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medical cannabis vs recreational cannabis

Medical Cannabis vs. Recreational Cannabis Stocks: What’s the Difference?

Medical Cannabis vs. Recreational Cannabis Stocks: An Overview

Investors and companies alike have been excited about the cannabis market. Once on the fringes of the financial world, cannabis companies are gaining more traction, with mainstream companies jumping on the marijuana bandwagon.

Uruguay fully legalized pot in 2013, followed by Canada, which did so in 2018. But many other countries have been slow to follow suit—partly because of the stigma associated with marijuana. The drug still remains illegal at the federal level in the United States, but attitudes are shifting at the state-level. Colorado became the first U.S. state to legalize marijuana, and as of November 2020, medical marijuana is legal in 35 states while recreational usage is legal in 15 plus the District of Columbia.

But even as the sector racks up significant gains in the stock market, investor assessment of marijuana stocks is still colored by past stereotypes. Some investors still find it hard to jump in on the action, even with promises of big gains.

The industry is broadly divided into two markets—medical and recreational marijuana. As their names suggest, both have applications in different industries and cater to different markets. Medical marijuana stocks represent companies involved in research and development for the treatment of certain health conditions, while recreational cannabis companies cater to products that don’t serve a medical purpose. Instead, their users seek the high that comes with smoking, consuming, or drinking cannabis.

Depending on an investor’s risk profile and time horizon, stocks in both markets are attractive because they represent a growth opportunity, similar to the one that existed for tech stocks.

Key Takeaways

  • Although it is used to treat medical conditions and symptoms, medical marijuana is still considered a controlled substance at the federal level in the U.S.
  • Recreational marijuana caters to a larger market and has multiple applications from marijuana-infused beer to coffee and cigarettes.
  • According to research, more spending is expected to take place in the recreational cannabis market, but it is heavily taxed.

Medical Cannabis Stocks

Medical cannabis is a type of therapy prescribed by doctors for a wide variety of health conditions and symptoms. For this reason, a patient must receive a prescription before he or she can get access to cannabis treatment. To date, the drug has been used to treat Alzheimer’s, different forms of cancer, various mental health conditions, multiple sclerosis, nausea, and pain.

Medicines that incorporate marijuana may find significant applications in government health care. A 2016 research paper by Ashley Bradford and W. David Bradford from the University of Georgia found that prescription drug sales for painkillers “fell significantly” in states which legalized medical marijuana. “National overall reductions in Medicare program and enrollee spending when states implemented medical marijuana laws were estimated to be $165.2 million per year in 2013,” the authors wrote.

As noted above, 35 states legalized medical marijuana as of November 2020. But there are limitations because of how the drug is viewed at the federal level. The Food and Drug Administration (FDA) has approved four drugs with chemicals from or similar to the ones found in the cannabis plant, including Epidiolex, a drug used to treat a rare and severe form of epilepsy in children. The agency has yet to approve medical marijuana as a whole. That’s because the U.S. Drug Enforcement Administration (DEA) still lists marijuana as a controlled substance.

Despite this, the industry has been moving forward. Research conducted in 2018 stated that Sanofis Aventis (SNA) and Merck (MRK) are among the top cannabis-related patent holders. And companies currently involved in the use of marijuana for medical uses are GW Pharmaceuticals (GWPH), Tilray (TLRY), Corbus Pharmaceuticals (CRBP), Cara Therapeutics (CARA), and Zynerba Pharmaceuticals (ZYNE).

According to ArcView Market Research and BDS Analytics, spending on legal cannabis is poised to grow 230% worldwide from $9.5 billion in 2017 to $31.3% billion in 2022—33% of which is expected to go toward the medical marijuana industry. Most of this figure will be spent in the United States.

So how does this all stack up for investors? The basic framework for evaluating medical marijuana stocks remains similar to that for the pharmaceutical industry, which means investors should focus on the company’s pipeline of drugs and spending on research. Because research in cannabis is relatively new, it is safe to assume that the payback for investors in this industry will be longer as compared to recreational marijuana. For context, consider that GW Pharmaceuticals spent 19 years researching cannabis chemicals before getting its first drug approval earlier this year.

Getting into the market is as easy as any other industry. Investors may consider purchasing stock in companies researching or those that currently have medical marijuana on the market as mentioned above. Many are listed on stock exchanges like the Toronto Stock Exchange (TSX), while many are traded over-the-counter (OTC).

Another option is to consider an exchange-traded fund (ETF), as limited as they are in the market. These instruments trade just like stocks but pool together assets such as stocks, bonds, and/or commodities. The Alternative Harvest ETF includes companies such as GW Pharmaceuticals and Tilray and was trading at $13.12 as of Nov. 10, 2020.

Uruguay and Canada are the only two countries that have fully legalized both medical and recreational cannabis for its citizens.

Recreational Marijuana Stocks

Even though medical marijuana was legalized first and already has a semblance of distribution infrastructure in the form of medical dispensaries, recreational marijuana caters to a bigger audience and has a greater recall in public memory. This head start translates into a potentially bigger market for this type of marijuana and is reflected in the exponential growth statistics for companies involved in this sector.

The recreational marijuana industry primarily uses tetrahydrocannabinol (THC), a psychoactive agent that is responsible for the high that comes from smoking marijuana, for its products. It has multiple applications across products, from marijuana-infused beer to coffee and cigarettes. Instead of having a medical purpose, this industry markets the high that marijuana is known for and that many users seek.

According to the report released by ArcView Market Research and BDS Analytics mentioned above, 67% of global cannabis spending is expected to take place in the recreational industry—a big draw for investors. However, the federal legalization of recreational marijuana is essential before the market can reach its true potential.

The variety of products available for recreational marijuana comes with a catch—hefty taxes. For example, Colorado charges a 15% excise tax for sales from cultivators to retailers and another 15% sales tax. This makes the final marijuana product fairly expensive. Companies involved in recreational marijuana products will have to account for significant regulatory charges from governments on their balance sheets.

Just like medical marijuana, there are stocks and other investments available in the recreational cannabis sector. The most prominent company involved in recreational marijuana is Canada’s Canopy Growth (CGC). The stock price closed at $24.58 on Nov. 9, 2020, and had a market cap of $8.938 billion. Canopy Growth reported total annual revenue of $398.77 million for 2020, compared to $226.34 million from the previous year.

Medical marijuana and recreational marijuana are two high-growth sectors in the cannabis industry. Learn about how the two differ—and how you can get into the market.

What is the Difference Between Medical Marijuana and Recreational Marijuana?

Medical marijuana has gained popularity over time, with the increase in doctors’ recommendations, legalized access, and licensed dispensaries. Today, more people are wondering about the differences between medical and recreational marijuana – if it is really safe, regulated, or beneficial for use.

Marijuana is often referred to as cannabis or weed and is produced from the hemp plant, one of the many strains of the Cannabis plant species. The plant itself will produce over 400 different chemical compounds throughout its life span. The cannabis plant was mainly used for industrial purposes to make fibers, like ropes and sails for use, back in the 1700s. Other uses include textiles, clothing, insulation, and biofuel.

The marijuana plant itself contains 113 chemical compounds that scientists call cannabinoids. Cannabinoids have different effects and benefits on the human body. Typically, the two main cannabinoids in marijuana use are THC and CBD – Tetrahydrocannabinol or THC and Cannabidiol or CBD. THC is the psychoactive element in marijuana that produces the “high” while CBD does not.

In fact, THC is unique among the rest of the cannabinoids due to it being the most potently psychoactive compound, thus producing a range of mostly pleasurable effects on the human body. However, marijuana used for medical purposes actually has lower THC content and high CBD content instead, so patients are unable to feel a similar level of euphoria as they would with regular recreational marijuana.

It has been found that CBD from the marijuana plant provides an excellent medical remedy for various conditions and disorders. With that, some governments have allowed and legalized the hemp plant to be grown with low THC content for use by marijuana patients vs. recreational marijuana users.

Recreational cannabis

Recreational cannabis has mental and physical effects on the body, the most common being the “high” or euphoria. Other effects include changes in perception and concentration, impaired short-term memory, altered sense of time, increased relaxation, impaired bodily movements, and even an increase in appetite. This is due to the high THC content – the active ingredient in recreational cannabis.

Although THC has medical benefits as well, the psychoactive element is not ideal for medical patients who are looking to use marijuana to exclusively address their health condition. So marijuana with low THC to CBD ratio is commonly used for recreational purposes only.

Recreational and medical cannabis: difference in quality

The quality between medical and recreational marijuana is worth noting. Mainly the difference lies in how the hemp plant is cultivated and produced. Recreational marijuana can be grown either indoors or outdoors in the states which allow it, while regulations for medical marijuana are far more stringent – this is one of the main differences between recreational and medical marijuana production.

With all rights reserved, the legal production process to grow medical marijuana is stricter and requires more care since it will be consumed by patients ranging from children to elderly, with health conditions diagnosed by a licensed doctor. There are legalities in place to ensure safe and clean production such as bans on pesticide use and close monitoring of the plant while it is grown in a controlled indoor environment.

Protocols must be observed throughout production before medical marijuana is distributed to the medical dispensaries. In the end, it can be said that medical marijuana is the purer and safer end product.

Recreational and medical cannabis: effects on the human body

Recreational cannabis is often preferred by people who are after some type of social enjoyment or simply for their own personal satisfaction. Usually, it is acquired by a specific age group only – that which are legally allowed to get high without getting distressed. There is a legal age limit imposed on recreational users in the countries and states which allow its use. Meanwhile, medical cannabis is allowed across a wider age group and even those with conditions or disabilities, making it accessible to more people.

Medical marijuana has gained a lot of attention in recent years, growing in popularity. This is due to legal changes, improved accessibility, and availability, and more studies being conducted to research on its medical purposes. People are often confused about the effects of medical vs recreational marijuana on the body.

While scientific studies have been continuously ongoing, it is still inadequate due to production and governmental restrictions across states and countries. However, there are enough initial studies which have been helpful to get a picture of how medical marijuana is beneficial for a variety of purposes.

These include how it reduces nausea of chemotherapy patients, improves the appetite of HIV/AIDS positive patients, reduces chronic pain and muscle spasms, and even treating various forms of epilepsy. Note that these medicinal benefits in medical marijuana are due to the CBD component, and not the high THC content which is found in recreational marijuana.

The effects of cannabis on medical marijuana patients may also differ, varying on their condition, overall health, age, and other circumstances. The CBD levels, method of consumption, as well as particular cannabis strain (with a recommendation from a doctor) are factors that should be taken into account upon the use of medical marijuana. Take note that these should only be observed in states with legalized cannabis use and a registered dispensary or company for distribution. Currently, medical marijuana is legal in 29 states in America.

Recreational and medical cannabis: legalities

There is a difference between medical and recreational cannabis across federal laws, states, and countries. Serious fines and/or jail time awaits users or those who are found in possession of recreational cannabis. It is not accessible to people who wish to find recreational marijuana in countries where the use of cannabis is not legal at all. It is best for one to really travel to a state where cannabis use is legal, this ensures higher chances of availability and access to cannabis.

Shopping for medical marijuana is different from recreational marijuana. Generally, one needs to be above 21 years old and with a valid identification card (ID) on hand in order to buy recreational weed. The products of cannabis also vary in form across states. For example, there are recreational cannabis edibles available in shops in California, but none in the state of Hawaii.

Meanwhile, to buy medical marijuana the laws are different. Medical marijuana dispensaries require a Medical Marijuana Card which the patient can acquire, under the listed medical conditions by the Department of Health Services in that state. Only physicians with a medical cannabis license are allowed to approve Medical Marijuana Cards. This assures the staff at the medical dispensaries regarding the purchase of cannabis and that the patient will be using it to treat a health condition.

In Hawaii, these conditions include cancer, glaucoma, multiple sclerosis, lupus, AIDS/HIV, epilepsy or seizure disorder, post-traumatic stress disorder (PTSD), among others. First, patients need to acquire a Valid 329 or a Medical Cannabis Card.

There is an important difference between medical and recreational marijuana access because the patient’s medical marijuana card (and prescription, if any) will shield them from prosecution in their respective state.

Summary of differences between medical and recreational cannabis: which is better?

Overall, there are many differences between medical and recreational marijuana – which should be considered before one can decide what they would need or want. Note that before acquiring either product, one must be of legal age, with a valid government-issued ID, and in a place with legalized access to marijuana.

Medical marijuana has gained popularity over time, with the increase in doctors' recommendations, legalized access, and licensed dispensaries. Today, more