In the Medical Marijuana Market, Pick a Winner
02 May 2014 - 12:30AM
Most savvy investors are aware of the recent surge in interest in
the Medical Marijuana and Industrial Hemp space. The sector is
quickly developing, as new Federal rules kicked in April 1st 2014.
It is important for investors to align themselves with companies
that will actually deliver. There are several market figures
floating around, but safe to say the market will grow exponentially
over the next 5-10 years. Early exposure is likely warranted.
Only 12 licenses have been granted to date, with Health Canada
indicating more would be issued. For context, in the US, more
states plan and/or will pass the legalization to allow medical and
in some cases recreational marijuana—20 have legislations pending–
and the market is forecast to hit $10.2 billion in less than 5
years.
There are currently about 40,000 users of Medical Marijuana in
Canada. Forecasts are that that number could increase 10-fold
within five years.
Vancouver-based Supreme Pharmaceuticals (SPRWF – OTC) (SL – CSE)
recently announced that it secured an option to purchase a South
Okanagan based Medical Marijuana company and forwarded the initial
capital and shares. This company is currently producing and selling
Marijuana under the older MMAP licence and with a recent court
decision to extend the MMAP program will be able to continue to
operate under its current licences. The Okanagan Company has
applied for a commercial MMPR license to produce and sell
commercially grown medical marijuana.
The company reports, "We are excited to be purchasing a business
that is established and has a realistic chance of acquiring a major
MMPR commercial license from Health Canada. Medical marijuana as an
industry is flourishing. We are continuing to evaluate additional
opportunities in both Canada and the United States, which will give
our shareholders tremendous upside potential."
Supreme intends to employ a 'Roll-Up" strategy, where the
principal aim is to reduce costs through economies of scale and
also have the effect of increasing the valuation multiples the
business can command as it acquires greater scale. Rollups may also
have the effect of rationalizing competition in crowded and
fragmented markets—which this space certainly is-- where there are
often many small participants but room for only a few to succeed.
In this regard, Supreme plans to acquire multiple producing
facilities and apply for several separate MMPR licenses increasing
the company's chances of a successful application.
All an investor has to do to vet the scope and potential of the
market is to see the growth of the Marijuana Index
(http://marijuanaindex.org/), which has seen constituents rise from
20-50 in Q1 2014 and a current value of $4.2 billion. Companies
must be publicly traded and have a market cap of at least $1
million. Listing and delisting criteria are constantly
monitored.
Many companies have announced plans, but few even have any deals
in the pipeline. The few—as below-- that have, have seen nicely
enhanced stock activity.
Affinor: Announced its plans to move into the space and has hit
a recent high of $0.35 in heavy trading; likely as a result that
Vertical Design is taking a controlling 10% stake in AFI.
Tweed: The first Medical marijuana producer on the TSX.V,
trading at $3.50
Enertopia: JV with LEXARIA in Medical Marijuana industry. Shares
up from $0.10 in January to hit $0.80 at the end of March.
Management continues: "We believe this industry is in its
infancy and we are excited to be able to get into the business in
the early days. We think that this life science field complements
the businesses that we are currently reviewing, and that 2014 will
be a very satisfying one for our shareholders. "
Investors should be impressed with the uniqueness of Supreme's
potential. Unlike a lot of its peers, it has solid deals underway
as it builds to become a leader in the Life Sciences/Medical
Marijuana space: With deep R&D to bring other opportunities,
therapies and products to market. Management has targeted
underserved areas alongside a blue ribbon scientific advisory board
that will quickly ramp up and take advantage of exceptional and
fast growth markets.
At this stage of development, investors would be wise to keep an
eye on Supreme's progress, as evidenced by the milestones it has
already achieved in a very short time frame.
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CONTACT: Supreme Pharmaceuticals Inc.
Suite #430, 580 Hornby Street
Vancouver, BC
V6C 3B6
Email:
info@supremepharmaceuticals.com
Phone:
647-340-6744