Currently, cannabis is federally illegal in the U.S. with the majority of Americans now having access to some form of cannabis. More than half of U.S. states have a medical cannabis program and 18 states, two territories and the District of Columbia have legalized adult-use (recreational). 70+ countries have some version of a medical cannabis program, most not as robust as the majority of U.S. states. 2021 was undoubtedly a year when success required the foresight to recognize a need to pivot and execution, regularly. For cannabis companies and those which support the industry verticals this happens regularly with changes in policy.
In 2021, the global cannabis industry saw a significant amount of growth both in medical cannabis and adult-use markets. What’s ahead for the industry in 2022 in the U.S. and global markets? My predications follow.
Revenue Growth: There will continue to be significant industry growth in the U.S. and global markets. New Frontier Data reported in 2021 that the U.S. is on track for almost USD $25B in sales and will be close to USD $43B by 2025. Globally, the industry is projected to grow to USD $496B by 2025 combining both legal and illicit cannabis markets. The size of the illicit market is significant and underscores existing demand.
The end of 2021 saw the first EU member state, Malta, legalizing adult-use and the new German government declaring its intention to legalize adult-use. Assuredly, additional countries will follow suit. What’s important about these market size predictions is that they are the floor, not the ceiling. Consumers and patients are becoming increasingly aware of cannabis and integrating it into their daily lives as a wellness production (CBD) and/or high-THC medicine. In turn, healthcare providers need to be educated on cannabis science and therapeutics.
DEI Progress: When I founded CannabizMD sister social enterprise Tea Pad in early 2019, very few states and cannabis companies were executing DEI strategies. That’s been part of Tea Pad’s mission, to challenge the industry to walk the talk of DEI. Tea Pad is launching a new program in 2022, The Tea Pad Fellowship Program. The Program will immediately educate qualified candidates with a background in cannabis science, policy, and the industry as well as provide a small stipend while they continue with professional development and gain hands-on work experience.
A few U.S. states have created microbusiness licenses that have lower barriers to entry for a license or an ancillary service. These licenses typically have limits to canopy-size, plant-count limits, and restrictions on the number of employees and residence requirements. This is a strategy to grow diversity in a market via lower barriers to entry.
Federal Reform: I predict a change to federal regulations by mid-term elections. All 435 seats in the House and 34 out of 100 Senate seats will be contested. My money is on SAFE Banking which will reduce the tax burden of cannabis companies via 280E tax reform (plant-touching businesses pay approximately 60% in taxes compared to a standard business rebate of 21%). Banking reg reformation will include greater access to capital with very strong equity measures in place addressing barriers to entry and criminal justice reform.
I also predict federal reform for cannabis research. Schedule 1 classification of cannabis (drugs, substances, or chemicals are defined as drugs with no currently accepted medical use and a high potential for abuse) has comparatively paralyzed U.S. cannabis scientists and researchers to their global colleagues, i.e. The Netherlands, Israel, and Canada. The DEA has announced less than a handful of new cannabis cultivation licenses by the DEA in 2021, removing the monopoly the University of Mississippi has had on supplying cannabis for FDA-approved research. As well, the DEA proposed “significant increases” in the manufacturing of “the schedule I substances “psilocybin, psilocin, marihuana, and marihuana extract” for research and clinical trial purposes in support of the more than 575 DEA-licensed researchers.
More of the Same and New M & A: Per NFD, the bulk of 2021 M & A was in the U.S. market (Canada 2nd) with cultivation and retail the bulk of transactions. The U.S. East Coast is heating up with adult-use programs and MSOs are busy positioning themselves for significant market growth. Cannabis technology also saw a great deal of activity. I predict an increase in activity for ancillary service providers which support the industry with unique knowledge assets, i.e. education and product formulation.
More from Pharma: 2021 saw two significant acquisitions in the pharma industry, both included the acquisition of cannabinoid-based medicines. GW Pharmaceuticals was acquired by Jazz Pharmaceuticals for close to USD $7B. GW manufactures the first FDA-approved plant-based pharmaceutical product Epidiolex. Pfizer recently acquired Arena Pharmaceuticals for close to USD $7B. Arena has a synthetic cannabinoid drug in Stage 3 clinical trial to treat colitis. These acquisitions demonstrate that cannabinoids are valued which boosts the value of clinical-focused cannabis companies. There’s sure to be more and see my prediction on federal reformation for research. Pharma has some very deep lobbying pockets.
Innovation: One of the greatest challenges for healthcare providers is the standardization of dosing. Along with the variables of patients’ unique endocannabinoid system, variables include differences in cultivars and cannabinoid profiles, consumption methods, and measured dosing. Technology drives innovation and innovation drives technology – data is the invaluable outcome. We’re sure to see more innovation in products focused on data capture and application across the industry’s verticals. There will be growth for companies focused on smart dosing delivery methods and non-smoking formulations (e.g., transdermal delivery) utilizing innovations in technology, i.e. IoT and AI.
If you’d like to share your 2022 cannabis industry predictions, see opportunities for partnering, or would like to learn more about CannabizMD and the Tea Pad Fellowship Program, please email me. Wishing you a very healthy, joyful, and prosperous New Year!
Jacquie Cohen Roth, MS, is Founder/CEO of both CannabizMD and sister social enterprise Tea Pad. In 2021, she received a MS in Medical Cannabis Science and Therapeutics from the University of Maryland School of Pharmacy cum laude.
Resource: New Frontier Data, 2021. Cultivating Capital Cannabis Finance & Investment.