Tilray, Inc. ($TLRY) is hugely supported after Kamala Harris announced that Biden‘s government wants to decriminalize cannabis. Legalization of medical cannabis helps destigmatize related products. It also discussed the possible deletion of files of those convicted of cannabis possession. The shares of various cannabis companies enjoyed a nice jump today, causing the share of Tilray to go up with over 18% today – which means a share price of around $6.10.
The medical cannabis sector holds the bulk of the market share, as progress is slowly being made to remove the stigmas associated with cannabis and CBD products. The era seems to have come where more value is being created for this developing market. The potential for legalization allows more effective drugs to be produced for patients that prefer or need alternative solutions to their conditions.
The current “legal” cannabis market in the United States is helping to create a multi-billion dollar industry. Increasing awareness and legalization efforts will significantly further improve the overall market. Due to the current policy, the United States is lagging behind to other countries with the options for medicinal cannabis. In 2017, sales of the global medical cannabis market were expected to increase by more than $11 billion. By 2023, the sector must have reached a value of $37 billion.
What distinguishes Tilray during these developments?
Last month, Tilray announced that Australian researchers showed – A publication of Annals of Oncology – preliminary results showing that one of the company’s GMP-produced products shows promise in reducing nausea and vomiting for cancer patients undergoing chemotherapy. Nausea and vomiting are among the most troubling and dreaded consequences of chemotherapy. 25% of patients using medical cannabis did not experience vomiting and nausea. This is an improvement of more than 11% compared to patients who took placebo. Improving the control of nausea and vomiting not only removes bothersome complications, but also improves the well-being of cancer patients, potentially increasing the chances of survival a bit as well.
The trial will move to a next phase to gain more knowledge about how effective medical cannabis is and whether it should be considered for use in routine cancer care.
Tilray is a smaller company with a market capitalization of $613 million. The company released recent second quarter results on August 10. Its published revenue of $50.4 million is 10% higher than the same period in 2019. While diversification is a strength for Tilray, it is difficult to predict how the company and industry will perform in the coming periods.
In August, the U.S. Drug Enforcement Administration (DEA) proposed new design rules for hemp. This would make it easier for companies like Tilray to pass the 0.3% THC limitation. The 0.3% limitation can also apply to the extraction process once the new rules have gone through. Despite the fact that it is still speculation, it is already a subject that concerns many experts and investors.
Finally Tilray also has a critical point, as it slowly seems to become a hemp company. And this may deter some investors. Hemp is Tilray’s largest segment, generating $41.6 million in revenue in the first half of 2020. This is several millions more than their second specialization, which can mean their hemp business may outpace the other segments in the coming quarters.
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