Patients will spend more money on legal cannabis than recreational pot smokers within four years, according to new research.

That’s a startling forecast given the rapid march of marijuana legalisation around the world this year — prompting earlier predictions that recreational use would surpass the medical market.

In May, shortly before Canada voted to legalise recreational pot, investment bank CIBC predicted Canadians would buy 850,000kg of cannabis a year by 2020 — with a retail value of $C6.8 billion.

But only 40,000kg would go towards medical use, leaving 95 per cent “for adult, non-medical” use, CIBC predicted at the time.

>> Scroll down for a list of ASX cannabis stocks

Researcher Frost & Sullivan now believes medical cannabis revenues “will overtake recreational use revenues in the next four years” in the United States.

That’s good news for ASX cannabis stocks (see table below) — most of which focus on the medical market.

Total cannabis revenue in the United States was expected to grow at 13 per cent a year from $US5.3 billion today to $US10 billion in 2022, Frost & Sullivan reported in new research released this week.

“Revenue projections suggest the medical segment of the market may surpass the recreational revenue segment in the next four years, as patients in US States where marijuana is legal look for alternatives to opioids to treat their chronic pain.”

Medical cannabis is now allowed in about 22 US states, while recreational marijuana is legal in eight.

Cannabis is still technically outlawed by US federal law, however President Trump has indicated that may change.

The US Food and Drug Administration recently approved a cannabidiol (CBD) drug called Epidiolex, which — when launched — will be the first legal CBD-derived drug on the US market for the treatment of epilepsy.

Cannabidiol (or CBD) is one of the active ingredients found in cannabis. It has well-researched medicinal benefits — but unlike another cannabinoid, tetrahydrocannabinol (THC), doesn’t get you high.

Cannabis market drivers

Frost & Sullivan believes demand for a non-opioid pain treatent will be a key driver in the US medical cannabis market.

“In some US states where medical marijuana has been legalised, prescription pain drug use has reduced, especially opioids. Medical cannabis-derived products have the potential to treat pain, which could significantly curb the out-of-control opioid epidemic gripping the nation.”

Market growth would also be driven by big pharma companies with “the capital and regulatory expertise to get CBD-based drugs approved.

“Billions of dollars are being invested in cannabis research across the globe to study the effects of cannabis on different medical conditions.”

Investors should also keep an eye on Canada’s federal health authority which oversees the country’s use of medical cannabis for pain and diseases like epilepsy.

Health Canada would will be “a reference for future US coverage”, Frost & Sullivan said.

Cannabis market inhibitors

On the other hand, Frost & Sullivan identified a number of factors that would inhibit medical marijuana market growth.

Key factors yet to be resolved included protection of patient data, lack of understanding from physicians (“since they might not have completed medical cannabis coursework in medical school”) and a lack of standardised testing of cannabis plants.

Here’s a list of ASX cannabis stocks with six-month and 12-month share price performance:

ASX code Company Six-month price change (Jan 2) One-year price change Price Jul 25 Market Cap
CAN CANN GROUP 0.0104895104895 3.77685950413 2.89 407.5M
QBL QUEENSLAND BAUXI -0.296296296296 2.45454545455 0.038 60.6M
BDA BOD AUSTRALIA LT 0.307692307692 2.1875 0.51 29.3M
AC8 AUSCANN GROUP HO 0.248447204969 1.4512195122 1.005 316.5M
THC HYDROPONICS -0.158273381295 1.25 0.585 74.8M
BOT BOTANIX PHARMACE 0.441176470588 1.04166666667 0.098 75.7M
EVE EVE INVESTMENTS -0.4 0.8 0.009 17.9M
BKL BLACKMORES -0.135635163799 0.648314606742 146.7 2.5B
CPH CRESO PHARMA -0.247311827957 0.609195402299 0.7 79.2M
MXC MGC PHARMACEUTIC -0.354838709677 0.395348837209 0.06 72.8M
ZLD ZELDA THERAPEUTI -0.17 0.220588235294 0.083 64.2M
RGI ROTO-GRO INT. -0.101265822785 0.183333333333 0.355 34.3M
EXL ELIXINOL GLOBAL (listed Jan 2018) 0.5 0.01 1.5 154.4M
1PG 1-PAGE (suspended, delisting) 0 0 0.165 25M
CP1 CANNPAL ANIMAL (listed Oct 2017) -0.0975609756098 -0.075 0.185 17.2M
MMJ MMJ PHYTOTECH LT -0.384615384615 -0.0967741935484 0.28 67.9M
RNO RHINOMED 0.206896551724 -0.239130434783 0.175 19.4M
LSH LIFESPOT HEALTH -0.0384615384615 -0.264705882353 0.125 9.4M
MDC MEDLAB CLINICAL -0.357142857143 -0.361290322581 0.495 101.9M
TPE TPI ENTERPRISES -0.413043478261 -0.470588235294 1.35 109.5M
AEB ALGAE.TEC -0.269230769231 -0.5 0.019 17.3M
SCU STEMCELL UNITED -0.228571428571 -0.625 0.027 13.9M
ESE ESENSE-LAB -0.755172413793 -0.677272727273 0.071 5.7M
CHP CHAPMANS -0.833333333333 -0.833333333333 0.002 4.6M