New York, New York (NetworkNewsWire) – With leading recent
estimates clocking the 2016 North American legal cannabis market
between $6.7 and $7.2 billion, the only thing more impressive about
the industry is the growth projections. Research estimates a
whopping compound annual sales growth rate of 25 percent through
2021. This stupendous growth, driven by more and more states
adopting medical and even recreational legislation, has combined
with the fact that the FDA has not yet
approved any drug product containing or derived from botanical
marijuana to create a perfect storm for cannabis biotechs like
Vancouver-based InMed Pharmaceuticals, Inc. (CSE: IN)
(OTCQB: IMLFF) (IMLFF
Profile) and GW Pharmaceuticals (NASDAQ:
GWPH). Medical marijuana has among the highest values in
the broader marijuana space, and as with any burgeoning industry,
savvy investors are looking for evidence of the market’s core
value. A look at the operations of Canopy Growth Corp.
(TSX: WEED) (OTC: TWMJF), Aphria, Inc. (TSX: APH) (OTC:
APHQF) and Aurora Cannabis (TSX: ACB) (OTC:
ACBFF) provides insight into various niches within the
marijuana industry to help identify why cannabis biotechs are the
value sweet spot.
Despite its incredible potential, the success of medicinal
marijuana’s success in the U.S. is crimped by cultivation
capabilities. Due to the notoriously stringent regulatory
environment in the U.S., much of the research and even plant
cultivation has historically been done outside the country, with
Israel rapidly evolving into the premier
cannabis research and development location on earth, as the
nation’s scientists and producers chase what will potentially be a
$50 billion global market by 2025. Second only to Israel in this
regard is Canada, where top growers are benefitting from Access to
Cannabis for Medical Purposes Regulations (ACMPR) that allow
commercially licensed production. This limited participation market
has been very good for Canadian growers that have achieved
licensing, with only 58
participants to date. However, the real value of the industry
lies in the biotechs using cannabinoids extracted from the cannabis
plant to develop their drug candidates and potentially change the
entire future landscape of the medical marijuana industry.
Evidence of the value of cannabis biotechs is revealed in the
Bloomberg Intelligence Global Cannabis Competitive Peers Index
(http://nnw.fm/8bZ6k), which shows the
collective market cap of cannabis bio-pharma at $5.6 billion,
outpacing the valuation of cannabis producers at $3.4 billion.
While current cannabis drug development is handicapped by the
expensive industry standard “grow-harvest-extract-purify” process,
GW Pharmaceuticals’ ability to jump from $8 a share to more than
$120 a share following news of its new drug, is a prime example of
the types of gains cannabis biotechs can achieve, and what makes
them dominate the Bloomberg index.
As noted in the Bloomberg piece, InMed
Pharmaceuticals, Inc. (CSE: IN) (OTCQB: IMLFF) could become a
major breakout player, differentiating itself from leading
developers like GW Pharmaceuticals with biosynthetic offerings and
two key drug indications. This is a key advantage for InMed, which
has a market cap of $34 million, but to better understand this
advantage and valuation potential, it pays to examine the
underlying market dynamics in greater detail.
There are more than 90 cannabinoids that have been isolated from
cannabis, each affecting the body’s cannabinoid receptors and
responsible for unique pharmacological effects. Because these
cannabinoids are so small in size, isolating these compounds in
usable volume requires the cultivation of large quantities of
cannabis, currently some cannabinoid compounds are found in such
small volumes in the plant they are not commercially viable for
study in drug development.
InMed Pharmaceuticals, however, enjoys the unique benefit of
developing a cannabinoid biosynthesis process to provide access to
the entire suite of all 90 plus naturally-occurring cannabinoids
(not just THC or cannabidiol). Rather than having to rely on
outside cultivators in Israel or Canada, InMed uses its
proprietary, high-yield biosynthesis process capable of
manufacturing pharmaceutical grade, bio-identical cannabinoids in
the lab.
Diseases such as the primary targets of InMed’s current drug development
pipeline, like glaucoma, which the company is targeting the
root cause of via INM-085. Designed as a topical formulation which
facilitates absorption by the eye, the proprietary, polymer-based
INM-085 is a novel, multi-target, multi-mechanism package of
cannabinoids focused on relieving the intra-ocular pressure build
up which leads to optic nerve damage in glaucoma patients. INM-085
simultaneously provides key neuroprotectant properties that help
optic nerve tissues and retinal ganglion cells survive adverse
conditions. Glaucoma therapeutics was a $5.7 billion
market only two years ago, with projections of a 3.4 percent
CAGR through 2024, and the broader ophthalmic drug market is
on-track to top $30 billion by
2020.
Another disease currently targeted by InMed’s development
pipeline is epidermolysis bullosa (EB), a connective tissue
disorder characterized by the absence of certain proteins in the
skin, and currently classed as an orphan disease for which there
remains significant unmet medical need. INM-750 is just as novel as
INM-085, utilizing a broad-spectrum approach to modulate levels of
the key protein responsible for protecting epithelial (skin) cells
from damage and stress, known as keratin. In addition, INM-750 was
specifically designed to alleviate associated symptoms like
inflammation, itching, pain, while promoting wound healing, and
skin cell regeneration. INM-750 is on target for clinical trials as
early as next year and the global market for EB and glaucoma
combined is easily over $6
billion.
These target markets are just the tip of the iceberg, in terms
of market opportunity. With a valuation of $3.4 billion, GW
Pharmaceuticals (NASDAQ: GWPH) may be the frontrunner in
the search for cannabis-based therapeutics, but small biotechs like
InMed (CSE: IN.c) (OTC: IMLFF) are demonstrating
the vast potential of cannabis therapies and their value in the
broader medical industry.
GW Pharmaceuticals has been in the cannabinoid research game
since the late 90s and has become one of the most talked about
developers of plant-derived cannabinoid therapeutics today. Widely
known for bringing the world’s first plant-derived cannabinoid
prescription drug (Sativex) to market for spasticity in multiple
sclerosis patients, GW Pharmaceuticals markets the drug in 29
countries outside the U.S. and is currently in
phase 3 pivotal trials for Epidolex, which has been granted
both Orphan Drug Designation and Fast Track Designation by the FDA.
The company also famously decided to keep its entire
plant production footprint in the UK last year, despite driving
hard toward sizeable U.S. markets with Epidolex, and migrating its
shares from London markets exclusively to the Nasdaq exchange.
The success and valuation of Canada’s medical marijuana growers,
cultivators and producers sheds light on increasing global demand
and necessity for high-volume, high-quality plants for medicinal
purposes.
Canopy Growth’s (TSX: WEED) (OTC: TWMJF) is
among leaders on the production side of the marijuana industry,
with a market cap of $1.4 billion (CAD) as of September 11. The
company’s Bedrocan brand
is billed as the epitome of medical-grade cannabis due to decades
of selection and refinement. Enabling the company to produce
consistent, standardized whole bud cannabis strains, as well as see
those strains become used extensively by clinical researchers
across seven European countries. With a production footprint of
over half a million square feet, Canopy Growth is one of the
biggest growers in Canada. The company recently moved
to further solidify its expansion in New Brunswick with the
acquisition of ACMPR applicant Spot Therapeutics, which when
licensed will produce roughly 8,800 pounds a year, and when fully
expanded will provide around 100,000 square feet of production
space. The company also expanded its Smiths Falls and
our Bowmanville South footprints last quarter by 33% and 200%
respectively.
Currently valued at $831.5 million (CAD), Aphria, Inc.
(TSX: APH) (OTC: APHQF) is one of the lowest cost
producers in Canada and was the first publicly licensed producer to
go cash flow positive from operations. The recent
announcement of a $25 million investment in order to
effectively gain a strategic U.S. presence via one of only
seven licensees in the entire state of Florida is a big move
for the company, which will operate in the U.S. under the Aphria
USA brand. A big move, but with nearly 21 million people in Florida
and many of them elderly, this market could be a real goldmine for
Aphria, as it represents some 14 percent of the total U.S. medical
cannabis market, valued at over $1.1 billion.
Aurora Cannabis, Inc. (TSX: ACB) (OTC: ACBFF)
surpassed 19,000
active registered patients in the company’s first 20 months after
initial product sales and has over 55,000 square feet in
Alberta at its state-of-the-art production facility. Aurora is also
currently in the process of tacking on an additional 840,000 square
feet across two other sites in Canada. The company owns a 19.9%
stake in the first Australian company licensed to cultivate and
conduct research on medical cannabis, Cann Group Limited. As well
as owning a leading Germany-based wholesale importer, exporter, and
distributor of medical cannabis, known as Pedanios. Pedanios even
recently passed
the first stage of the tender application process in Germany to
become a licensed medical cannabis producer, which will further
expand the company’s presence in the EU. Aurora’s market cap is
$969.0 million (CAD)
As investors find their footing in the global marijuana
industry, the potential for cannabis biotechs is reaching
unprecedented proportions thanks to the innovations and drug
development capabilities of companies like InMed and behemoths like
GW Pharmaceuticals.
For more on IMLFF please visit: InMed
Pharmaceuticals, Inc. (CSE: IN) (OTCQB: IMLFF)
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