Marijuana industry analysts and investors looking for marijuana stocks to buy often engage in comparisons of similar stocks, weighing out which is the better stock option. Sometimes, the stocks in comparison visibly have a lot in common and other times, upon closer inspection, the stocks bring very different options to the table.
The differences of options are more evident in the case of GW Pharmaceuticals (NASDAQ:GWPH), a biotech focused on cannabinoid, and Aphria (NASDAQOTH:APHQF), one of Canada’s largest marijuana growers.
These big players may have the MMJ industry in common, but, their models for conducting business within the industry are strikingly different. The winner this year, by far, for investors in marijuana stocks, has been GW Pharmaceuticals. The biotech’s share price has been climbing, currently up more than 10%. Aphria’s share price, on the other hand, has declined by almost 40%.
The question remains, however, how do these two cannabis stocks compare when looking at the overall picture and long term potential of either?
What GW Pharmaceuticals (NASDAQ:GWPH) has to offer as a marijuana stock to invest in:
The truth is, the release of Sativex, GW Pharmaceuticals’ first cannabinoid-based drug, has not proven very profitable. While Sativex, which is used to treat spasticity in multiple sclerosis patients, is on the pharmaceutical market in a few countries, it is not sold in the U.S. This factor could change fairly soon, however, and GW may see the profits come rolling in, thanks to a recent turn of events for the biotech.
In June, GW won approval from the FDA in the U.S. for its drug, Epidiolex, which was created to treat two rare forms of epilepsy, Lennox-Gastaut syndrome (LGS) and Dravet syndrome. This FDA win made its own history, as Epidiolex officially became the first among cannabinoid, plant-based drugs to receive this approval in the U.S. The drug faces a final hurdle, however, before it will be able to reach the market. It must be classified as a narcotic by the DEA into one of the five schedules.
Epiodiolex has the potential to bring in annual sales in the ballpark of $1 billion; a few analysts suggesting the drug’s prospects are even greater than this estimation. One market research firm, EvaluatePharma, placed Epidiolex near the top of a list of ten of the biggest new drugs to launch in 2018; the research firm predicts sales for Epidiolex will near $1 billion in four years.
The hope for GW Pharmaceuticals is Epidiolex will also win approval to treat the same rare forms of epilepsy in Europe. The company must wait until early next year before a decision is made by the European Medicines Agency. In the meantime, Epidiolex is under evaluation in another of GW’s clinical studies, to see if the drug may also be used to treat tuberous sclerosis, a genetic disorder involving benign tumor growth on different body parts. Currently, the drug is in phase three of the clinical study.
The biotech continues to work to bring more cannabinoid drugs to the market. GW still hopes to bring Sativex to the U.S. market, to treat spasticity in MS patients; currently, the drug is in phase 3 of a clinical trial. The company is also interested in developing a cannabinoid-based drug to treat schizophrenia, epilepsy, autism spectrum disorders, neonatal hypoxic-ischemic encephalopathy (HIE) and glioblastoma.
What Aphria (NASDAQOTH:APHQF) has to offer as a marijuana stock to buy:
While Aphria’s stock has not performed as well as GW Pharmaceuticals’ this year, the major grower anticipates seeing revenue growth through the roof in the coming quarters. By the time of Aphria’s Q3 report in April, the company’s sales were at a record high, a solid CA$10.3 million. Yet compared to what is likely coming for Aphria by the end of this year, even this all-time high may look like chump change in comparison.
Then, there’s the long-awaited opening of Canada’s recreational marijuana market coming in October, of which Aphria has strategically positioned itself to capture what appears to be a sizable market share. Owing to a recent partnership with one of North America’s largest wine and spirits distributors, Southern Glazer, Aphria also seems poised to reach a wide base of retail customers.
Additionally, Aphria has worked aggressively to ramp up its production capacity ahead of the country’s high anticipated demand, not only for recreational, but, also medical marijuana. By the beginning of next year, Aphria intends its capacity to be 225,000 kilograms annually.
However, the greater opportunities for growth lie beyond Canada, where Aphria has turned its focus. With medical marijuana legalized in Germany last year, Aphria saw the opportunity to step into one of the fastest-growing MMJ markets in Europe and acquired Nuuvera (NUU), a fellow Canadian grower with ties to the German market. Aphria may have stepped back from initial expansion plans in the U.S. after the Toronto Stock Exchange threatened to delist stocks with ties to the States; however, pending federal changes to marijuana laws in the U.S., the company should not have a difficult time assuming its plans for expanding into the U.S. market.
Another possible strategic partnership may also be on the horizon for Aphria. Molson Coors Brewing (NYSE:TAP), a major company in the alcoholic beverage industry, has reportedly engaged in talks about investing in the development of beverages infused with cannabis with several of Canada’s marijuana growers. Of the growers, Aphria is thought to be one of Molson Coors’ top choices to partner with in seeing this plan through.
Which is believed to be the better marijuana stock to buy?
By now it should be clear to see either of these two cannabis stocks come with their own risks and perks. GW Pharmaceuticals may face challenges winning approval for Epidiolex as a treatment in Europe and, therefore, difficulty securing reimbursement for the drug. Aphria runs the risk of oversupply in the next several years should the company’s production exceed domestic and global demand.
Based on what we know, however, it seems GW Pharmaceuticals may be the better positioned of the two stocks when it comes to meeting expectations. This clearly does not come with a guarantee, but, Aphria’s risks outweigh GW’s. For one, GW faces far less competition as a biotech than Aphria as a grower. Should the partnership with Molson Coors come through for Aphria, of course, the company’s stock might shoot skyward; however, taking a longer perspective, GW Pharmaceuticals still seems to come out with better prospects.
(For another stock comparison, read How Does Aphria Marijuana Stock Match Up to The Hydropothecary Corporation?)