When Will Weed Stop Being Weed?
A couple months ago here in our Outsider Club newsletter, I posed a simple question — are we looking at the marijuana sector the wrong way?
Now I have another to ask — when will weed stop being weed?
The simple fact of the matter is that, through old stigmas and just plain old outdated information from just a couple years ago, a vast majority of investors and analysts do not realize what is happening right now in the marijuana industry.
What we’re seeing in the sector is the birth of two high-tech business models.
On the recreational side, scales of economy, automation, and high-tech extraction systems are rapidly moving away from the green-filled bags we’re all familiar with.
And on the medical side, things are changing even faster.
The marijuana sector is unrecognizable from what it was just several years ago. It will be again several years from now.
More Like Pharmaceuticals
If you missed the article I mentioned before, the basic premise is that we need to start thinking about the medical marijuana companies more like pharmaceutical companies.
Here is an excerpt:
Before the 2000 election, there were only five states that allowed medical use.
Now there are 29, if you include Washington, D.C. along with another eight with recreational laws.
It won’t be long before even more follow suit, based off of the numerous polls and surveys that show a profound shift towards support for medical use.
But we’re already past a tipping point. Just over 62% of the U.S. population now has access to medical marijuana for a range of qualifying conditions and diseases…
...In other words, the biggest gains from adding more states to the list to increase the legal market size have already been realized.
And the number of patients utilizing medical marijuana for conditions and diseases that are approved for its use is low across the board.
It is time to start looking at the growth of market penetration, and not just the growth of the potential market.
In essence, it is time to start viewing medical marijuana companies like pharmaceutical companies.
A condition or disease exists, and they have to research, patent, and bring to market a better option than what currently exists.
That raises the question, what kind of better options are being researched and patented?
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It isn’t just variations on the same plant. It is the selective breeding and creation of patent-protected strains for the extraction of patent-protected chemicals and derivatives.
It may start as marijuana, but what will be sold to the vast majority of patients in the near future will not be anything like marijuana.
Just like how the penicillin you may take is no longer a blue-green mold.
Nor do a massive amount of the medicines we use today still resemble their sources.
About 50% of the FDA-approved drugs during the last three decades are either directly or indirectly from natural products, according to the National Center for Biotechnology Information division of the National Institutes of Health.
Good luck naming even a handful. Marijuana-derived medicines will soon be the same in this regard.
Birth of a High-Tech Industry
What we’re witnessing in the medical marijuana sector is the beginning of a whole new class of pharmaceuticals.
We haven’t seen anything like this — with its massive scope and wide-ranging applications — in our lifetime.
From pain management to mental health to cancer, companies are bringing new technologies and techniques to bear that will rapidly introduce new prescription options for doctors and patients.
Nor have we seen anything like the rapid consolidation and maturation of the recreational side of the sector.
In just a couple years, global-scale businesses will be entrenched.
The smart money is already aware of this, and is flooding in. Silicon Valley investors in particular are practically throwing money at companies.
But it isn’t indiscriminate. There are just a handful of companies they are targeting en masse, and they are being as secretive as ever about it.
These companies are already public, though. Venture capitalists can’t dominate the sector and capture all the growth and profit for themselves.
If you think you missed the boat, you haven’t. If you think you’re too early, you’re not.
We’re in a sweet spot for the entire sector, and for investors to realize massive gains within just a couple years by targeting the best-in-breed companies.
Adam's editorial talents and analysis drew the attention of senior editors at Outsider Club, which he joined in mid-2012. While he has acquired years of hands-on experience in the editorial room by working side by side with ex-brokers, options floor traders, and financial advisors, he is acutely aware of the challenges faced by retail investors after starting at the ground floor in the financial publishing field. For more on Adam, check out his editor's page.
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