Big Pharma can no longer ignore cannabis. Here’s how to make sure you don’t get burned when they make their jump into the world’s fastest-growing industry.
The cannabis plant offers tremendous potential as a natural pain reliever.
The active compounds contained within cannabis plants are incredibly effective and – in most cases – easily made into treatments. Sensing a profit opportunity, Big Pharma is trying to enter the game.
In fact, 7 of Canada’s top 10 cannabis holders are major pharmaceutical companies. Pfizer Inc. (NYSE: PFE) and Merck & Co. Inc. (NYSE: MRK) are leading cannabis patent holders in Canada, according to a joint research report from analytics firm New Frontier Data and UK-based cannabis company Grow Biotech.
But here at the National Institute for Cannabis Investors, we believe pharmaceutical companies will have a hard time turning these treatments into profitable drugs.
Of course, that’s not stopping many drug companies from trying to shoe-horn these old approaches into their development of cannabis-based medications.
For decades, pharmaceutical companies have controlled the medical industry with lab-created drugs. They haven’t even considered offering a more natural solution.
Now, with an opioid crisis devastating communities around the U.S., the chickens have come home to roost.
People do not want to become addicted to Oxycodone, and they are turning to cannabis-based medicines to fight anxiety, depression, and physical pain.
Because they ignored medical marijuana for so long, pharmaceutical companies could rack up hundreds of millions – or even billions – in losses for investors. Patients could ultimately decide they would rather not pay the huge premiums that come with certain prescription drugs, and they certainly don’t want to buy medicine that could lead to addiction.
Before you invest in a pharmaceutical company claiming to be developing the next “blockbuster cannabis drug,” you need to understand the company’s profit model. The old methods pharmaceutical companies have relied on won’t work for cannabis-based medicines.
We’re here to tell you how not to lose your shirt when Big Pharma jumps into the cannabis world…
Cramming a Natural Peg in a Synthetic Hole
The profit models for drug companies are not built for intense competition.
They rely on all sorts of protections to keep a dominant position in the market.
These fortifications are well suited for synthetic chemical drug formulations, or compounds that have to be cooked up in a lab.
But they are ill-suited for compounds that don’t require sophisticated processing to turn into treatments.
And when it comes to the compounds found in cannabis – like CBD – this is especially true.
Traditional Big Pharma Defenses Won’t Work for Medical Cannabis
One way Big Pharma keeps smaller players out of the market is just through the cost of developing a drug.
To take a drug all the way to market costs $3 billion on average. That’s a high price of admission for an upstart company.
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Big Pharma also has another protection for its stronghold because of the sheer amount of time it takes for a new medicine to hit the market. It takes an average of 12 years for a new drug to make it from the laboratory to your medicine cabinet, according to MedicineNet.
Without anything to sell, most pharmaceutical startups would simply run out of money while they wait for their first product to be developed.
Finally, that brings us to patents.
By patenting drug formulations, manufacturing processes and techniques, Big Pharma builds economic moats around its prescription drugs. These moats can stave off competition for years, allowing drug companies to charge higher prices.
So it’s easy to see why drug companies work hard to maintain these protections – or stubbornly cling to them. This year alone, global prescription drug sales will exceed $800 billion.
And in four years, sales will likely climb well above $1 trillion (but we are much keener on another industry potentially worth $1 trillion).
However, if a drug is naturally available, easily refined, and simple to manufacture, this model fails.
Cannabis-Based Medicine Will Disrupt Big Pharma
Cannabis medications are easy to manufacture.
It doesn’t get much easier than rolling marijuana flower into a joint, and extracting the active compounds in cannabis to make oils and tinctures is not much harder.
And with plenty of extraction methods and lots of competition, patents on extraction methods may not have much value.
So a pharmaceutical company spending billions to create a drug that can easily be treated by a much cheaper alternative stands little chance in recouping – and much less profiting from – its investment.
This is creating an enormous opportunity for those health and wellness companies building brands that promote natural alternatives for pain relief. The companies that get this right will breach Big Pharma’s defenses and gain a share of its revenues.
In fact, members of our Cannabis Investor’s Report have a few of these well-positioned companies in their portfolio.
That doesn’t necessarily mean that all cannabis pharmaceutical solutions will fail. Our NICILytics database contains several analyst reports on pharmaceutical companies developing cannabis-based drugs, some of which show promise.
But even patients who feel more comfortable with prescription-based drugs have limits to how much they’re willing to pay when a cannabis-based medicine is so much cheaper.
And I can assure you that insurance companies have similar limits.
Stay cautious and well informed. The opportunity to profit from the cannabis boom is historic, and the medical applications are the fastest-growing segment within cannabis.
But cannabis is also a disruptor, and the pharmaceutical industry isn’t immune.
Thank you for being an important part of the National Institute for Cannabis Investors,
Executive Director, National Institute for Cannabis Investors
P.S. Here at the National Institute for Cannabis Investors, we have one goal: to be your official source for cannabis investing. With former Speaker John Boehner and Danny Brody’s help, we’ve assembled the most successful cannabis CEOs and investors in modern history. As well as the most politically connected players in this industry. For the first time ever, we’ve all joined forces. We’re not going to waste a moment. So make sure you don’t miss your chance to be a part of history. Just click here to see how you can become a Founding Member today.
10 responses to “Avoid Losing Your Shirt When Big Pharma Takes On Cannabis”
January 31 2019