Much of the consumer focus in the cannabis industry highlights recreational use, legalization, and the end for weed prohibition, while the institutional investor fixes squarely on medical uses and the output of the clinical trial pipeline.
The largest valuations in cannabis follow public companies who sell other products, but jumped on building (acquiring) a clinical trial pipeline, and are leveraging the profits generated while incorporating the industry multiple attached to cannabis. Below is a graphic that shows what companies are leveraging this pipeline.
* Chart from GWpharma, Tilray and Medipharm labs
The graphic shows that few companies are able to leverage these early revenues while cannabis remains illegal on a federal level. Most know we are in the final phases of a logical federal mandate in 2020 which will make marijuana legal on the entire continent of North America from Canada down to Mexico creating a huge consumer marketplace.
The projections for profitability are mammoth, and more and more companies are leveraging public markets from all ends of the supply chain to seed to sale. This black market business has been operating efficiently for 50 years, and the transition to public markets is one of the larger investment opportunities of our lifetime.
Make no mistake, we are experiencing early cycle growing pains associated with the sale of marijuana flip-flopping between the black market and legal purchases in states with applicable laws, but the traction we see from a few of the medical companies is a harbinger of what the industry will look like in years to come where many public and private companies will generate some portion of their revenue related to this magic plant. It is now, in the early cycle that investors can get a foothold in an industry that is taking its first steps.