COVID-19 Update: Cannabis as an Essential Service. Science Rules. Stocks Up.

In a recent Stockhouse article, we detailed an intriguing new study looking into the efficacy of medical cannabis in the fight against COVID-19. Now, data appears to be trending in the direction that pot is being consumed in masses to treat the psychological symptoms of social distancing and the anxiety created by the world’s worst pandemic in over 100 years.

The cannabis industry is still part of the high-growth industrial sector and a significant contributor to the Canadian economy. Since the legalization of pot in October 2018, the country has gained over 400 brick-and-mortar stores.

At the outset of the pandemic, the cannabis industry was not factored into the statement made on April 6th by the Business Development Bank of Canada, which outlined qualifications for the Business Credit Availability Program (BCAP), including access to the Canada Emergency Business Account, the SME Loan, and Guarantee Program. This prompted 71 firms in the industry to write to Finance Minister Bill Morneau and Industry Minister Navdeep Bains, to issue a policy change.

Additionally, the provinces Newfoundland, Prince Edward Island, and Ontario also announced closure of all non-essential businesses, including cannabis retail stores, when they declared state of emergency in mid March. The pot stores were quickly reopened.

Across the border, according to cannabis industry analytics company Headset, weed sales in the US jumped in mid-March, with sales growth peaking at over 60 percent in the week ending March 16 – the highest growth rate since the beginning of 2019.

But after consumers had apparently replenished their stockpiles in fear that cannabis dispensaries might be closed amid virus shutdowns, sales decelerated during the last two weeks of the month to the ‘mid- to high-single-digit range’, the analytics firm said.

In April, most US federal states surprisingly declared cannabis an "essential good" like groceries, allowing cannabis dispensaries to offer curbside delivery.

Bear in mind, the early boom in cannabis stocks came to an end well before COVID-19, especially in legalization trailblazer Canada, where official licensing numbers in 2018 were disappointing and subsequently failed to attract more investments.

Especially troubling, the report concluded that the pandemic had become "an extinction-level event for some companies." But not the cannabis industry, per se.

Remember, low share prices can also signal bargain opportunities for savvy investors looking for cannabis companies with strong EBITDA and low debt to service ratio.

One such company is 1933 Industries (C.TGIF, OTC: TGIFF, Forum) – a vertically-integrated CBD company, focusing on the cultivation and manufacturing of cannabis consumer branded goods, controlling all aspects of the value chain with cultivation, extraction, processing, and manufacturing assets supporting its diversified portfolio of cannabis brands and licensing partners. While the Company’s latest Q2 numbers may not be eye-popping, TGIF is a consistent revenue generator and holds considerable asset wealth, while trading at a just 8 cents a share at press time.

On the R&D side of the ledger, a recent report from Pathway Rx Inc. – a research company focused on developing custom cannabis therapies to treat specific diseases and Swysh Inc. – a cannabinoid oral health product developer, announced on May 5th that they intend to further expand their research to evaluate the potential for medical cannabis to treat COVID-19 and its possible complications.

Results from a study by Pathway Rx were recently shared publicly through a press release. The research paper has been submitted to a scientific journal for thorough peer-review study.

So far, the data suggests that a limited sample of high CBD cannabis sativa extracts modulate ACE2 gene expression and ACE2 protein levels in gateway tissues of the COVID-19 causing virus and also have the potential to inhibit its entry into cells, curtail disease spread and reduce mortality. The study was conducted using artificial human 3D models of oral, airway, and intestinal tissues. A second research study that examines the use of cannabis extracts for taming the cytokine storm will be published shortly.

The long-term investment model for the industry hasn't changed as legalization spreads globally and demand for both adult-use and medical cannabis grows. And despite the coronavirus outbreak, several cannabis companies are clearly set to make up for some of the staggering losses of the past 12 months. And then some.

Remember, everyone is in this together. Be well. Stay safe. Keep calm and carry on.


FULL DISCLOSURE: 1933 Industries is a client of Stockhouse Publishing.

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