The Motley Fool

Canopy Growth Corp. Is a Cannabis Pastoral

Canopy Growth Corp.’s (TSX:CGC) management has heralded to popular demand for the new natural miracle drug: cannabis. Canopy Growth’s product consistently meets the stringent specifications of the medical community because it has drafted a superb technical team capable of cultivating marijuana that reliably delivers the required potency.

How hard can it be to grow marijuana? After all, it’s just a weed. But cannabis isn’t just any garden variety wild flower to medical professionals, who must be certain of the potency of their prescriptions. According to its website, Canopy Growth owns exclusive licensing rights to supply Canada with Bedrocan whole bud medical–grade cannabis  “pioneered … in Holland through decades of selection and refinement.”

Many growers have 70-100% of their crops rejected by medical distributors because their strains are not standardized. These “bad crops” are supposed to be “disposed of” by the growers by burning the rejected weed. Let’s be honest … in reality, a lot of that stuff is probably finding its way out the back door for recreational use.

That type of distribution is  illegal, and, eventually, Canopy Growth will absorb the market share of those growers who can’t harvest strains that meet medical specifications. Bedrocan strains are so consistent they are relied on for clinical research in seven European countries as well as by the EQUAL Study in Canada.

Canopy Growth has 500,000 square feet of indoor and greenhouse capacity, in which specialist growers cultivate genetically superlative cannabis strains. The production costs of growing standardized plants according to proper technical specifications are much less than those associated with patented synthetic pharmaceuticals.

The consumer can enjoy the lower prices of cannibanoid medicines along with greater relief from what ails them and fewer side effects. All the while, a first-class producer like Canopy Growth will be enjoying wide profit margins in an ever-growing market.

How large could the available market for Canopy Growth’s products be in the long term? Canadian veterans are interesting indicators, since they use marijuana and cannibanoid medicines more than any other drug that is prescribed to them. Of all the drugs provided to our Canadian veterans, 22% are cannabis drugs. It is reasonable to imagine an exponential market growth if the general population consumed even half that percentage 10 years from now.

Leaders in the cannabis industry won’t be able to escape spending serious money on scientific research any more than the  pharmaceutical companies do with their patented drugs on research. Canopy Growth has hedged against such expenditures by purchasing the exclusive licensing rights to the American continents of both the existing and future gene pools of Bedrocan. This hedge will offset necessary future expenditures as GDC will need to maintain state-of-the-art equipment to expand capacity as well as to entice and retain the most highly specialized growers in this growing market..

Canopy Growth Corp. is a centerpiece in today’s nascent,  idyllic cannabis market because it has the management and the knowledge necessary to remain in the vanguard of Canadian cannabis producers.

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Fool contributor Drew Currah has no position in any stocks mentioned.

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