Will Laboratories Embrace Medical Cannabis as Marijuana Legalization Takes Hold?
As legal cannabis markets take root in individual US states and across Canada, laboratory testing companies have the opportunity to provide new quality control, testing and certification services for a wide range of botanical, edible, and infused cannabis products — for both medicinal and recreational uses.
Analysts Project Legal Cannabis Market Will Grow to $50B in Annual Sales Within Ten Years
Times are indeed changing when a 99-year-old Wall Street Brokerage firm conducts its first investor conference on the potential growth of the legal marijuana market. That was the scene this past January as Cowen & Co. briefed well-known institutional investors — including those from Fidelity Investments and Janus Capital Group* — during their “Cannabis Colloquium” event.
*You might want to check the fine print of your 401K investments more carefully from here on out to see if you are invested in cannabis!
According to a report by Cowen and Co.’s market analysts, annual sales of cannabis will skyrocket from $6 billion to a cool $50 billion by 2026 — if (and this appears to be a big ‘if’ at the moment) the Federal government legalizes cannabis sales across the US.
Cannabis laws in the United States1
Jurisdiction with legalized cannabis.
Jurisdiction with both medical and decriminalization laws.2
Jurisdiction with legal psychoactive medical cannabis.
Jurisdiction with legal non-psychoactive medical cannabis.
Jurisdiction with decriminalized cannabis possession laws.
Jurisdiction with cannabis prohibition.
1 Includes laws which have not yet gone into effect.
2 Marked states have only legal non-psychoactive medical cannabis.
Arcview Market Research is another firm conducting surveys in the cannabis market. Their latest report says that legal North American marijuana sales totaled $6.7 billion in 2016 — a whopping 30% year over year increase as more states have legalized marijuana sales. Arcview projects North American cannabis sales will reach $20.2 billion by 2021 — thanks to an astounding 25% projected compound sales growth each year.
Big Money Makes Investment Bets to Monetize Legal Cannabis Market
Now that twenty-eight states have made medical cannabis available (to a greater or lesser degree), investors are looking at ways to enter the market despite the threat of a Federal crackdown.
A San-Francisco-based startup, called Eaze, is providing an on-demand delivery service that allows its customers (scrupulously called “patients” by Eaze) to order medical cannabis (always called “medicine” by Eaze staff) at the touch of a button. To say that Eaze (which claims to be “the UBER of pot”) is ambitious is an understatement: it’s already developed a smartphone-based application that allows patients to get a medical evaluation by a doctor and, presumably, an immediate prescription for medical cannabis. If this feature takes off, one could imagine Eaze-based doctors displacing a significant number of brick-and-mortar based primary care doctors in the future as well.
CNBC has a humorous take on the medical cannabis home delivery market: they conduct a race between Eaze (pot delivery) and pizza delivery.
To date, Eaze has received $23 million in funding.
There may be many more cannabis start-ups on the way, thanks in part to Gateway, a start-up accelerator based in Oakland that’s offering its upcoming class of budding entrepreneurs (pardon the pun) access to a modern workspace, business coaching services, and a $50,000 investment — in exchange for a 5% stake.
Meanwhile, Cowen and Co.’s investment banking arm helped Canopy Growth Company (a publicly traded Canadian marijuana firm) raise $60 million this past December.
Investors are also combing traditional companies for cannabis opportunities — last year the share price of Scott’s Miracle-Gro Co. rocketed up by nearly 50%. Investors saw potential growth opportunities in its line of plant fertilizers and hydroponic gear, which they felt were well suited to the burgeoning indoor cannabis farming market.
The growth potential for cannabis sales even extends to our pets: The New York Times reports that pet owners are increasingly looking to cannabis-based products to help their pets with a range of conditions, such as anxiety, seizures, and arthritis.
Growing Need for Laboratory Testing Services to Assess Marijuana Potency, Purity, and Quality
Given the increasing consumer demand for a wide-range of cannabis-based botanical and edible products, the laboratory testing market has awoken to find a potential bonanza on their hands.
Consumers are looking for assurance that legally-acquired cannabis products they will ingest are properly tested for quality and efficacy.
Here are just a few of the cannabis testing regimens that laboratories can provide:
- Certify that the product delivers the expected levels of marijuana potency by measuring the full range of THC and CBD concentrations in the ingredients
- Certify that the product is free from foreign material contamination, including insect or rodent damage, pesticide residue, as well as excessive or dangerous minerals concentrations
- Certify that the product meets standards for the amount of bacteria living on non-sterile surfaces by performing microbial bioburden screening tests
*THC and CBD stand for tetrahydrocannabinol and cannabinoids respectively and are a measure of marijuana potency.
What is the difference between THC and CBD?
The Changing Legal Status for Medical Cannabis Across U.S. States and District of Columbia
At the Federal level, the use, possession, sale, cultivation, and transportation of cannabis are prohibited under the Controlled Substances Act of 1970. This statute classifies cannabis as a Schedule I substance, e.g. one with no “accepted medical use” and a high potential for abuse and/or dependence.
Nonetheless, in what some would call a legal gray area, eight states* have legalized the sale and possession of cannabis for both medical and recreational use.
*These states are Alaska, California, Colorado, Maine, Massachusetts, Oregon, and Washington. The District of Columbia voted to decriminalize as well; however, this effort has been overridden by Congress.
In November 2016, Arkansas, Florida, Montana and North Dakota voters approved legalizing medical cannabis, joining the majority of states which have legalized or decriminalized cannabis at least to some degree. This leaves only Idaho, South Dakota, and Kansas where cannabis is prohibited at the state level.
Mandatory Laboratory Testing of Cannabis Now Required in More US States
According to the cannabis industry trade magazine Leafly, most states that permit cannabis sales also have some level of laboratory testing requirements. Here is a brief state-by-state summary of Leafly’s report:
