Top 20 cannabis stocks to watch
Investors have plenty of choice when it comes to cannabis stocks. We look at the top 20 largest cannabis companies and explain how to trade stocks and the new IG cannabis index.
Top 20 marijuana stocks by market cap
- GW Pharmaceuticals (GWP)
- Canopy Growth (CGC)
- Aurora Cannabis (ACB)
- Cronos Group (CRON)
- Tilray (TLRY)
- Aphria (APHA)
- HEXO (HEXO)
- Innovative Industrial Properties (IIPR)
- Organigram (OGI)
- The Green Organic Dutchman (TGOD)
- MediPharm Labs (LABS)
- Auxly Cannabis Group (XLY)
- Corbus Pharmaceuticals (CRBP)
- CannTrust (TRST)
- PharmaCielo (PCLO)
- Aleafia Health (ALEF)
- Emerald Health Therapeutics (EMH)
- Zynerba Pharmaceuticals (ZYNE)
- Zenabis Global (ZENA)
- Khiron Life Sciences (KHRN)
Below are the 20 largest publicly-listed US and Canadian companies with direct revenue exposure to the cannabis industry. You can trade or invest in individual cannabis stocks with IG, or you speculate on the wider market by trading IG’s cannabis index.
The cannabis index market captures the gross total return performance of the 20 stocks listed in this article. This allows traders to speculate on the future direction of the wider cannabis market rather than individual stocks, and benefit by the leverage offered by financial derivative products like spread betting and CFDs.
Will cannabis IPOs provide investors with growth opportunities?
Patrick Morton from Cannabis Invest and Avihu Tamir, chief executive officer (CEO) of Kanabo Research, sat down with IGTV's Victoria Scholar to talk about the cannabis initial public offering (IPO) market and future investment opportunities.
GW Pharma (GWP)
GW Pharmaceuticals develops cannabinoid-based prescription medicines and is only involved in the medicinal market. Its key drug, Epidiolex, has been approved by the US Food and Drug Administration (FDA) to treat seizures triggered by Lennox-Gastaut syndrome or Dravet syndrome. Since being launched, over 2500 physicians have prescribed Epidiolex to more than 12,000 patients, with net sales in the US breaching $100 million for the first time in the first half (H1) of 2019. It plans to launch Epidiolex in France, Germany and the UK before the end of 2019, before expanding further into Spain and Italy in 2020.
It also commercialised the world’s first plant-derived cannabinoid prescription drug, Sativex, which helps alleviate spasms in multiple sclerosis patients in numerous countries outside the US, with trials underway for a US launch. It is evaluating how both drugs could help treat other diseases, including epilepsy, autism, Tuberous Sclerosis Complex and Rett syndrome.
The company is by far the largest publicly-listed pure-play cannabis stock in the world with a valuation of over $50 billion.
Canopy Growth (CGC)
Canopy Growth was the first cannabis stock to go public in North America in 2014 and the first producer to list on the New York Stock Exchange (NYSE) in 2018. The company is pursuing all aspects of the market, selling both medicinal and recreational cannabis – although sales in the latest quarter were heavily skewed in favour of the latter. Still, it was the first company to secure approval to export dried cannabis to German pharmacies. Spectrum Therapeutics is its medicinal arm that operates in 12 countries, while its recreational retail stores in Canada are housed under the Tweed and Tokyo Smoke brands.
S&P 500 alcoholic beverage firm Constellation Brands has invested a staggering $4 billion into Canopy Growth – the biggest deal in the industry to date – to help propel Canopy Growth into the US, Europe and South America. Canopy will use some of that capital to continue acquiring businesses, either to add new technology or to scale up the business. It recently bought Europe’s largest cannabinoid-based pharmaceuticals manufacturer, C3, and The Works, which focuses on using cannabis for skincare and to improve sleep. As well as cannabis-infused beverages, Canopy is hoping to be the leader in using cannabis in everything from animal health products to pain relief to health and wellness products.
Aurora Cannabis (ACB)
Aurora Cannabis is one of the largest cannabis producers, with 15 facilities serving 25 countries. It expects annual production capacity to reach 625,000 kilograms in 2020. The company says it is a ‘medical company at heart with a patient-first philosophy’ and has earned the market-leading position in key European markets, such as Germany. However, it currently makes around twice as much revenue from selling to the recreational market than medical, although the latter boasts better gross margins. In addition, it is planning to disrupt other recreational markets like beverages and tobacco.
It has made over 18 acquisitions over the past two years to become involved in the entire supply chain, and is trying to scale up enough to bring down the cost of production below CAD1 per gram from around CAD1.42 at present. It is also developing premium goods such as edibles, beverages, vape and cosmetic products from a new facility to improve its margin further, stating it is ‘well on its way to near-term profitability and the shift to a strong cash flow position’. Still, its pre-tax loss over H1 2019 mounted to over CAD340 million.
Cronos Group (CRON)
Cronos Group serves the medicinal market through its PeaceNaturals brand and the recreational market through brands including Cove and Spinach. The company has struck numerous partnerships to scale up and expand. It has a deal for MediPharm Labs to supply it with product to ensure it has enough to develop new derivative products in Canada, and has gained access to exclusive technology from Ginkgo Bioworks that should help it produce pure cultured cannabinoids at scale (lowering the cost) by leveraging existing fermentation infrastructure owned by the likes of breweries and pharmaceutical companies. It has also teamed up to bolster its efforts to enter the vape market.
The company is not the largest producer, with capacity of under 120,000 kilograms per year, but it has received some of the biggest backing. Tobacco giant Altria has chosen Cronos as its exclusive cannabis partner and has bought a 45% stake in the business with an option to take a controlling 55% stake.
Tilray is one of the largest and most-diverse cannabis companies. The company has distribution deals with pharmaceutical companies across Latin America, South Africa, Australia, New Zealand and Europe. One of its unique features is its Portuguese manufacturing facility, which has recently started to export product to other European markets like Germany. Around 30% of its revenue comes from the medicinal market while the rest comes from the recreational markets, including a large proportion from selling edibles.
It has also secured support from other industries. This includes a partnership with Novartis on the medicinal side while its recreational ambitions are being pursued through a 50/50 joint venture with drinks giant AB InBev, whereby each are investing CAD50 million to develop non-alcoholic cannabis-based beverages for the Canadian market.
While most companies are racing to expand as much as possible, Aphria has a more focused strategy. It has minor production capabilities outside of Canada - in Germany and Lesotho - and operates in 10 countries with the intention of entering Brazil in the near future. It says its strategy outside of Canada is focused on the medicinal market, while it is primarily concentrating on Canada for recreational sales.
Vaping products are the primary focus for new recreational products, thought to account for 17% to 30% of all cannabis sales, and has said it will only develop edibles and beverages once its vaping portfolio has been established. It has said it will not enter the US market until cannabis is legalised at the federal level, showing it is slightly more hesitant than its competitors.
Over 90% of its production currently comes from its main facility in Canada. It owns 51% of the facility alongside a partner with expertise in greenhouse farming. It has applied to build a second facility near the site which, when completed, would take annual capacity to around 255,000 kilograms per year.
HEXO Corp (HEXO)
HEXO Corp is implementing a ‘hub and spoke’ strategy that aims to partner with established, Fortune 500 companies in five key sectors: cosmetics, health and wellness, edibles, vapes and beverages. Its first partner covers the beverage sector with beer giant Molson Coors, with HEXO owning 42.5% of the joint venture. It is still looking for partners in the other areas. Although it serves both the medicinal and recreational markets, HEXO’s main goal is to ‘become the premier branded ingredients for food cannabis company in the world’ and says it aims to ‘make cannabis experiences for sleep, sport, sex and fun’.
It is primarily focused on cementing its position in Canada. Its forward order book from Canadian provincial governments is larger than any other company in the country. However, it is already establishing a presence in Greece to prepare to enter the European market. It is planning on entering the medicinal market in eight US states in 2020 before moving into the UK market in 2021, followed by France shortly afterwards. HEXO, which boosted capacity by about one-third to 150,000kg per year after acquiring Newstrike Brands, believes around 70% of the global cannabis market will be controlled by just three companies in the near future, and it intends to be one of them.
Innovative Industrial Properties (IIPR)
With the legalised cannabis market at such an early stage, investors are struggling to find companies that are profitable, let alone pay a dividend. Yet, Innovative Industrial Properties is profitable and already rewarding shareholders with a policy to return 90% of its pre-tax income on a quarterly basis – a commitment it has consistently delivered since the second quarter of 2017. As a real estate investment trust (REIT), the company purchases facilities from cannabis companies and leases them back, freeing up vital capital for growers to redeploy elsewhere in the business.
Innovative Industrial Properties only operates in the US and caters for the medicinal market. It currently has around 22 properties in its portfolio and is still expanding rapidly.
OrganiGram is not the largest player but is more financially stable, having delivered positive Earnings before interest, tax, depreciation and amortisation (Ebitda) for four consecutive quarters to the end of May 2019. It even managed to book a CAD23 million pretax profit over the last nine months, although it did report a CAD12.4 million loss in the latest quarter. The company is primarily focused on the medicinal and recreational markets in Canada, but it has said it intends to capitalise on the international opportunity in the future by signing partnerships with foreign firms. It already has deals to distribute to Germany and access to production facilities in Serbia.
OrganiGram claims to have ‘one of the lowest cultivation cost per gram’ of any licensed Canadian producer, partly thanks to its proprietary software. It is scaling up rapidly and should have capacity of around 113,000kg per year in 2020 from just 61,000kg at present. Its main facility uses vertical farming methods and it has recently dedicated a section to producing edibles and other derivative products. It intends to launch several new higher-margin products soon, with vape pens to be launched before the end of 2019 and both chocolates and a dry-powdered beverage formulation to be released in 2020.
Green Organic Dutchman (TGOD)
The Green Organic Dutchman is at an earlier stage of its life compared to most of its rivals and is focused on producing organic cannabis, stating it is the ‘only certified organic scaled producer in the industry’. It has only just started to commercialise its products targeting international medicinal markets and the recreational market in Canada. Its production capacity is set to expand dramatically over the forthcoming years, from around 17,500kg to 219,000kg by 2021. It currently has facilities in Canada, Denmark and Jamaica, with distribution capabilities in other countries including Poland.
The company has struck a major deal with ingredients giant Symrise to create Califormulations, a new beverage company that will look to launch organic hemp-based cannabidiol (CBD) beverages in the US before going global.
MediPharm Labs (LABS)
MediPharm Labs is taking a different approach to most of the other large cannabis players. The company produces cannabis extracts and is an expert in producing cannabis oils. It has decided to work as a partner and supplier to those that cultivate cannabis rather than sell directly to consumers or patients. In fact, it secured a licence to produce cannabis extracts before applying for a cultivation licence. It already has deals with many of the big guys, including Cronos, Canopy Growth, AusCann and Emerald Health Therapeutics.
The company supplies purified cannabis concentrate raw materials and also helps others formulate new products, as well as with processing and packaging goods. The company says it is aiming to increase its annual throughput to 500,000kg per year from 300,000kg. It intends to export its products to Europe from Canada and is in the process of building a bespoke manufacturing facility in Australia to cater for the domestic medicinal market and, later on, to export to Asia.
Auxly Cannabis (XLY)
Auxly Cannabis focuses on branding, supplying branded products to cater for the medical and recreational markets. It currently has capacity of around 100,000kg per year through its own facilities and that of third-party suppliers, and operates in Canada and Uruguay, the latter of which is the only other country to have legalised recreational use.
It has struck some major partnerships already. Tobacco giant Imperial Brands has taken just under a 20% stake in Auxly as its exclusive global cannabis partner, with the pair initially focusing on vaping. It is also aiming to ‘create the world’s first beer brewed from cannabis’ through a deal with Province Brands, which it owns 10% of. It is also developing new products including tablets, lozenges, sprays, oils and capsules.
Corbus Pharmaceuticals (CRBP)
Corbus Pharmaceuticals is medicinal cannabis company targeting inflammatory, fibrotic and metabolic diseases. It says this makes it unique in the market as other pharmaceutical firms are mostly developing cannabis-based medicines to treat conditions affecting the central nervous system. It is a clinical-stage company, meaning its medicines are still being tested and are yet to be commercialised. Its most advanced drug candidate, lenabasum, is an oral treatment designed to relieve inflammation caused by systemic sclerosis, cystic fibrosis, dermatomyositis, and systemic lupus erythematosus. Topline data is due to be released in the summer of 2020. It has another candidate named CRB-4001 that will enter a Phase 1 clinical trial before the end of 2019.
The company does generate revenue but is loss-making. Still, the company hopes it can develop its drugs enough to entice bigger pharmaceutical companies to work with it, possibly making it a takeover target in the future.
CannTrust is primarily interested in the medicinal market and is developing standardised pharmaceutical products, but it has started to expand into the recreational, beauty and pet care markets. It currently makes about two-thirds of its revenue from the medicinal market with the rest from recreational, and is aiming to turn a profit in 2019. It has an extraction, manufacturing and packaging facility in Canada and is expanding its core production facility from around 75,000kg per year to between 100,000 and 200,000kg in 2020.
Its strategy for the medicinal market involves a partnership with Apotek, the largest generic pharmaceutical company in Canada that operates in 115 countries. It has struck deals for other markets too, including a subsidiary of Breakthru Beverage Group, the largest alcohol distributor in Canada, and has set-up a joint venture with vet company Grey Wolf. It is also keen to break into other product areas such as vaping, beverages and confectionary. It has overseas operations through a 20% stake in Australian cannabis firm CannaTrek and a partnership with Stenocare, which supplies virtually all pharmacies across Denmark.
PharmaCielo is another company aiming to process and supply medicinal-grade cannabis oil extracts that can be used in standardised products. However, the Canadian company’s main USP is the fact it produces and processes cannabis in Colombia, which it believes offers better agricultural and economic conditions than other countries like Canada.
It has its own facilities but also works with local Colombian farmers, which grow and sell produce to the company. Importantly, it was the first company to be awarded a licence to grow cannabis dominate in either CBD (the medicinal compound) and THC (the psychoactive one), and is able to grow cannabis with unlimited levels of THC – potentially giving it an edge over rivals operating elsewhere. It expects commercial sales of both CBD and THC based oils before the end of 2019 and hopes to book its first commercial revenue in 2020. It recently exported its first product from Colombia to Europe and has nearly finished constructing a new processing facility. The company is in the process of acquiring Creso Pharma, which compliments its own exposure in Latin America with operations in Europe and Oceania. It is also expected to take PharmaCielo from bulk oil sales to a mix of bulk sales and proprietary branded products.
Aleafia Health (ALEF)
Aleafia Health is a medicinal marijuana company with two operational production facilities in Canada with a third one in development. It is currently ramping-up cultivation capacity to 138,000kg per year and extraction capacity of 50,000kg. The company has agreed to merge with medicinal producer Emblem, creating the ‘largest cannabis medical clinical network’ in Canada. It says merging with Emblem gives it access to higher-margin products like capsules, oil and sprays, and to Emblem’s ecommerce platform and distribution capabilities that will allow it to sell directly to patients. The company has said it aims to be a consolidator rather than be consolidated.
The company has expanded into Germany through a distribution and supply deal with pharmaceutical firm Acnos Pharma, and has entered Australia by taking a 10% stake in cultivator CannaPacific. It has also recently launched its first recreational brand, Symbl.
Emerald Health Therapeutics (EMH)
Emerald Health Therapeutics produces dried cannabis and oils to the medicinal and recreational markets, operating a ‘seed-to-sale’ model. The company’s main asset is a Canadian facility that it jointly owns with Pure Sunfarms, which is now producing 75,000kg per year. It is bringing two of its own production and extraction facilities online in 2020.
It has struck an exclusive deal with Factors Group of Nutritional Companies, the largest nutritional supplement manufacturer in Canada, which will see the pair run a facility capable of producing 600 million softgel capsules annually. As its new facilities come online and its partnerships gain momentum, Emerald Health expects a significant step up in growth next year.
Zynerba Pharmaceuticals (ZYNE)
Zynerba Pharmaceuticals concentrates on developing medicinal marijuana products that treat rare and ultra-rare diseases through transdermally-delivered (through the skin) products. It is targeting diseases like Fragile X syndrome, Autism Spectrum Disorder, 22q, and a heterogeneous group of rare and ultra-rare epilepsies. It uses a proven pharmaceutical manufacturing technique to ensure its products are up to scratch and says its lead product, Zygel, is the ‘first and only’ CBD gel that has been manufactured in this way. Zynerba pursues rare diseases because most of them have no treatments available.
Zynerba says it has no debt and enough cash to keep it going until the H2 2021, which may be enticing to investors considering the amount of dilution early investors in most cannabis stocks have suffered so far.
Zenabis Global (ZENA)
Zenabis Global produces medical and recreational cannabis with four facilities in Canada. It currently has licensed capacity of just 54,000kg per year but, having raised $25 million in debt, is building capacity to 143,200kg with a second site. It says all of its facilities can eventually be converted into production to give it capacity of up to 479,000kg. Whilst it is one of the smaller players at present, it has plenty of room to grow and is currently producing at just 78 cents per gram – considerably less than most Canadian producers.
It has binding deals in place to serve the German market and non-binding deals to enter other parts of Europe, Malta, Panama and Paraguay. Importantly, it says the recent debt it raised to increase capacity should be enough to make it self-sustainable and cashflow positive – meaning it shouldn’t have to raise more debt or issue more equity again.
Khiron Life Sciences (KHRN)
Khiron Life Sciences is a Latin American company listed in Canada. It is fully licenced to produce both medicinal and recreational cannabis in Colombia and Uruguay, although the medicinal market is the priority. Commercial production at its core Colombian facilities is imminent and costs are expected to be over eight times cheaper than the average cost for Canadian producers.
The company has a joint venture with Dixie Brands to cater to the recreational and wellness market, led by its Kuida CBD skincare products that are already available in Colombia and Italy, with plans to start selling it in the US in 2020. Although it does aim to capitalise on the huge potential in the US and European markets it is focused on branching-out in Latin America and it is making moves into Peru, Chile and Brazil.
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