Big Pharma has a love-hate relationship with marijuana. Pot legalization has been cutting into the sales, profits, market share, and stock prices of giant drugmakers, which is why these cash-rich behemoths have lobbied against lifting cannabis restrictions. However, their efforts at stopping “the green rush” have met with scant success.

Hence, we’re seeing “Plan B” unfold, whereby Big Pharma resorts to co-opting the unstoppable marijuana megatrend, through mergers and acquisitions (M&A) and other forms of direct investment.

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For mainstream drugmakers, the stakes are enormous. A new report released August 31 by the BeiHang University School of Economics and Management found that when a U.S. state newly legalizes medical or recreational marijuana, Big Pharma’s profits and share prices take a big hit.

Researchers crunched data from 45 major marijuana legalizations throughout the United States between 1996 and 2018. The results showed that giant pharmaceutical firms as a whole quickly lost a cumulative $3 billion in sales, roughly $10 billion in market share, and experienced meaningful drops in stock returns.

Stock market returns for listed pharmaceutical companies were 1.5% to 2% lower at 10 days after legalization. Equity returns fell in response to both medical and recreational legalization, for both generic and brand drugmakers.

The research project, called “U.S. Cannabis Laws Projected to Cost Generic and Brand Pharmaceutical Firms Billions,” stated:

“Legal medical cannabis likely decreases the use of prescription drugs, including opioids, in Medicaid and Medicare populations. Patient-level studies find legal medical cannabis reduces prescription drug use. Recreational cannabis facilitates use for a broader set of conditions, and may also lead to reductions in prescription drug use if it brings in new patients with unapproved medical conditions or patients who were unwilling or unable to register as medical patients.”

Big Pharma recognizes the threat and has taken aggressive countermeasures by lobbying against state legalization. However, most of these anti-legalization efforts have proven fruitless, due to the enormous public popularity of marijuana and the desire of lawmakers to derive tax revenue from weed sales.

The cannabis community is abuzz (pun intended) over the study and the data is getting widely shared on social media, as reflected by this tweet:

But here’s the twist. The study also points out that “for private and public drugmakers, we expect the response to legalization to include investment and marketing.”

The recent wave of M&A activity among Big Pharma players and smaller marijuana companies bears out this prediction

Big Pharma is powerful but not omnipotent. The fact is, despite the efforts of pot prohibitionists, the legalization of marijuana rolls on (so to speak).

Today, support for marijuana legalization has become a mainstream issue among Democratic politicians, and even many Republicans support the idea.

The latest legalization efforts bring the total of legal adult-use states to 18, along with the District of Columbia. There are currently 37 states that have medical marijuana laws, including all that allow recreational use.

Read This Story: Pot’s Budding Political Clout in 2022

Anti-pot crusaders have consistently proven unsuccessful in putting the genie back into the bottle. By the time all the votes are counted in the November 2022 midterms, additional states are likely to have legalized marijuana to one degree or another.

The midterms will provide voters with more opportunities to express their support for the creation of new marijuana markets across several states.

There are proposed adult-use ballot initiatives in Arkansas, North Dakota, Ohio, and South Dakota. Similarly, there are both adult-use and medical ballot measures proposed in Florida, Idaho, Missouri, Nebraska, and Oklahoma. Most of these initiatives are ahead in the opinion polls.

Your definitive guide for pot profits…

Major bills are pending in Congress to legalize marijuana on the federal level. And when that happens, the marijuana industry will explode on the upside. Cannabis is on the cusp of becoming a $230 billion juggernaut, with Big Pharma on board.

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John Persinos is the editor-in-chief of Marijuana Investing Daily. You can reach him at: mailbag@investingdaily.com.

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