Cannabis takes a bite out of big Pharma

Original article can be found here: https://www.thestreet.com/investing/cannabis-news-week-cannabis-takes-a-bite-out-of-pharmaceutical-industry

t’s not just the pro-prohibition types that are angry about the wave of states that have legalized recreational and medical cannabis in recent years. 

The legal marijuana industry is taking a bite out of big pharma, according to a new research article.

After studying how cannabis legalization between 1996 and 2019 affected stock market returns for listed generic and brand pharmaceutical companies, researchers found that returns were 1.5% to 2% lower at 10 days after legalization. 

Returns decreased in response to both medical and recreational legalization for both generic and brand name drug makers.  Investors expect a single legalization event to reduce drugmaker annual sales by $3 billion on average, according to the study. 

When separately assessing for medical and recreational events, medical legalization implied an annual sales decrease of $2.4 billion, while the implied impact from recreational legalization was about 129% greater than that of medical. 

Researchers paired stock return data with the dates of 45 cannabis legalizations between November 1996, when California became the first state to legalize medical, and November 2018, when five other states legalized cannabis markets.