Medical Cannabis Monthly Report | March

Medical Cannabis ETF Monthly Report: Key Takeaways

• Fund holding Clever Leaves (NASDAQ:CLVR) has signed an international sales agreement to import Colombian grown cannabis extracts into Germany. Working with German operators and manufacturing partners, Clever Leaves will become supplier of cannabis extracts for German operators to manufacture and distribute orally administered gel capsules for consumption on a prescription basis by customers and patients in Australia, Europe and Latin America. The global supply chain for cannabis is coming together in anticipation of German adult-use market opening up and fund constituents are keen to partake in this highly anticipated market potential. [1]

• As of March, the cultivation of cannabis for medical use is now authorized in France. [2] The published decree treats cannabis for medical use like any medicine. This follows a medical cannabis pilot project which launched in March of 2021 with a target of obtaining up to 3000 patients suffering from severe conditions such as chronic pains and epilepsy. [2]

• Project Twenty21 launches in Australia with the goal of engaging 1000 patients. The program with roots in the UK is expanding data collection on efficacy and safety of medical cannabis in the treatment of chronic pain, anxiety, PTSD and multiple sclerosis. The program offers access to cannabis at discounted prices for participants. [3]

• The populace of Italy collected 630,000 signatures to get the ability to take cannabis legalization to a vote via referendum. However in a surprise twist, the country’s constitutional court has blocked the initiative citing that Italy would be in violation of its international obligations to prevent drug trafficking if the referendum were to pass. [4]

• In a surprise twist to the Italian story, the country’s constitutional court has blocked an initiative to legalize the personal use of cannabis in the country, a petition which managed to attract 630,000 signatures, enough to put the matter to a vote. [4]

• In another surprise twist, the Israeli government is reported to be fully moving ahead with legalization of cannabis. The government is also considering expunging criminal records of those convicted of possession or personal use of cannabis. [5]

Macro Outlook

With the ebbs and flows of financial markets, growth stocks have come under immense pressure as investors flock to safe haven assets in the face of volatility stemming from a hawkish Federal Reserve combined with geopolitical instability in Eastern Europe. This is the case for all growth equities in North America and abroad and is negatively impacting the ability of incumbent operators to finance future growth. The dichotomy between the consistent fundamental growth story and the lack of valuation uptick is quite interesting and this issue will not really dissipate unless additional investors are allowed into the space by regulators.

On the fundamental side, there is continued uptick in potential market size. Additional US states continue to come online for medical and adult-use cannabis and European market is now taking positive steps as well. Recently, we have seen adult-use reform approved in Malta [6] and progress uptick in Germany, Luxembourg and Switzerland. Italy’s referendum however has been blocked by the courts but proponents of reform point to Germany and Malta and are optimistic of potential reform.

On the valuations side, the pharmaceutical cannabinoid and the ancillary services industries remain the most attractive as they attract a vast variety of investors which help stable out valuations. We think these two sectors will offer the core of risk-managed exposure to the space in the coming year as cannabis reform is discussed across many continents and jurisdictions.

The Fund has significant exposure to the ancillary services industry which is tied to the future of cannabis reform in the US as well as significant exposure to the pharmaceutical cannabinoids space which continues to attract global players in this evolving space. These two themes combined with the growth of the European opportunity remain the biggest investment themes for the fund into 2022.

The Medical Cannabis ETF Performance Table (As of 28.02.2022)

Performance before inception is based on back tested data. Back testing is the process of evaluating an investment strategy by applying it to historical data to simulate what the performance of such strategy would have been. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. Past performance for the index is in USD. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product. Please note that all performance figures are showing net data. 

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