There are two things that should make marijuana investors sit up and beg.
First, it has become apparent that for the foreseeable future, a few select Canadian marijuana companies will lead the sector growth, particularly over the US.
Second, the virtually unlimited growth in the space will and is being realized through the pharmaceutical developments, particularly in the pain, sleep and anxiety markets. Pain markets alone are $60 billion and will rise over 30% to $83 billion by 2024. Pain and sleep markets are two of the largest component markets.
Key to this growth at companies such as Emblem (TSXV:EMC) is when society embraces marijuana as what could well be the first line of defense and treatment for many afflictions, including the devastating opiate crisis.
“Emblem is focused on developing mainstream medical therapies to deliver consistent, 12-hour relief, with reduced side effects.,” states Gordon Fox, CEO Emblem Corp. “Canada is one of the few jurisdictions in the world –including the USA--with a path to regulatory approval of cannabinoid based medication. ACMPR has mechanisms for approval and these mechanisms are currently being expanded. The Canadian medical community can participate in research and clinical trials and share data and results across provincial boundaries.
With our recently announced exclusive arrangement with CanntabTherapeutics, Emblem is executing to plan.”
The Canntab Deal
Very simply, Canntab has the proprietary sustained release formulation: Emblem is licensed under the Access to Cannabis for Medical Purposes Regulations (the “ACMPR”) to cultivate and sell medical marijuana.
Canada is one of the few jurisdictions in the world with a path to regulatory approval of cannabinoid based medication.
- The current medical cannabis market in Canada is about $400 million. It is searching for better dosage formats. Simple oils have grown to about 35% of the market in less than a year. More appropriate dosage formats are expected to have comparable effects in the market.
- Currently, Cannabis tends to require re-dosing. A titratable, sustained release formulation would have substantial appeal in the chronic neuropathic pain market. Anecdotally, that segment represents a reasonable percentage of the current$400 million medical cannabis market.
- The Canadian non-cannabis chronic pain pharmaceutical market is over $500 million and dominated by opioids and is expected to reach $42.16 billion worldwide by 2021. A cannabinoid based sustained release product has potential to enter that market.
From Emblem’s October 3rd Press Release:
Canntab Therapeutics Limited is a Canadian cannabis oral dosage formulation company based in Markham Ontario, engaged in the research and development of advanced pharmaceutical grade formulations of cannabinoids. Canntab has developed in-house technology to deliver standardized medical cannabis extract from selective strains in a variety of extended/sustained release pharmaceutical dosages for therapeutic use.
The Agreement grants to Emblem the exclusive right in Canada to Canntab’s patents and know-how for the purpose of developing, commercializing, using, selling, and offering the Sustained Release Product for sale under the Emblem brand. The License does not include the right to import or export the Product. The Sustained Release Products will be manufactured by Emblem or by Canntab, after Canntab receives appropriate licensing allowing such manufacture.
As per other Royalty Agreements in the Pharmaceutical Sector terms weren’t disclosed other than ‘double digit” royalty. To be clear this relationship with Canntab is extremely favorable to Emblem.
It cannot be overstated how important a develop this is for patients. Instead of waiting 5-10 years for a therapy to get to patients, cannabis based products take mere months. There is substantial evidence that cannabinoids are effective for the treatment of a number of conditions including (i) chronic pain (ii) nausea, (iii) anxiety and sleep disorders, and (iv) spasticity in patients with Multiple Sclerosis.
The Global Opiate Crisis
While therapies will address particular conditions, anecdotally many patients know and have expressed the efficacy, ease of use and lack of side effects in pain management particularly.
Emblem plans to bring products to deal with neurological pain by fall 2018. Once the 12- hour delivery protocol is established, many afflictions can be addressed via the proper strain and titration.
Investors need to embrace the potential of this market and acquire some exposure. Choose carefully as there are many companies who have and will likely fail or price themselves out of the market.
Emblem’s business plan sets three divisions to be profit centres. From ongoing reasonable to maximum growth:
- Dried flower is the commodity space which provides superior, but generic product
- High quality strains (think aged single malt scotch versus JW Black) for the aficionado
- Top quality strains for ongoing therapeutics’ development.
Margins increase exponentially from dried flower to medical strains. Emblem (TSXV:EMC) is focused on the two markets above dried flower, although will be a major force in all three.
Marijuana Market Maturing Slightly. Invest Carefully, but Invest
The Marijuana space has matured somewhat from mining guys seeing a quick turn in fortunes by announcing some hair-brained participation to get their languishing stock prices up.
Then there the companies who conclude that more marijuana is better and are growing as much as they can.
Finally, there are a few companies, such as Emblem that have a solid growth plan and are not afraid to state their corporate intentions. Many comparisons are made to the UK’s GW Pharma as the direction a developing company should travel.
GW’s Sativex is approved for the treatment of spasticity due to multiple sclerosis in 30 countries outside the United States. The Company has a deep pipeline of additional cannabinoid product candidates which includes compounds in Phase 1 and 2 trials for glioma, schizophrenia and epilepsy. GW’s ADS on NASDAQ in 2013 came at $8.90. Last trade at this writing was $114.07.
Fun Facts
- Some plant biologists got their early weed (60’s, 70’s) experience by serving time for possession, etc.
- Lots of anecdotal evidence that Big Pharma continues to pay doctors to keep their products at the forefront
The five companies that disclosed what they paid doctors over a six-month period (July to December 2016) were:
- AbbVie (NYSE:ABBV) : $4,104,000
- Novartis (NYSE:NVS) : $3,645,026
- Amgen (NASDAQ:AMGN) : $2,365,000
- Bristol-Myers Squibb (NYSE:BMY) : $1,388,187
- Gilead (NASDAQ: GILD) : $539,761
That alone should give Marijuana companies such as Emblem a place in your speculative portfolio.
Oh, yes. 10 percent of patients suffer from Trypanophobia. That fear keeps 20 percent of that number to never seek medical attention. Look it up…
Perhaps with the inevitable insertion of Marijuana based therapies should reduce or eliminate that number.
And how would Big Pharma ‘payola’ doctors for such a readily available and efficacious therapy? Bueller?
Next couple of decades should be interesting; with less pain, more sleep, relief from chronic disease as well as lives saved.
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