At this time last year, the cannabis industry looked like it was ready to explode. On Oct. 12, 2018, Aurora Cannabis (NYSE:ACB) stock traded at $10.52 per share. Since then, Aurora stock has been riding a roller coaster. Unfortunately, in the last six months, that ride has been all downhill. The industry has incurred a
At this time last year, the cannabis industry looked like it was ready to explode. On Oct. 12, 2018, Aurora Cannabis (NYSE:ACB) stock traded at $10.52 per share. Since then, Aurora stock has been riding a roller coaster. Unfortunately, in the last six months, that ride has been all downhill. The industry has incurred a lot of negative headlines. And like elementary school, the whole sector got detention for the actions of a few bad actors.
That’s not to say Aurora is without its issues. Aurora has a problem with supply and demand. Put succinctly, there’s too much supply and not enough demand. When the market for recreational marijuana opened up throughout Canada, the floodgates opened and it turned out, demand was only a trickle.
Another problem that investors are punishing Aurora stock for is its gaudy valuation, despite its low stock price. But as my colleague Luke Lango wrote in an article last month, the question investors have to ask is whether or not Aurora Cannabis will be one of the $20 billion companies that will have a seat as the cannabis industry contracts like a game of musical chairs.
While Aurora Cannabis stock may have a million problems, medical marijuana is not one of them. In fact, that may be the saving grace for ACB stock.
Did ACB’s Acquisition of CanniMed Just Pay Off?
Despite some headwinds facing ACB stock, Aurora did a little flex for investors when they announced their initial findings from a University of Saskatchewan study. The study focused on ACB’s CanniMed 1:20 oil. The report showed the oil could cure or lower seizures in young patients with severe epilepsy. The oil features a high quantity of cannabidiol (CBD) and a low quantity of tetrahydrocannabinol (THC).
The initial results appeared in the scientific journal Frontiers in Neurology. The study also provided guidance to physicians on proper dosage. Until now, physicians had very little guidance on the proper dosages necessary to treat severe pediatric epilepsy with cannabis-based medicine.
Dr. Richard Huntsman of the University of Saskatchewan headed the research study. “What makes these results really exciting is it opens up a treatment option for kids who have failed to respond to traditional medications.”
It’s important to note that Aurora Cannabis did not fund the study. Aurora acquired CanniMed in May of 2018.
ACB Is a Major Player in the Global Medical Marijuana Market
The global market for medicinal marijuana may reach $40.9 billion by the end of 2024. Industry analysts expect the industry to grow at a compound annual growth rate (CAGR) of 19.4% between now and 2024. Aurora has made several acquisitions that will set it up for growth.
In addition to its acquisition of CanniMed in 2018, ACB also acquired Pedanios GmbH, Germany’s largest medical cannabis supplier. This gave ACB a foothold in the European market which is harder to access due to the strict regulatory framework.
More importantly, these acquisitions made Aurora a global organization, including having a number of national and international medical marijuana patents.
Medical Marijuana Is the Game Changer
The news this week of the positive test results for CanniMed 1:20 reminds investors why this once taboo industry is a truly compelling industry. Growing adoption of cannabis as a pharmaceutical treatment option for the treatment of a variety of medical conditions such as cancer, Parkinson’s disease, Alzheimer’s disease, arthritis, and other neurological conditions will drive demand for medical marijuana in upcoming years.
But in addition to treating disease, medicinal marijuana will assuredly grow in popularity as a relief for pain management, particularly in relieving the chronic pain that many elderly patients experience.
Not surprisingly, the medicinal marijuana market is highly regulated, but that regulation presents an opportunity for ACB. As one of the leaders in the category, it already has the road map from working in the industry.
As of this writing Chris Markoch did not have a position in any of the aforementioned securities.