From spending on cardiology to oncology to specialty foods, people love their pets and religiously earmark income for requisite and discretionary spending on their furry friends. This is evident through industry expert American Pet Products stating overall expenditures in the pet industry climbed from $43.2 billion in 2008 to $55.72 billion in 2013. Not even the 2009-2013 Great Recession caused consumers to hit the brakes hard on allocating cash for their pets. The largest chunk of the overall spending went to food ($22.6 billion), followed by the veterinary care category ($15.3 billion) and then supplies/Over-the-Counter medicine ($13.7 billion). As noted by Embrace Pet Insurance, the supplies/OTC meds category remains robust, with their analysts estimating that growth in this sector outpaced the 6.7% expansion forecast by American Pet Products in 2013.
The upward trend looks firmly intact, which should benefit players across the board, like retailer Central Garden & Pet Co. (NASDAQ: CENT), vet services and animal diagnostics company VCA Antech (NASDAQ: WOOF) and distributor MWI Veterinary Supply (NASDAQ: MWIV).
In this article we are going to focus on a newcomer to the companion animal industry, Cannabis Therapy Corp. (OTCQB: CTCO). Cannabis Therapy Corp. has signed an exclusive agreement to distribute the Canna-Pet™ brand line, becoming the first publicly traded company to successfully meld the rapidly growing field of cannabinoid-based products and the pet market.
A Bit on Cannabinoids
Cannabinoids are a group of 21-carbon–containing terpenophenolic compounds produced uniquely by Cannabis species. They have long been heralded to deliver a litany of therapeutic benefits across a broad spectrum of indications from muscular dystrophy and cancer to palliative effects for pain and inflammatory conditions. In fact, a search for “cannabinoids” at PubMed.gov, the library of medicine of the National Institute of Health, uncovers more than 18,000 documents on the compounds.
Despite the stack of literature supporting its many uses, cannabinoids have only recently begun to garner strong support thanks to the whole “green rush” underscored by reformation of medicinal (and in some cases recreational) marijuana use across a wide swath of the U.S. and in Canada. It should be understood that there are 66 cannabinoids found in the Cannabis sativa plant, with the most well known being delta-9-tetrahydrocannabinol (Δ9-THC), the substance primarily responsible for the psychoactive effects of marijuana. Other cannabinoids, such as CBD, have medicinal benefits that can be realized without psychotropic effects on the body.
It is these non-psychoactive cannabinoids that form the cornerstones of development for Cannabis Therapy, as it aims to become a leader in the research, development and commercialization of safe, ultra-low THC, cannabinoid-based medicinal therapies and supplements. By utilizing naturally occurring, low-THC hemp, rather than high-THC marijuana cultivars, the company is able to capitalize on the 2014 Farm Bill and federal regulatory framework that allows for hemp to be grown, formulated and distributed as Over The Counter (OTC) nutraceutical products throughout the U.S. This is a significant competitive advantage to other players focusing on THC-rich, Schedule 1 marijuana products, where there is still a lot of work to be done to define the regulatory standards.
Melding of Animal Health and Cannabinoids
Cannabis Therapy is developing its business through simultaneous horizontal and vertical growth efforts. Originally formed to commence research on nutraceuticals for human applications, the company recently extended their strategic focus through an exclusive license agreement with Canna-Pet, LLC. The agreement gives Cannabis Therapy worldwide license and rights to Canna-Pet technology and products, as well as future co-developed products in exchange for a royalty on sales. The current Canna-Pet lineup contains CBD pet products from hemp plants that are the culmination of two decades of R&D by experts in the field. The products are sold exclusively through e-commerce currently, but Cannabis Therapy says it is exploring different sales channels as it plans to quickly amplify sales efforts.
Targeting human and animal demographics is a move akin to large pharma like Bayer AG (OTC: BAYRY), who produces many types of traditional drugs, but also has its Bayer Animal Health division that markets products such as Advantage flea control. Partnering with an existing company to move to the next level was a succinct move by Cannabis Therapy to collect their first revenue in the near-term, and grow shareholder value as its scientists begin research on new products.
Keeping an animal healthy, albeit a cat in the house or a horse in the barn, is very important to pet owners. 41% of pet owners have tried or considered alternative therapies, including nutritional supplements (29%), herbal remedies (7%) and homeopathy (4%), according to a State of the American Pet Survey. That’s a tremendous market opportunity with a massive number of people looking outside traditional medicines, considering about 100 million U.S. households have pets, providing a home for about 156 million dogs, cats, birds and horses.
Ultimately, it is the convergence of two growing industries, one still in its infancy and the other demonstrating that it is recession-proof, that has created such an engaging opportunity. For investors looking to further their exposure to multiple industries within a single company, Cannabis Therapy Corp. is worth taking a closer look at. While it will not be until mid-November until sales numbers are made public, the company is already generating revenues in the short-term, a rare feat for such a young company, especially one in the Cannabis space.
Disclaimer: Except for the historical information presented herein, matters discussed in this article contain forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from any future results, performance or achievements expressed or implied by such statements. Emerging Growth LLC dba TDM Financial, which owns CannabisFN, is not registered with any financial or securities regulatory authority, and does not provide nor claims to provide investment advice or recommendations to readers of this release. Emerging Growth LLC dba TDM Financial, which owns CannabisFN, may from time to time have a position in the securities mentioned herein and may increase or decrease such positions without notice. For making specific investment decisions, readers should seek their own advice. Emerging Growth LLC dba TDM Financial, which owns CannabisFN, may be compensated for its services in the form of cash-based compensation or equity securities in the companies it writes about, or a combination of the two. For full disclosure please visit: http://www.cannabisfn.com/legal-disclaimer/.