Investors would struggle to find an industry that is growing at a faster and more consistent pace than the legal marijuana industry. According to an annual report from Arcview Market Research and BDS Analytics, global sales of cannabis will increase from less than $ 10 billion in 2017 to an estimated $ 31.3 billion by 2022. This estimate includes an expected increase in sales of 38% in 2019  With Canada having legalized the leisure environment, 33 US states give the green light to growing use of weeds at a certain capacity, and more than 40 countries now aboard legalized cannabis to some extent, Wall Street and investors see quite a few clear path to substantive profit for most pot ware. But, truth be told, not all marijuana shares will roll in green anytime soon.
According to Wall Street's consensus estimates for fiscal 2020 (not all pot warehouses operate on a normal calendar year from January to December), a few Marijuana shares, such as MedMen Enterprises Cronos Group and Emerald Health Therapeutics is only expected to be profitable in 2020 by the smallest margins. But two more prominent marijuana shares are expected to lose big again.
The largest marijuana stock in the world by market coverage, Canopy Growth (NYSE: CGC) has a lot of work in his favor. The company's 5.6 million square meters dedicated to cultivation space (more than 4.3 million square meters already licensed by Health Canada) will ensure peak annual output of more than 500,000 kilograms a year, making the company easily a top-tier producer. This production has been particularly important to help Canopy Growth secure 70,000 kilos in its annual supply deal with Canadian provinces.
Canopy Growth also secured a major investment from November 194590001 Constellation Brands (NYSE: STZ) . Constellation, the company behind the Corona and Modelo beer brands, invested $ 190 million in Canopy in October 2017, bought nearly $ 150 million in Canopy's convertible debt bid in June 2018, and then bought a $ 4 billion stake that closed it last November. Constellation Brands now has a 37% stake in Canopy Growth, with Canopy gaining a time-tested partner and some needed money to implement its long-term business strategy. It would not be surprising to see the two works on a non-alcoholic cannabis-infused drinking line.
But despite all this and the fact that Wall Street calls $ 832 million Canadian in fiscal 2020, a consensus projected a loss of about $ 0.24 per share next year.
How Earth can a 216% back-to-back year and 238% sales growth lose money? The simple answer is that Canopy Growth is still busy and laying the groundwork for its international press, making acquisitions, and aggressively marketing and branding its products to stand out in a very crowded field. Although it is possible that the International Financial Reporting Standards accounts can make the Canopy income statement a little less intimidating from the perspective of the headline figures, this is a company that will still lose a lot of money on an operational basis possibly in 2021.  There is also the potential for future write-downs given how much goodwill Canopy Growth is now on the balance sheet after the purchase of Mettrum Health, ebbu and Hiku Brands, to name a few. Over the past nine months (ie since Canopy's previous fiscal year ended) until December 31, 2018, goodwill has grown from $ 314.9 million to $ 1.82 billion. With pot-shares hell on the growth of acquisitions, future write-downs with this very good will are a very real opportunity.
Cannabinoid-based fabric maker GW Pharmaceuticals (NASDAQ: GWPH) ] is also expected to generate some very significant losses per share in 2020. According to Wall Street, the company is expected to lose over $ 3 per share next year, despite revenue growth from $ 15.9 million in 2018 to over $ 415 million in 2020.
On the bright side, GW Pharmaceuticals created its own marijuana milestone when the US Food and Drug Administration (FDA) ) approved the first cannabis-derived drug June 25th. Epidiolex, which is targeted at two rare forms of childhood epilepsy, easily achieved its primary endpoint in multiple trials and reduced baseline seizure rates relative to placebo. Following the unanimous vote of the FDA panel in the approval of the drug, the FDA formally made the same in June. After launching Epidiolex in early November, GW Pharmaceuticals is ready to reap the benefits of its first drug that makes it into American pharmacy shelves.
Of course, there are several concerns with GW's main drugs, the launch, and the remaining product portfolio. For example, the competition appears to be in the immediate vicinity. Zogenix (NASDAQ: ZGNX) has an experimental drug known as fines that blended into late-stage studies in Dravet syndrome, an indication that only has an approved drug at the moment – Epidiolex. Although Zogenix and GW Pharmaceuticals have never peaked in the Dravet syndrome with their main doses, there may be some medical, patient or insurance data based on clinical data with fines that produce seizure rate reductions of more than 50% and Epidiolex regularly falls. in the reduction range 30% to 40%. Long story short, Zogenix's leading drug can start later this year (assuming FDA approval), which can really eat in the Epidiolex sales lanes.
Epidiolex also comes with an impressive $ 32,500 price tag for a full year of treatment. The management suggests that this price is on a par with existing roads to treat its two indications, but it can still be a tough sale at this price.
GW Pharmaceuticals also conducts several studies to expand Epidiolex's label to include tuberous sclerosis complex and Rett syndrome, as well as examine new cannabinoid compounds for autism spectrum disorders, glioblastoma and schizophrenia to name a few indications. Continuous clinical trials cost a lot of money; And since GW Pharmaceuticals is still burning a lot of money, it could potentially turn to the secondary market to raise capital. All told, this seems to be a stock and situation to avoid.