Nine months ago, the Danish pharma specialist NNE sowed a seed – a team providing strategic business consulting on growing, producing and distributing medical cannabis.

Now NNE reaps the harvest; The team has 25 projects in the basket and is currently counsellors for Canadian Atlas’ major cannabis investment in Denmark. The NNE CEO describes the team as a ‘disruption from within’.

While greenhouses with tomatoes and mushrooms are transforming into growth centres for cannabis in the Danish countryside, disruption is taking place in the Copenhagen Metropolitan Area, where pharma specialist NNE is located.

The connecting thread is medical cannabis – the pharma industry’s engine of growth.

Successful knowledge-sharing from Canada to Europe and back again

A year ago, a small group of NNE employees gathered to identify new business opportunities. Just three months later, NNE made a strategic choice and established an agile cannabis team that advises businesses in the development and investment phase ahead of the decision to build a facility for growing, producing and distributing cannabis.

According to Jesper Kløve, CEO of NNE, it was a ‘disruption from within’: “Our cannabis team operates with a new approach in relation to our classical modus operandi. With this new team, NNE provides consulting from cradle to grave.

“We identify the client’s commercial basis and participate in investor meetings as advisors. If a company then decides to invest in a cannabis project, we can help establish the business.”

The NNE cannabis team already has experience from more than 25 medical cannabis projects – and NNE is very successful when it comes to sharing knowledge from Canada to Europe and back again.

Business Director Christian Carlsen said: “Instead of focusing on NNE’s highly specialised engineering services and our 70 years of pharma know-how, we offer advice on companies’ commercial onset. We provide feasibility studies, forecasts and advice on locations.”

A current example is the investment from Atlas in the region of Funen, Denmark, where NNE has advised from the first phases of the project, including Atlas’ choice of geo-location. Now NNE continues its consulting, and the investment is expected to result in hundreds of new jobs.

Attractive structural competitive advantages

When international companies choose Denmark as their tip of the spear for investments in the European market, it is no coincidence. According to Invest in Denmark in Toronto, the regulatory framework and a strong pharma sector are key factors.

Michael Prytz, Investment Manager at Invest in Denmark, part of the Danish Ministry of Foreign Affairs explained: “Denmark has several structural competitive advantages. A unique and clear legislative framework for medical cannabis, low energy prices, competent workforce and a great know-how within pharma.

“The Danish business eco-system consist of competent partners that foreign investor can seamlessly cooperate with – for instance companies with extensive expertise in establishing facilities for producing cannabis and obtaining the necessary official approvals, with patient safety as the ultimate goal.”

The market potential in Europe is enormous. Atlas grew up in the Canadian market with approximately 35 million citizens. In the European Union, the market is just over DKK 510m (~€ 68.28m), markedly larger than the US market.

High legal and patient safety requirement

The market for medical cannabis is characterised by both small companies with an investment maximum of DKK 250,000, and big companies from e.g. Canada with investments of around DKK 250m in Europe, Asia and Denmark. NNE’s cannabis team delivers advice for both types.

Carlsen said that NNE’s experience with Danish and international regulatory framework for medical cannabis and GMP is key to its business partners: “We have established relationships with Canadian companies primarily through their need for a credible advisor in meetings with investors and shareholders. We can validate the business model and – when it comes to engineering, compliance and technology – we are experts that strengthens the potential and suggest changes.

“The players in this market foresee that companies living up to the high but clear regulatory requirements in Denmark also live up to 85-90 percent of the possible European requirements. Thus, Danish NNE is an attractive partner for companies with European expansion plans. We are trusted advisors to several of the major players. Our customers work with us in Denmark as well as internationally.”

Asia is also interesting. NNE, which has a department in India, is already embarking on a cannabis project in the more than one billion-person market.

On that basis, Christian Carlsen works diligently on harvesting even more value with NNE’s ‘disruption from within’ – the fruitful cannabis team.

The past year, the European cannabis industry has grown more than the previous six years combined. More than 500 million Euros have been invested in the industry.

The European Cannabis Report expects that the European market for medical cannabis will grow to reach a value of 123 billion Euros in 2028. This means it will become the World’s largest market within the next five years.

Between the start of 2016 and the end of the first quarter in 2019, cannabis stocks were practically unstoppable. Early investors who had the wherewithal to buy and hold pot stocks often found themselves up by triple- or even quadruple-digit percentages in a relatively short amount of time.

However, the past six and a half months haven't been pretty. You could rightly say that the rug has been pulled out from underneath the feet of pot stock investors, with most marijuana stocks shedding 30%, 40%, or perhaps more than 50% of their value since the second quarter began.

While there are clear hurdles the industry needs to overcome, this precipitous decline in marijuana stocks has led to some arguably intriguing valuations. Right now, you won't find cheaper pot stocks on the planet, based on their forward price-to-earnings ratios, than the following five marijuana stocks.

Supreme Cannabis Company: 8.8 times forward-year earnings per share (EPS)

For the time being, the crown of "cheapest pot stock in the world" goes to niche Canadian cannabis grower Supreme Cannabis (OTC:SPRWF) at less than nine times Wall Street's consensus EPS for the upcoming year.

What makes Supreme Cannabis different from many of its peers is that it's focused on quality, rather than quantity. The company's 7Acres campus is only expected to produce about 50,000 kilos of marijuana annually, which places Supreme Cannabis well outside the top 10 or even top 15 producers in Canada. But the company is focused solely on premium and ultra-premium weed, which is a category that most of its peers offer little or no supply. This suggests that Supreme Cannabis should have little competition within its niche, and its pricing power, even on dried cannabis, should be strong.

Furthermore, the 7Acres facility is likely to produce at above-industry-average rates. Admittedly, peak production figures are a little difficult to pinpoint at the moment, but based on rough estimates from major growers, there are only a small number that look to offer a higher yield per square foot than Supreme Cannabis.

Valens GroWorks: 9.1 times forward-year EPS

An exceptionally hot trend right now is extraction services, which Valens GroWorks (OTC:VGWCF) is looking to ride to a forward price-to-earnings ratio of just over 9.

Next week, on Oct. 17, Canada will officially legalize cannabis derivatives, such as edibles, vapes, infused beverages, topicals, and concentrates, with these products expected to hit dispensary shelves by mid-December. To produce derivatives, growers often need third-party processors like Valens GroWorks to take cannabis and hemp biomass to yield concentrates, resins, distillates, or targeted cannabinoids. Since derivatives are a much higher-margin product than traditional dried cannabis flower, third-party extraction service companies like Valens should be busy for the foreseeable future.

In addition, these extraction providers sign intermediate-term contracts with their clients for fee-based services. That's a fancy way of saying that a company like Valens should have very predictable sales and cash flow. With significant deals with Tilray and HEXO under its belt, Valens is well under way to maximizing its annual extraction capacity.

Sundial Growers: 9.3 times forward-year EPS

Although it's a relatively new initial public offering, Alberta-based Sundial Growers (NASDAQ:SNDL) has slid right in as one of the cheapest pot stocks in the world, with a forward price-to-earnings ratio of 9.3.

The beauty of Sundial's business model is that it approaches growth from both sides of the aisle. The company has three grow farms that should, at peak capacity, produce as much as 95,000 kilos of weed per year. That places Sundial on the verge of being a major grower. Sundial is currently producing at an annual run rate of about 60,000 kilos but should end the calendar year at closer to 75,000 kilos of annual run-rate production.

On the other side of the aisle, Sundial has 3.6 million square feet at Bridge Farm in the U.K. that'll be devoted to hemp and/or processing. Note that nearly 2 million square feet of this space is still under or awaiting construction. Hemp is a considerably easier-to-grow plant than cannabis, and it's often rich with cannabidiol (CBD), the nonpsychoactive cannabinoid that's best known for its medical benefits and is regularly used in high-margin derivatives. 

Village Farms International: 11.6 times forward-year EPS

British Columbia-based Village Farms International (NASDAQ:VFF) is the fourth cheapest pot stock in the world.

Like Sundial, Village Farms approaches growth from a variety of ways. It formed a cannabis-growing joint venture with Emerald Health Therapeutics, known as Pure Sunfarms, in 2017. Since then, Pure Sunfarms has acquired two 1.1 million-square-foot greenhouses from Village Farms that had been used for growing vegetables. The Delta 3 facility is already fully operational and projected to produce at least 75,000 kilos per year, with the Delta 2 facility expected to be fully online and generating 75,000 kilos of yearly run-rate production by the second half of 2020.

This is a company that's also been very active on the hemp production front. Village Farms has formed two hemp-focused joint ventures that have combined to plant more than 700 acres of hemp in the U.S. thus far in 2019. Next year, this figure should climb to more than 900 acres. Plus, Village Farms has more than 5 million square feet of greenhouses in West Texas that could be retrofit for hemp production, should it choose to do so. CBD-rich hemp is a hot commodity, and Village Farms aims to take advantage of that demand.

Trulieve Cannabis: 13.2 times forward-year EPS

Lastly, vertically integrated multistate dispensary operator Trulieve Cannabis (OTC:TCNNF) clocks in with a forward price-to-earnings ratio of just over 13. Of the five marijuana stocks listed here, it's the only one that's been consistently profitable for a number of quarters now.

Although Trulieve Cannabis has a presence in four U.S. states, its success is built on the fact that it's focused its efforts on its home market of Florida. Even though only medical marijuana is legal in the Sunshine State, Trulieve has generated plenty of growth and gobbled up significant market share. The company recently opened its 37th store in Florida, and by doing so has been able to effectively build up its brand and image, all while keeping its expenses reasonably low. 

Beyond Florida, Trulieve Cannabis is aiming to build its brand in California, Massachusetts, and Connecticut, all of which are billion-dollar potential markets by 2024, save for Connecticut. If Trulieve can use its Florida success as a blueprint for expansion into other states, the sky is the limit.

Indiana is a very conservative state that’s traditionally been eons behind when it comes to cannabis regulations, however, small changes in different localities may trickle down and have a statewide impact – for the better.

Just to quickly get it out of the way – no, cannabis is NOT legal in the Hoosier state yet, neither for recreational nor medical purposes. Under current law, possession of 1 ounce or less is a misdemeanor offense that carries a penalty of up to 180 days in jail and up to $1,000 in fines.

But of course, that doesn’t mean there aren’t some grey areas here and there. And while these exceptions are currently limited to 1, maybe 2, counties, they’re creating an environment that’s conducive to progressive legal change; and the rest of the state won’t be able to hold out much longer.

Enter, Marion county.

No Longer Prosecuting Cannabis Cases

Marion county is home to the largest city in Indiana, as well as the 17th largest city in the United States: Indianapolis.

Last week, Marion County’s acting prosecutor Ryan Mears abruptly announced that his office would no longer be prosecuting people charged with possessing small amounts of cannabis. He said that cannabis cases are blocking up Indiana courts and overcrowding jails, and he believes the county’s resources would be better spent trying to curb violent crime.

His decision was sudden and unprecedented, and needless to say, was met with a quite a bit of backlash. Mears, however, says this isn’t a matter of politics – but rather, of morality. “I don’t think doing the right thing is a bold thing to do,” he told the IndyStar. “I’ve been a prosecutor for 12 years, I have the experience of seeing what causes violent crime. And over the course of 12 years, I can tell you, small amounts of marijuana is not our problem.”

“This is not a political decision,” he continued. “This is a moral decision. And I have a moral responsibility to make sure everybody is treated fairly under the law. And the continuing enforcement of marijuana laws is unjust and unfair to people of color. So I’m not going to do it.” 

Mears’ office will also look into the 400+ pending possession cases and dismiss as many as possible, granted they meet a certain set of criteria.  

But before you get too excited, know that just because you won’t actually be charged with cannabis possession, that doesn’t mean you’re completely in the clear. Police officers can still confiscate your buds, cite and even arrest you, but the charges will be dropped once they reach the prosecutor’s office.

“Lawrence police officers, like most Indiana law enforcement officers, are able to use their discretion in taking misdemeanor enforcement action, just like the Marion County prosecutor can use prosecutorial discretion when making final charging decisions,” Lawrence Deputy Chief Gary Woodruff said in a statement. “We’re continuing business as usual for the officers patrolling the streets and neighborhoods of Lawrence.” 

So it’ll still be lost buds, lost money, and a whole lot of hassle; but it likely won’t continue much longer. The police departments are holding strong for now, but they’ll eventually get tired to making arrests and doing paperwork for an offender who will just be released anyway.

Now, if you step outside of Marion county, that’s a different story entirely. Even if you’re a Marion county resident, if you’re caught with cannabis in Hancock county for example, you WILL be prosecuted there. And such is the case throughout the whole state, so, be careful.

The CBD Conundrum

Many would argue that Mitch McConnell accidentally legalized cannabis with his push for hemp reform. Let me explain. Last year, the 2018 Farm Bill came with a provision to legalize hemp farming and products containing 0.3% THC or less, which includes Hemp Flowers, or CBD Buds.

THC Buds on the left, CBD Buds on the right. Can you tell the difference?

These CBD Buds look, smell, and taste just like regular, THC-dominant cannabis buds, but because they’re under the threshold for THC content, they’re legal. They contain all the same terpenes, flavonoids, and cannabinoids as regular cannabis, but only trace amounts of THC. Sounds pretty simple right? Well, when it comes to enforcing this law, the situation gets a bit hazy.

Because CBD Buds look, smell, and taste the same as their psychoactive counterpart, there is only one way to determine which one a suspect is in possession of – with a lab test. It’s a loophole like no other.

Sending each and every sample out for lab testing, at a lab that may or may not even be in the same state (in the case of Indiana, not), is expensive and time consuming, pushing many law enforcement agencies to give up on policing cannabis altogether.

Looking Forward

As it stands, Indiana is the lone prohibited state surrounded by a sea of legal cannabis. Their neighbors on all sides have some sort of cannabis legislation on the books; Cannabis is completely legal for adults in Illinois and Michigan, Ohio has medical with talk of passing recreational, and Kentucky is in the process of approving a bill to legalize medical cannabis as we speak (or write), plus, they are on the forefront of hemp production.

Indiana is the only state in that region that has yet to make any forward moves, but many believe that this anti-cannabis era will soon come to an end. Just take a look at Terre Haute, a small city near the border of Illinois. Vigo County Sheriff John Plasse told the local newspaper that, “faced with recreational weed next door in Illinois, possession cases would likely result in just a ticket.”

And it’s not only local authorities who are coming around on the idea of cannabis. Former Indiana State Police Superintendent Paul Whitesell has this to say about the subject: “It’s here, it’s going to stay, there’s an awful lot of victimization that goes with it. If it were up to me, I do believe I would legalize it and tax it, particularly in sight of the fact that several other states have now come to that part of their legal system as well.”

At this point, it makes no sense to continue enforcing archaic cannabis laws that benefit no one. Aside from the huge burden these regulations have on citizens, how do they impact the community and state as a whole? What are the costs associated with prosecution, incarceration, and probation? How does the criminal records of the thousands of Hoosiers convicted each year influence the labor force? What kind of effects does this have on productivity in the state?

These questions aren’t easy to answer, but here’s one thing we know for sure; cannabis = money, which can be used to make much-needed improvements in Indiana. Since legalization in 2014, Colorado has collected over $1 billion in cannabis tax revenue. This money has been used mostly for education improvements, but also for additional cannabis research, addiction treatment, affordable housing, and numerous other public programs.

When you look at it like that, cannabis legalization definitely seems a lot brighter, and hopefully the powers that be in Indiana see it the same way.

Cannabis has a positive effect in taming inflammation and a myriad of ailments associated with swelling.

While inflammation is the cause of many maladies, it’s also sometimes the remedy. It accounts for back pain, arthritis flare ups, headaches, bowel disorders and even an increase in heart disease. Alzheimer’s is yet another affliction associated with inflammation. And cannabis? It’s a known anti-inflammatory.

As studies show, not only does cannabis have a positive effect in taming inflammation and a myriad of ailments associated with inflammation, the entourage effect created by the combination of cannabinoids, including THC, gives a person an even better result. When this synergy takes place, inflammation is greatly relieved, and thus so are the diseases and pains that go with it.

Quality and longevity of life are sincere goals of most human beings, and accomplishing those goals takes a level of fitness that is somewhat lacking in the average American lifestyle. Many people unable to exercise or stretch for their health aren’t capable because of inflamed joints or other painful inflammations that hinder activity.

Because cannabis works as an anti-inflammatory, it could very easily be the ticket to better health and wellness all around. If the joint pain isn’t in the way and the mindset is elevated to a can-do level, the world opens up a bit and the first steps toward holistic health have been taken.

Cannabis has been studied for the relief of inflammatory bowel diseases like Crohn’s and one study showed that the anti-inflammation properties are to be thanked. Although the initial purpose of the study to seek complete Crohn’s remission wasn’t achieved, it was found that 10 out of 11 patients treated had “clinical, steroid free benefits.”

Steroids and other anti-inflammatory pharmaceuticals have many side effects. For steroids, immune system efficiency can go down and muscle weakness may occur among other problematic possibilities. For NSAIDs, the most common over the counter anti-inflammatory, prolonged use can result in stomach pain and eventually to ulcers.

One thing cannabis is short on is side effects. Sure there’s dry mouth, increased hunger, an enhancement of the senses and, oh yeah, a substantial reduction in inflammation, but aren’t most of those things part of the point? It’s no wonder that so many patients use cannabis for chronic pain, inflammatory bowel disease and even Alzheimer’s. It’s truly a miracle plant.