The Amazon of Cannabis
[Todd Harrison is the CIO and co-founder of CB1 Capitaland a columnist for Investopedia. The views expressed herein are those of the author and do not necessarily reflect the views of Investopedia.]
In recent weeks, Tilray Inc. (TLRY) became the first Canadian licensed produced to list on the NASDAQ, while Constellation Brands (STZ) invested an additional $5 billion-dollars in Canopy Growth Corporation (CGC) to develop cannabis-infused beverages. What both companies have in common is that inherent in their respective share prices, investors are getting the upside call option of their biotech research & development.
While history paints a picture of Reefer Madness, cannabis and hemp have emerged as the base-line ingredients in a wide array of end-products and use cases that include building materials, plastic composites, cosmetics & vanity, pet supplements, clothing, food, and yes, medicine. While each of these verticals have investment merits, it is the wellness arena that excites us most.
Why? Because the medical community informs the stock market much of it hasn’t studied the science behind the endocannabinoid system. Most doctors remain unaware the cannabinoids found in cannabis are identical in action to the endocannabinoids our bodies produce to regulate neurotransmissions. By using our endocannabinoid system (ECS) as a retrograde pathway, we are able to target a multitude of pernicious conditions and disease.
Most of the world is just beginning to understand the therapeutic benefits of cannabis but two players on the global stage figured it out long ago. Israel has studied the science for 50 years, thanks to groundbreaking work of Dr. Raphael Mechoulam, but there are only a handful of publicly traded early-stage biotech companies with which to express an investment view. And there’s the UK-based GW Pharmaceuticals (GWPH).
The GWPH Advantage
In the 1990s, the U.S. and U.K. governments commissioned separate but similar studies to help determine whether cannabis had the potential for medical efficacy, and both found there to be encouraging evidence. The U.S. ignored those findings and continued its failed War on Drugs, while the U.K. government laid the groundwork for GW Pharmaceuticals, which was founded in 1998.
Over the last twenty years, GW has conducted groundbreaking clinical research and importantly, they’ve filed numerous patents in both the U.S. and U.K. They’ve studied CBD, THC, and a wide range of novel cannabinoid molecules in several distinct therapeutic areas, including epilepsy, autism, cancer and schizophrenia. In short, they’ve got a massive first-mover advantage in a space that most people still don’t realize is a space.
Of course, there is much to learn once the Federal decriminalization of cannabis arrives, paving the way for research, banking and institutional investment in US-based operators, along with what I presume will be a fair amount of M&A. There are two pathways on that front: legislatively, through efforts such as the STATES ACT; and with the demonstration of medical efficacy, which compels the DEA to reschedule within 90 days.
GW’s first drug, Epidiolex ™ for the treatment of childhood onset epilepsy disorders, received FDA approval in June but the collective body language suggests that only CBD will be rescheduled, leaving cannabis as Schedule I. This is due to perceived fear of THC, the cannabinoid that is responsible for the euphoria often associated with cannabis, and widely considered the black sheep of the cannabinoid family. We believe that perception is misplaced and GW has two opportunities to establish that.
Sativex®, a THC-based oromucosal spray for the treatment of MS spasticity, has already received regulatory approval in numerous countries outside the U.S., and we expect an NDA to be filed shortly. Further along the clinical pathway, and the story to which nobody seems to be paying attention to, is glioblastoma, or brain cancer, which we believe will serve as the foundation of GW’s oncology platform and demonstrate once-and-for-all the efficacious agility of cannabinoid wellness.
In February of 2017, GW announced positive phase two primary endpoints for their GBM trial, which used a 1:1 CBD:THC ratio, but they couldn’t release secondary endpoints (overall survival) because “too many people were still surviving.” CEO Justin Gover said at the time that more information would likely be available in “the coming weeks to months.”
Fast-forward to August 2018, a full seventeen months later, and we’re still waiting for those secondary endpoints. The only data we received, a few weeks ago, was that the median survival rate was 662 days compared to 369 days on placebo, and that the company received an Orphan Drug Designation from both the FDA and EMA. For those paying attention, the company is quietly positioning for this new reality.
Last May, the company hired Dr. Volker Knappertz as their Chief Medical Officer. Dr. Volker received his clinical scientist training and M.D. as well as a doctorate degree in research on glioblastoma from the University at Cologne in Germany. We found this to be an interesting nuance given the street-wide perception that GW is only an epilepsy platform.
It’s not uncommon for a biotech company to have a promising pipeline; it is uncommon, however, for analysts to assign no value to it. Only eight Wall Street analysts cover the stock and for the most part, all of them base the entirety of their price targets on the blockbuster potential for Epidiolex ™. We don’t think they understand the story, just as most people don’t understand cannabis; and therein lies the opportunity.
The chasm between perception and reality is where profits are found, and most of the world still views ‘pot’ as a gateway drug. By the time clinical validation arrives, and other people understand that cannabis is more impact investing than vice-fund fringe, GW Pharmaceuticals, more than any other stock in the cannabis universe, is poised to benefit the most.
(Disclosure: At the time of writing this article, CB1 Capital Management has a position in GW Pharmaceuticals, Tilray and Canopy Growth Corporation)
As interest in marijuana companies goes up, one stock is poised to separate from the rest
Can Namaste Technologies Become The Amazon Of Cannabis?
A ladybug crawls on the leaf of a hemp plant grown for medical research in Thailand. (Photograph: . [+] Taylor Weidman/Bloomberg)
As the Canadian market prepares for the anticipated rise in the demand for recreational cannabis post its legalization in October, Namaste Technologies, (CVE:N), a leading online retailer of ancillary hardware cannabis products, is busy spreading its roots in the online cannabis market. Just like the large cannabis producers, Namaste’s stock has surged, rising from $0.21 per share in November 2017 to $3.55 per share at present. However, the company hasn’t stopped growing, and aims to become the “Amazon of the cannabis market” in the coming years. For this, the company announced the pre-launch of an artificial intelligence-driven medical cannabis marketplace – CannMart.com – which would enable it to procure and sell medical cannabis from both domestic and international cultivators. In this note, we discuss how this move will augment Namaste Technologies’ plans to become the “Amazon of the Cannabis Market.”
We currently have a price estimate of $7.00 per share for Namaste Technologies, which is higher than its market price. View our interactive dashboard – Namaste Technologies’ Price Estimate – and modify the key drivers to visualize the impact on its valuation.
Global E-Commerce Company In Cannabis Space
Namaste Technologies is a Vancouver-based online retailer of medical cannabis vaporizers and smoking accessories. The company is one of the largest online retailers of cannabis delivery systems, operating through its 32 e-commerce sites in over 20 countries and distribution hubs located across the globe. The company’s websites have over 600,000 monthly visits with a database of approximately 1.5 million users. The company has a strong presence in the UK, Canada, and Germany and holds a large chunk of the online cannabis markets in Europe and Australia. With the growing demand for medical cannabis products, the company is catering to the emerging markets such as Brazil, Mexico, and Chile through a number of new supply channels.
What Is CannMart.com?
In 2017, Namaste Technologies acquired CannMart Inc., a Canada-based late-stage applicant for a medical cannabis sales-only license under Health Canada’s Access to Cannabis for Medical Purposes Regulations. The acquisition was a strategic decision, taken to strengthen Namaste’s e-commerce and logistics platform and enable it to establish a stronger presence in retail distribution of medical cannabis in Canada.
In the quest to achieve this objective, Namaste announced the pre-launch of a medical cannabis online marketplace – CannMart.com – earlier this week. The company has launched this marketplace, given its expectations that its subsidiary, CannMart, will receive its sales-only license in the coming months. Once this milestone is achieved, Namaste will be able to procure and sell medical cannabis from both domestic and international Health Canada approved cultivators and offer them on an AI-driven e-commerce marketplace designed to provide a unique and personalized experience to each patient.
AI-driven Marketplace And Strong Network Of Suppliers Will Drive Sales
Namaste will incorporate the advance e-commerce AI from its existing technology platform – NamasteMD, Canada’s first fully integrated patient consultation portal, to create a personalized user experience for every patient ordering through CannMart.com. In addition, the company will further integrate the AI technology and expertise of Findify, a leading e-commerce AI company that Namaste had acquired in May 2018, into the new platform. Furthermore, the company plans to leverage the database of over 1.5 million customers to expand its presence in the online cannabis market in Canada and gradually across the globe. Apart from this, Namaste has secured a network of suppliers and holds an inventory of medical cannabis flower and oil, which will be immediately available for sale once CannMart receives its sales-only license.
Namaste’s existing platform is known for its safe and reliable distribution and is in line with the current provincial and federal guidelines for the sale of cannabis within Canada. The new marketplace will enable Namaste to become a one-stop-shop for medical cannabis consumers in Canada by offering both cannabis consumables as well as ancillary products on the same platform, assuming approval. Thus, we expect CannMart’s sales-only license, coupled with an AI-driven marketplace to sell cannabis products, to solidify Namaste’s position as a leader in the cannabis e-commerce market in the coming years.
As the Canadian market prepares for the anticipated rise in the demand for recreational cannabis post its legalization in October, Namaste Technologies, (CVE:N), a leading online retailer of ancillary hardware cannabis products, is busy spreading its roots in the online cannabis market. Just like…