana opportunists, but the small Canadian company is on track to be one of the dominant financiers of the marijuana industry with one distinct advantage - for their investors, they can promise diversified, reduced-risk exposure in a market with skyrocketing demand.
Cannabis Wheaton aims to connect distributors and producers through its standout “streaming cannabis” platform, which allows firms access to capital and markets in this exploding industry, while Cannabis Wheaton collects royalties.
The “streaming” model largely removes investor risk. Instead of putting all your eggs in one basket, Cannabis Wheaton invests in varied producers and distributors, protecting investors against risks like a failed firm or an unsuccessful crop.
Cannabis Wheaton already has 15 partners with 17 production facilities totaling a potential 2.0 million effective square feet of growing space, as well as strong political support and a coast-to-coast network. They have also already established strategic alliances with a national chain of convenience stores, a national chain of independent pharmacies, and other promising distribution partnerships.
The company already has its foot in the door with the medical marijuana industry (they are partnered with 39 clinics with access to 30,000 registered patients), leaving them perfectly positioned to take on the market boom from the coming legalization of recreational cannabis.
(Click to enlarge)
#3 Pfizer (NYSE:PFE)
A huge pharmaceutical power offering huge dividends, Pfizer is gearing up for a big year. With a net income of $7.2 billion and operating cash flow of nearly $16 billion, it goes without saying that Pfizer has some serious buying power.
However, after a series of less-than-impressive quarters, Pfizer is looking to corner new markets. The company has recently acquired Anacor Pharmaceuticals, Hospira and Medivation, and is seeing promising growth from innovative cancer and autoimmune drugs.
Meanwhile, the company’s current best-sellers are continuing to trend up, with steadily climbing demand for fast-growing drugs like Ibrance, Eliquis, and Xeljanz. Xeljanz could take off in a big way this year if the FDA takes the advice of its advisory committee and approves the autoimmune disease drug for treatment of moderate to severe ulcerative colitis, a $5 billion market worldwide.
Stay tuned for this summer’s FDA decision on Xeljanz in addition to other Pfizer trial drugs including lung cancer drugs, lorlatinib, and dacomitinib, poised to target a largely untapped market. Also slated for July, the FDA will be making a decision on whether to expand the application of prostate cancer drug Xtandi (which already gained $159 million in the first quarter) to include patients with non-metastatic castration-resistant prostate cancer, pushing sales even higher.
Also, if Pfizer’s recent attempted merger with Allergan was any indication, it can be assumed that they have some very big plans down the line.
#4 Canopy Growth Corp. (OTCMKTS:TWMJF)
Canopy Growth Corp. is a diversified cannabis firm, with multiple brands, curated strains, half a million square feet of production space, and a $4.35 billion valuation. The bullish company also boasts partnerships with leading names in the cannabis industry, including Tweed, Spectrum Cannabis and Bedrocan.
Canopy has been preparing for recreation legalization for the past few years. Shares in the firm jumped in March 2017 when the Canadian government indicated its push toward this year’s full legalization in 2018. That was nothing, however, compared to the last years’ astonishing 386 percent growth in stock, gaining the company a reputation as a “cannabis unicorn”.
The company continues to boast growing stock prices as stock market speculators sing its praises. As we all know, size does matter, and Canopy blows the competition out of the water in terms of peak annual production potential with what is soon to be 5.7 million square feet of space for cultivation, making it a no-brainer for investors.
Speaking of which, Constellation Brands, the investment powerhouse behind Corona, recently investing a whopping $245-million into Canopy Growth Corp. in what amounts to a 99 percent stake, indicating big growth for the small company in the years to come.
#5 Sanofi (NYSE:NYS)
French pharma titan Sanofi is playing the long game. With a market cap of $123.99 billion, the company is sitting back while smaller firms do the risky work of early short-term investing and will swoop in for acquisitions once some of the little guys begin to strike gold. With the coming legalization and cannabis boom in Canada, there is sure to be a lot of gold to go around.
Since its IPO, Sanofi has performed at 8.41 percent. Its biggest growth has been thanks to the drug Dupixent, an anti-eczema drug which is expected to reach sales of $4.3 billion by 2022 in the U.S. alone since its FDA approval in March 2017.
Sanofi has also just made a major advancement in the race to enter the fast-growing PD-1/PD-L1 inhibitor market. The company won an FDA deadline of October 28th for a review of its cemiplimab, designed to target cutaneous squamous cell carcinoma, the second most common form of skin cancer. This drop is just one of many that the pharmaceutical company hopes to begin rolling out to stimulate growth.
Like many other pharmaceutical companies with massive cash flow, cannabis will be hard for Sanofi to ignore when looking for new (massive) markets to target.
Other companies to watch in the space:
Aurora Cannabis Inc (OTCMKTS:ACBFF) which is a producer and distributer of medical marijuana across Canada. The company, formally Prescient Mining Corp, is a Vancouver-based business founded a little over one decade ago. Aurora’s main objective is to bring medicine to the people reliably and economically, which sets it aside from many of its major competitors. In the marijuana industry, patients will often have to jump through hoops to procure their medication, but with Aurora’s caring and knowledgeable staff, patients no longer have to worry.
One of the most appealing things for patients ordering medications from Aurora is the company’s delivery method. This marijuana major sells marijuana by phone and over the internet and then it is delivered straight to the patient’s door.
Aurora is a major player in Canada’s cannabis scene. With a $1-billion market cap and solid growth, savvy investors are watching this stock like hawks.
By. Joao Piexe
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FORWARD-LOOKING STATEMENTS. Statements in this communication which are not purely historical are forward-looking statements and include statements regarding beliefs, plans, intent, predictions or other statements of future tense. Forward looking statements in this article include that: new cannabis legalizing legislation will create an $8-billion-dollar industry; that there will likely be a supply shortage; that this industry could have an economic impact of $22.6 billion annually; that by 2021, marijuana demand is expected to grow by 420,000 kg; that Cannabis Wheaton Income Corp.’s (“Cannabis Wheaton”) business model reduces risk for investors; that Cannabis Wheaton will be able to close streaming deals with its current 15 partners, along with 1.4 million effective square feet of acreage by 2019; that producers will need to obtain additional financing from companies like Cannabis Wheaton; that timeliness of government approvals for granting of permits and licenses, including licenses to cultivate cannabis, and completion of grow facilities will occur as expected; that actual operating performance of the facilities meets expectations, that regulatory change occurs as announced; that competition does not quickly develop; and that Cannabis Wheaton can retain key employees and contacts. Forward-looking information is based on certain factors and assumptions believed to be reasonable at the time such statements are made, including but not limited to: facts and assumptions relating to expected changes to cannabis legislation and the effects thereof; the potential demand for recreational and medical cannabis; that Cannabis Wheaton’s business model will position it well to capitalize on upcoming cannabis legislation changes; that Cannabis Wheaton will be able to close expected transactions, compete and retain employees and contacts; and such other assumptions and factors as set out herein. Forward-looking information is based on the opinions and estimates of Cannabis Wheaton at the date the information is made, and is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. Forward looking statements involve known and unknown risks and uncertainties which may not prove to be accurate. Actual results and outcomes may differ materially from what is expressed or forecasted in these forward-looking statements. Matters that may affect the outcome of these forward looking statements include that: markets may not materialize as expected; marijuana may not turn out to have as large a market as thought or be as lucrative as thought as a result of competition or other factors; Cannabis Wheaton may not be able to diversify or scale up as thought because of potential lack of capital, lack of facilities, regulatory compliance requirements in Canada or outside of Canada or lack of suitable employees or contacts; partners of Cannabis Wheaton may not be granted licenses or additional capacity under existing licenses for them to grow for the cannabis market; foreign governments may not allow Cannabis Wheaton to operate in their countries; and other risks affecting the Company in particular and the cannabis industry generally. The forward-looking statements in this document are made as of the date hereof and the Company disclaims any intent or obligation to update such forward-looking statements except as required by applicable securities laws.
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