Medical cannabis vs recreational cannabis: what future?

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The potential of medical marijuana is widely known, not only in Canada and the United States, but also around the world. Many patients find medical cannabis has helped them health problems where conventional medicine has failed, including chronic pain, post-traumatic stress disorder (PTSD), Crohn’s disease and anxiety.

Meanwhile, recreational cannabis is gaining popularity due to the variety it offers to satisfy consumers looking for an intoxicating or relaxing experience.

To take advantage of this popular and evolving market, two big names in the cannabis space, Aurora Cannabis (NYSE: ACB) and Canopy growth (NYSE: CGC), are in a tight race. But before I tell you about the progress everyone has made, let’s take a look at the growth of the medical and recreational cannabis markets in Canada and the United States.

Image source: Getty Images.

How has medical and recreational cannabis progressed?

Global sales of legal cannabis have been impressive. In 2017, the number was $ 9.5 billion; this rose to $ 12.2 billion in 2018, according to data from BDS Analytics. In 2019, medical marijuana made up 71% of the total legal sales of pots.

Canada legalized medical cannabis in 2001, and since then the market has been booming. A Marijuana Business Daily The research report indicated that the number of patients with medical cannabis exploded in Canada between 2004 and 2017. To be precise, the increase went from 7,914 patients in the second quarter of 2014 to 201,398 in the second quarter of 2017 Cannabis oil, which was introduced in the first quarter of 2016, has also resulted in increased sales.

The first wave of legalization of recreational cannabis in Canada – “Cannabis 1.0” – occurred in October 2018 and included flowers, oils, plants and seeds. Total legal sales in 2018 were $ 1.6 billion, double the amount spent on just medical cannabis in 2017.

The second wave of legalization, “Cannabis 2.0” in October 2019, made edible products, vapes, drinks, concentrates, topicals and more legal in the country.

In the United States, medical marijuana is legal in 33 states and in the District of Colombia, while recreational cannabis is legal in 11 states and DC The strongest markets – California, Washington and Michigan – recorded good sales . Now the newest legal market, Illinois, draws attention with strong month-to-month sales since recreational cannabis became legal in January 2020.

Advances of cannabis companies in the market

Without a doubt, revenues from medical cannabis have been robust for Aurora and Canopy. In fiscal 2019, Aurora reported total revenues of C $ 94.6 million, of which its medical offerings contributed C $ 29.7 million, while cannabis consumption and wholesale revenues from the Canada amounted to C $ 44.9 million and C $ 20.1 million respectively. Meanwhile, Canopy achieved total net sales of CA $ 226.3 million, of which CA $ 78.9 million came from global medical sales and CA $ 140.5 million from recreational sales.

The hype for recreational marijuana has forced not only Aurora and Canopy, but most cannabis producers to increase production. Unfortunately, external factors such as regulatory bottlenecks and the slow deployment of legal stores have pushed consumers into the black market, affecting the revenues of licensed producers. Plans for the launch of Cannabis 2.0 also went well until the launch of COVID-19. So far, Canopy and Aurora have failed to achieve positive EBITDA.

That said, things seem to be getting better this year with increased cannabis sales in the middle of the pandemic. Additionally, Ontario Also plans to resume issuing new authorizations for cannabis stores this year. Although Aurora has not updated its plans for derivatives, Canopy has announced the launch of its next cannabis infused drinks and vapes.

Aurore appears to be recovering and is taking all measures to reduce costs and achieve profitability by the first quarter of fiscal 2021.

What does the future hold?

The future of medical cannabis will depend on research. For the moment, the market seems solid and growing. More advanced research could reveal other health benefits of marijuana, boosting sales and helping profits for cannabis companies soar.

Aurora and Canopy have now made a name for themselves in the medical cannabis space. But they also Aphria (NASDAQ: APHA) and Organizational chart (NASDAQ: OGI) in the race, who are in a much better financial position, posting higher revenues and profits while Aurora and Canopy have not yet achieved positive profitability. The shares of Aurora Cannabis, Canopy Growth, Aphria and Organigram decreased by 12%, 2%, 3.3% and 14.2% respectively in June, while the FNB SPDR S&P 500 is up 0.92%.

Data source: YCharts.

When it comes to recreational cannabis, as I said above, cannabis 2.0 products could turn the tide in Canada this year – as long as the COVID-19 crisis doesn’t put a stop to the launch of products to come. With more states legalizing marijuana in the United States, the long-term opportunities are enormous, not only for Canopy and Aurora, but for the whole cannabis industry. Grand View Research data shows that the legal global cannabis market could be worth $ 73.6 billion by 2027.

That said, it is a volatile industry, so investors should be careful before making investment decisions.



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