As more and more research demonstrates the benefits of cannabis-derived medicines, pharmaceutical companies are increasingly interested in entering the space. Known as Big Pharma, these multinational firms are powerful behemoths with global reach.
They want to increase their sales and profit margins by boosting their portfolios with innovative products. One of the most promising markets for such a strategy is the medical cannabis industry.
The Benefits
Cannabis and its natural derivatives are valuable therapeutics for various clinical ailments, including pain, inflammation, epilepsy, sleep disturbances or insomnia, multiple sclerosis, anorexia, schizophrenia, neurodegenerative diseases, antinausea, and cancer.
Pharmaceutical companies such as Johnson & Johnson, Teva, and others are now looking at cannabis as a potential revenue driver. These big drugmakers have been trying to diversify their income sources and could benefit from an industry that has proven to offer significant growth opportunities.
However, investors must understand that legal cannabis access poses a competitive threat to traditional drugmakers. A recent study found that legal cannabis significantly decreased stock market returns for listed generic and brand drugmakers during medical and recreational legalization.
With this being said, investing in a company that develops products with data backing them is a good strategy. The public will eventually embrace and trust cannabis as a viable therapeutic alternative.
The Challenges
While the potential for cannabis to improve the treatment of a wide range of diseases and medical conditions is undeniable, several challenges are associated with investing in cannabinoid pharmaceutical companies. These challenges include operational efficiencies, cash flow management, and complex tax strategies.
Legal and regulatory barriers are also a challenge. Several laws govern the use of medical marijuana, and some states have strict guidelines.
These challenges can inhibit growth and impact financial performance. Therefore, it is essential to understand and address the challenges before investing in a cannabinoid pharmaceutical company.
Cannabinoids bind to receptors throughout the body, which play critical roles in regulating many physiological processes. This makes them attractive pharmaceutical targets. They are used to treat diseases such as pediatric epilepsies, glaucoma, neuropathic pain, and schizophrenia and have anti-tumor effects. They can also suppress chemotherapy-induced nausea.
The Companies
Many of the biggest pharmaceutical companies are flexing their muscles in the cannabis industry. Several have been making deals to develop and distribute cannabis products in legal markets worldwide.
For example, some have a deep pipeline of early and late-stage cannabinoid product candidates. They have also established a specialized growing and manufacturing expertise for cannabis-based medicines.
The Market
As defined by the 18th-century British economist Adam Smith, the market is the “extended system of trade in a given commodity or group of commodities.” Today’s global marketplace encompasses various assets, from cotton textiles to automobiles.
For cannabis investors, the market is a critical consideration because it can affect the benefits and challenges of investing in cannabinoid pharmaceutical companies. The market can impact a company’s financial performance by changing its growth prospects, reducing the profitability of its products or services, or making it more difficult for the company to raise capital.
The market for cannabinoid pharmaceuticals is expected to increase over the next few years. The growing awareness of the medical benefits of marijuana and the increasing number of clinical trials on cannabis-based drugs are significant factors driving the market for cannabis pharmaceuticals.
