The Future of Cannabis – Market Overview

cannabis

The marijuana plant, also known has cannabis sativa, is thought to have originated as a medical plant ~4,000 years ago. First evidence dates back to the Chinese Emperor Shen Nung in 2727 BC and records indicate that medicinal cannabis was widely used throughout Asia up until 500 BC. Early applications for medicinal marijuana appear to include treatment of inflammation, malaria, gout, depression and nausea.

Sativa has also created a market that can compete with big pharma. Arguably, sativa provides patients with alternative options for treatment – that is good for medicinal drugs markets and governments and health providers alike.

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Charlotte’s Web

Close Price4.55
52 wk Range Low2.10
52 wk Range High9.17
MCAP (m)$631.95
EV (m)$558.81
Market IndexOTC QX
Financial YE31-Dec
CurrencyUSD

Business Activity

Nutraceuticals

Key metrics

Gross debt (m)$24.4
Cash (m)$65.9
Net Debt (Cash) (m)-$41.5
Net Operating Cash (m)-$52.2
Revenue (m)$91.1
Net Income (loss) (m)-$51.3

Key ratios

(Net Cash) / Shareholder Equity %-6.57%

Cannabis Sector Research
ACF Cannabis Team
+44 20 7419 7928
healthcare@acfequityresearch.com

cannabis index chart

Cannabis Market Overview

The marijuana plant, cannabis sativa, has been around for over 4,000 years. Its history is coloured with evidence of medical benefits. The growing demand is supported by liberal regulations, with the US and Canada leading the way. ACF forecasts a global legal cannabis market 2027E of US$ 75bn. ~260m people consume cannabis globally (medically / recreationally) and we expect this figure to increase in the short and medium term. This is a significant investment opportunity as we expect recreational use to surpass medicinal due to its ‘ease’ of acquisition and the ongoing regulatory restrictions.

70%

ACF estimates the global legal cannabis market will reach US$ 75bn by 27E

40%

~260m people consume cannabis globally every year

Investment Sub-sectors – Legal Cannabis

• Medical cannabis – Use of marijuana as a physician recommended therapy for treating conditions and symptoms such as epilepsy, Parkinson’s, and depression.

• Nutraceutical (Wellness) cannabis – The use of cannabis derived products and chemicals that bring benefits based upon observation, anecdote, or read-through.

• Recreational cannabis – The use of cannabis without medical justification, much like the use of recreational alcohol.

Global Cannabis (Regulated and Illicit) Market 2019 (US $bn)

Global Legal Cannabis Spending 2024E (US $bn)

*Others : AUS, Israel, MEX, NZ

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Cannabis Spending – Adult and Medical Use 2014A – 2024E

Cannabis’s therapeutic potential is fuelling its market growth. ~1.2bn people globally have medical conditions (chronic pain, depression, cancer) which marijuana can treat.

Clinical research and validation from organisations (e.g. Harvard Medical School) propel sales and garner support for regulatory change for marijuana usage.
Studies are still ongoing, but the consensus is that patients are opting to use marijuana instead of other large cap pharma drugs. Patient choices are underpinned by marijuana’s ‘natural’ medicinal benefits and less severe side effects. ACF estimates the medical market will grow but its market share will decline. See ACF’s 2024 estimates (E) below:

Medical cannabis spend share of total market 90% – 2014A

Medical cannabis spend share of total market 71% – 2019A

Medical cannabis spend share of total market 40% – 2024E

Our Peer Groups

Our mid-cap peers are reliant on retail distribution either bricks and mortar or on-line. We expect the recreational market to exceed the medical and nutraceutical markets in time. Three of the companies, Charlotte’s Web (CWBHF), Green Thumb (GTBIF) and Trulieve (TCNNF) are listed on the US OTC. Canopy Growth (CGC) and Cronos Group (CRON) are listed on Nasdaq. All the mid-cap peers are also listed in Canada.

Of our nano to small-cap peers – Tetra Bio-Pharma Inc. (TBPMF) and The Supreme Cannabis Company, Inc. (FIRE) are focused on the medical cannabis industry, while Kaya Holdings, Inc. (KAYA), WEED, Inc. (BUDZ) and Auxly Cannabis Group Inc. (CBWTF) focus primarily on the recreational cannabis market. All the peers minus FIRE are listed on the OTCQX market and have a similar market cap to BUDZ. The largest market cap in our nano-small cap peer group is Auxly Cannabis (CBWTF).

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