Cannabis Use Disorder – Evaluating The Market Opportunity
With the advent of legalized marijuana in some states, rates of a relatively little known condition called cannabis use disorder (CUD) have risen. According to research cited by the US Centers for Disease Control and Prevention (CDC), CUD affects between 10 and 30% of cannabis users.
The American Psychiatric Association’s Diagnostics and Statistical Manual of Mental Health Disorders (DSM) defines CUD as “A problematic pattern of cannabis use leading to clinically significant impairment or distress, as manifested by at least two of the following, occurring within a 12-month period.”
Industry has taken notice and has recognized CUD as an unmet need. Invidior, a global pharmaceutical company, has started developing a drug to treat the disorder. In collaboration with Aelis Farma, a French biotech, the drug is now in Phase 2 clinical trials.
According to the Financial Times, Invidior Chief Executive Officer, Mark Crossley believes there is a “huge opportunity” in treating CUD.
Having completed dozens of market analysis projects over 20+ years in business, I would like to provide a quick primer on the cannabis market and evaluate the opportunity that exists for Invidior.
The Cannabis Market
A budding plant, the cannabis industry is rife with growth. According to Satista, “Global cannabis sales are expected to increase from $13.4 billion in 2020 to $33.6 billion by 2025.” In the U.S, Morningstar forecasts “nearly 25% average annual growth for the U.S recreational market and nearly 15% for the medical market.”
Such growth has resulted in numerous IPOs, venture capital investments, and merger and acquisition activity in the industry.
Nationally, the largest players are Curaleaf, Trulieve Cannabis, and Green Thumb Industries according to companiesmarketcap.
In terms of market structure, given the regulatory issues on a national level, the industry does not cleanly fall into the categories of monopoly, oligopoly, nor perfect competition.
Instead, focusing on a state-by-state basis where marijuana is legal, one analysis finds that the market resembles monopolistic competition. In monopolistic competition, many firms offer similar but non-identical products.
Despite being price makers (having the ability to charge its own price), firms have little market power. Low barriers to entry exist in monopolistic competition, and demand is elastic (highly sensitive to price changes).
Despite the growth, the industry still faces a few significant issues in its path to profitability. As Investopedia points out, legality and regulation, access to capital, and a raising of interest rates all present key challenges to the cannabis industry.
Cannabis Use Disorder Market Opportunity
As a contrast to the majority of pharma, Invidior profits from the negatives of cannabis use. Invidior’s treatment will be the first of its kind in that it could be the only medicine in the U.S approved to treat CUD.
Medical professionals have traditionally treated CUD through cognitive behavioral therapy (CBT).
Research cited by the CDC estimates that 3 in 10 people who use marijuana have marijuana use disorder. However, this study, Hasin et al, is dated, having measured the difference in marijuana use disorder rates by comparing 2001-2002 to 2012-2013.
Nevertheless, given the high THC content of today’s marijuana products and increased availability as a result of legalization, one would expect CUD rates to be at least the same if not higher than 10 years ago.
For Invidior, if approved, its CUD treatment would benefit from the first mover advantage. A first mover advantage allows Invidior to establish strong brand recognition, customer loyalty, and set the market price for its treatment.
Likewise, Invidior would be able to establish patent protection, which would block out competitors for at least 10 years.
A disadvantage, as Investopedia points out, would be the risk of other firms copying or improving upon Invidior’s treatment.
The FT article on Indivior asserts that Opiant Pharmaceuticals and Anebulo Pharmaceuticals are developing treatments for extreme cannabis related highs. The presence of Opiant and Anebulo in the market could trend the industry towards monopolistic competition because Opiant and Anebulo are offering a similar but non-identical product.
In addition to creating an effective product, Indivior must develop relationships with groups that will advocate for responsible marijuana use.
The typical consumer in any industry needs to be reached at least five times before they purchase a good or service. In the life sciences, patients hear about treatments through their doctor and relationships with advocacy organizations.
Advocacy organizations are another way innovators may reach patients. NAMI, American Society of Addictive Medicine, NAADAC (the Association for Addiction Professionals), American Psychiatric Association, and the American Psychiatric Nurses Association are all critical organizations to reach out to for a product treating substance abuse.
A targeted advocacy strategy allows your company to reach more patients than the doctor or television advertising route.
The success of Invidior’s treatment will stem from first successful Phase 2 and 3 clinical trials, second a FDA approval, and third sufficient demand for its product.
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