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Alternative Thinking: The investment case for medical cannabis – Portfolio Adviser

The cannabis plant traces its medical roots back to ancient Indian, Chinese, Egyptian and Islamic cultures. It is one of the world’s oldest medicines. Indeed, in the UK, it was used as a medicine until 1971 – even, reputedly, by Queen Victoria on a regular basis to ease discomfort.

Nowadays, cannabis has gained a new lease of life. The once-forgotten plant has rediscovered its use as a treatment option for a wide range of symptoms and illnesses. It is a movement that has now gone global, buoyed by the tailwinds of favourable legislation, social acceptance and medical and scientific recognition. As it gathers pace in the months and years ahead, getting on the front foot of this global megatrend could yield tremendous results for those who can spot the investment opportunity today.

We are only just beginning to understand the full power of cannabis. We now have evidence it can improve symptoms and treat certain diseases. We also know it helps with sleep, anxiety, pain and appetite. We have seen its application in medicine – in particular in relation to cancer, multiple sclerosis and epilepsy. Equally, there are plenty of stories about its positive impact on people’s lives – how it has been life-changing and, in some cases, life-saving.

Reports of parents going as far as having to “smuggle” cannabis into their countries to treat their children suffering from seizures have touched hearts. Such stories have prompted governments to act. What was once a conversation about a stigmatised and part-understood weed has metastasised into a movement that is sweeping the world before our eyes.

Progressively-minded nations all over the world are opening up to the opportunities offered by the plant. And those on whom patients rely on the most – the regulators and the medics – are now taking bold steps to ensure that access is improved so this can become a conversation about helping those in need.

It is worth looking at the market as a whole in order to understand the tailwinds that underlie the global medical cannabis opportunity today, and why this could well be one of the best investment opportunities of our generation. Following that, we can take a look at how investors can gain exposure to this global megatrend today.

Size of the market

An estimated 1.2 billion people worldwide suffer from medical conditions for which cannabis could have therapeutic value. Adoption of medical cannabis treatments by even a small proportion of that population would create a massive market.

In the US, where neither medical nor adult-use cannabis is legal at the Federal level, calls for complete legalisation have been increasing. Until now, individual states have enacted their own cannabis legislation. Today, there are 33 states with full medical cannabis programmes, which compares with 13 states just 10 years ago.

In Europe, many countries have also enacted cannabis reform in recent years. Cannabis is now legal for medical use in 30 European countries. However, because of the fragmented nature of the market, approaches taken have varied in terms of types of products allowed and the regulatory frameworks governing their provision.

Legalisation nonetheless has been a pan-European story and, today, the biggest markets for medical use are Germany, France, Italy and the UK. In the rest of the world, calls for expanding medical access are also reverberating loudly. Globally, now, a total of 55 countries have made some form of medical cannabis available for legal use.

Legalisation is just one side of the story, however. People power is also a large driver in the acceptance of cannabis for medical use. Specifically, patients are demanding access. According to cannabis market intelligence firm New Frontier Data, 94% of medical cannabis patients reported cannabis treatment improved their condition. It also found that, if just 10% of the world’s population suffering from conditions for which cannabis is commonly used were to begin using cannabis therapeutically, it would create a market of more than 100 million patients.

Rapid growth

Even taken in isolation, this means the industry is set for rapid growth in the years ahead – but there are also other developmental reasons. As the following chart shows, in the US alone, medical cannabis sales are expected to grow at a compound annual growth rate (CAGR) of 16.8% through to 2025 to achieve a market size of more than $13bn (£10.5bn).

Growth of the US legal cannabis industry – 2017 to 2025

Source: New Frontier Data

Globally, the medical cannabis industry is expected to be worth as much as $56.5bn by 2025 according to Imarc Group. This translates into a global CAGR of 22.8% between 2020 and 2025.

By now, it is clear that medical cannabis has the potential to help millions of people globally. The stigma is rapidly coming down, and the cannabis plant is metamorphosing from a vice steeped in political, legal and cultural controversy to a medicine hailed for its remarkable therapeutic applications. Today, the movement is buoyed by the tailwinds of favourable legislation, social acceptance and medical and scientific recognition. Over time, the movement will shake the winners from the losers.

Rahul Bhushan is co-founder of RizeETF

Written by homegrownreview


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