CANNAINVESTOR Magazine September / October 2016 - Page 20

Currently, there is lack of established brands in the cannabis industry, which is due to the early stage nature of the industry and a lack of focus on channel development with the majority of cannabis companies. With legalization progressing forward in multiple states across the country, the ways cannabis consumers approach their purchasing decisions are beginning to shift. Consumers will be faced with choices about what cannabis to consume, and just as with alcohol, tobacco, and food categories, branding and marketing will increasingly influence their choices.

Biotechnology & Pharmaceuticals

The biotech/pharma opportunity is one of the most intriguing and significant sector in the entire cannabis industry. Biotech companies are looking to capitalize on the anticipated growth of the cannabis-derived pharmaceutical market by levering the mounting data on the therapeutic effects of cannabis and deploying rigorous testing for quality, safety, and efficacy. By putting their drug candidates through rigorous testing, they can reach a broader market, including people in those states where medical marijuana has not been legalized. While natural plant extracts cannot be patented, U.S. Food and Drug Administration (FDA) approval guarantees seven years of market exclusivity for drugs that treat rare diseases, regardless of origin. Regulatory approval of drugs also dramatically increases the likelihood that health insurance companies will pay for them.

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Infused product and extract providers are expanding into additional states in order to develop brand awareness and market penetration. Established and well-known companies in this sector have the benefit of being able to license out the standard operating procedures, manufacturing practices, and development processes they have created. These are typically organized through licensing deals or joint ventures, both of which allow the established brand to be marketed in the new locale, leading to expanded brand awareness, additional market share, and increased revenues. As these companies continue to build their brand portfolios and solidify their places as leaders in the sector, companies like Proctor & Gamble, PepsiCo, Constellation Brands, and Diageo that center around brands may look to bolster their own portfolios through strategic acquisition.