SEATTLE, WA / ACCESSWIRE / February 5, 2016 / Canada already has about 40,000 medical cannabis patients in a market worth between $80 and $100 million, but if recreational marijuana becomes legal, the market could be worth upwards of $5 billion, according to Dundee Capital Markets analyst Aaron Salz. With Justin Trudeau’s election as Prime Minister in October, recreational legalization seems inevitable to occur, as it was a key campaign promise that he made to voters. [1]

The burgeoning cannabis industry comes in stark contrast to the slowdown seen across many other sectors. With crude oil prices breaching $30 per barrel, the S&P/TSX Equal Weight Oil and Gas Index has fallen 8.74% so far this quarter. The overall S&P/TSX 60 Capped Index hasn’t fared much better, falling about 7.55% over the past quarter and 17% over the past year, as China’s economic slowdown takes a toll on export-driven sectors. [2]

In many ways, the cannabis industry may be an attractive investment given the predictable revenue from domestic medical cannabis users and the potential for recreational legalization over the coming quarters. Canopy Growth Corp. (CVE: CGC) (OTC: TWMJF), OrganiGram Holdings Inc. (CVE: OGI) (OTC: OGRMF), Supreme Pharmaceuticals Inc. (CNSX: SL) (OTC: SPRWF), Aphria Inc. (CVE: APH) (OTC: APHQF) and other licensed producers are all trading significantly higher over the past year compared to the TSX and S&P’s lackluster performance.

Strong Growth

Canopy Growth reported second quarter 2016 revenue that increased 44% sequentially to $2,466,121 with year-to-date revenue of $4,176,278. With approximately 9000 enrolled patients, the company is a clear leader in the emerging industry. Gross margins of 62% point to a very profitable business model that generated a net income of nearly $4 million last quarter – although that includes unrealized gains on biological assets. [3]

The company is also well positioned to take advantage of the future. With three state-of-the-art production facilities, the company is already capable of supporting tens of thousands of customers without any further expenditure. At the end of the second quarter 2016, Canopy Growth had over $24 million in cash [3]. This financial strength will support additional production, research and development, and sales and outreach efforts.

Watch a recent interview with Canopy Growth CEO Bruce Linton below. If the video does not display properly, please follow this link to view:

In November, the company invited Health Canada to inspect its facilities to pave the way for approval to produce and sell cannabis extracts. Obtaining this approval will enable Canopy Growth to compete in the cannabis extracts end markets. Since smoking has many dangers, many doctors have been hesitant to recommend medical cannabis. Cannabis extracts may solve this problem by enabling clinical dosing without the dangers of smoke inhalation. [3] Oil approvals appear to be imminent with the company saying that it expects licensing in early February 2016.

Limited Risks

Canopy Growth is largely unaffected by many factors influencing global equity prices over the past several quarters and may even benefit from some underlying trends.

Crude oil prices may have damaged the oil and gas industry, but Canopy Growth may actually benefit from lower energy costs. With lower input costs, the company could realize higher gross margins over time. Lower energy prices could also improve household finances and make medical cannabis – and perhaps recreational cannabis one day – more affordable for consumers.

In addition, the company is not reliant on exporting to China or emerging markets and conducts its business in Canadian dollars, which limits its currency risk exposure. It is also immune from being undercut by foreign competitors as the industry is domestically insulated with all production taking place in Canada.

The most important growth metric today is the number of patients enrolling in medical marijuana programs, which is expected to jump from 40,000 to more than 440,000 by 2024, according to Health Canada. The public health agency projects that these patients will create a C$1.3 billion per year market by 2024, while recreational marijuana legalization could expand that number significantly over the same timeframe. [4]

Canopy Growth’s wholly owned subsidiary Bedrocan Canada reduced prices from $7.50 per gram to $5.00 per gram in January. With production facilities operating at full capacity and performing well, operating costs are low enough to support the price decrease and make medical cannabis more affordable for patients.

A unique aspect of Bedrocan Canada’s offering comes from its deep history and growing experience. The division was purchased from Bedrocan BV, a Dutch company that spent 20 years perfecting growing processes that result in genetically stable and consistent product, something doctors and patients both truly need. Few competitors have the scale needed to produce cannabis at such a low price and the standardized product serves to further differentiate Bedrocan, all of which could translate to increased market share at the industry’s early stage when it matters most. [5]

Looking Ahead

Canada’s cannabis industry is growing at a rapid pace as medical cannabis becomes more ubiquitous and recreational cannabis moves through regulatory hurdles. As a leader in the market, Canopy Growth represents an attractive opportunity for investors to gain exposure to an industry that is rapidly growing and has limited risk exposure to bearish market dynamics, like crude oil’s dramatic fall, China’s economic worries, and fluctuating currency valuations.

For more information, visit the company’s website at