The Canadian cannabis industry has seen multiple levels of hype. Where did it leave the business of novel cannabis research?
Cannabis legalization in Canada brought the promise of global business opportunities, but it also led to missed potential in research on the medical side.
Even before the days of adult-use legalization in Canada, the market had seen a barrage-like cycle of ups and downs, creating uncertainty about where to find solid investment opportunities.
These bumps are likely to continue due to the volatile nature of the industry, but does that mean medical cannabis research will get a chance to shine? Here’s how experts think the situation will play out.
Recreational cannabis clouding research opportunities
Since cannabis legalization took place in Canada back in 2018, its sibling market south of the border has matured from a risky, small-scale and unapproachable opportunity to the unquestionable number one choice to go with for any kind of cannabis investment.
But while the US cannabis space has become appealing to investors, a key piece of the puzzle is still missing. One of the main desires for the industry is the complete opening of the recreational market.
Notably, cannabis researcher New Frontier Data recently indicated that by 2025, legal cannabis sales will amount to US$43 billion. The data shows that so far in 2021, there’s been just over US$6 billion invested into the cannabis industry.
It’s also hoped that banking and other financial tools — such as senior listings for US-based companies — will become available. From there, cannabis plays may be able to attract larger investors.
However, in a recent interview with BNN Bloomberg, Bruce Linton, an active figure in the industry and someone who helped shape much of the current landscape for cannabis investments, expressed disappointment surrounding the sole focus he perceives for recreational options.
When asked what the US can learn from Canada, he explained that there is not nearly enough attention being put towards science and research innovation in the cannabis industry.
“(Canada) for sure did a good job in getting out of the gates on recreational … but I don’t hear anything about science anymore and I certainly don’t hear enough about the medical program,” Linton said.
The former Canopy Growth (NASDAQ:CGC,TSX:WEED) executive highlighted an avenue of the business that he thinks needs to be addressed urgently.
“I would say maybe our misstep in Canada has been that we’ve been so busy working on the party we forgot about the 300 or 400, 500 million people under governance of a medical program, so there may be a bit of a lost opportunity there,” he added.
Although a move toward full legalization is heavily anticipated in the US, experts have told the Investing News Network (INN) many times in the past that investors need to be aware of the glacial pace of politics, particularly in the US. A quick resolution will not likely be at hand here.
Squandered opportunity highlights need to reevaluate
Linton isn’t the only cannabis expert who believes the exploration of cannabinoid drugs has so far represented some squandered potential for Canadian operators.
However, in some ways it’s understandable that few companies have gone this route. “It is a lost opportunity,” Nawan Butt, a portfolio manager with Purpose Investments, said. “But it also requires a lot of capital. I’d say the problem with the Canadian industry has been just inefficient allocation of capital.”
Butt told INN he no longer sees Canadian licensed producers, or for that matter US-based multi-state operators, as the companies expected to push the boundaries for cannabis-based drugs.
“We don’t think that’s a focus for any of the larger companies within Canada or the US, they’re very much focused on … the lowest-hanging fruit, which is federal reform in the US,” the expert said. Butt did clarify that this low-hanging fruit represents an US$80 billion opportunity that most can’t afford to dismiss.
Still, the lessons learned from Canadian legalization have left some companies behind. “This is a more nuanced industry, Canada has a head start on the world in something that can be much larger than just the Canadian market and a lot of the licensed producers have squandered that opportunity,” he told INN.
There are many unknowns ahead for investors in the cannabis industry — there will undoubtedly be new heights and similarly potential pitfalls moving forward.
When it comes to medical cannabis and the business of advanced research and drug development, time will tell about the potential benefits of betting on this aspect of the market.
“The fact that everyone is just so consumed by this idea that only (recreational) cannabis matters, I think, is a fallacy,” Aurora Cannabis (NASDAQ:ACB,TSX:ACB) CEO Miguel Martin told Business Insider recently.
Don’t forget to follow us @INN_Cannabis for real-time updates!
Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.