Better Marijuana Stock: Aurora Cannabis vs. GW Pharmaceuticals

You don't see Aurora Cannabis (NYSE: ACB) and GW Pharmaceuticals (NASDAQ: GWPH) lumped together very often. The two companies have very different business models, with Aurora producing cannabis for medical and recreational markets while GW focuses on developing and marketing cannabis-based prescription drugs.

Both Aurora Cannabis and GW Pharmaceuticals are marijuana stocks that have attracted significant attention from investors. They're also both off to a fantastic start in 2019, with Aurora up over 90% and GW soaring more than 70%. But which of these stocks is the better pick now? 

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The case for Aurora Cannabis

Aurora Cannabis' immediate growth opportunity is right at home in Canada. The country's recreational marijuana market opened for business in October 2018. Aurora has quickly become one of the top leaders in that market, capturing a 20% market share in the last quarter.

Capacity is critical for success in Canada. Aurora looks very good in that department. The company stated in its Q2 update that it expects to have an annualized production run rate of more than 150,000 kilograms of cannabis by the end of this month. Aurora should be on track to boost that level to well over 500,000 kilograms in the not-too-distant future.

While the company's sales are already skyrocketing, Aurora should enjoy another big boost later this year as the next phase of Canada's recreational marijuana market opens. Canadian officials expect to soon finalize regulations for cannabis beverages, edibles, and concentrates. Aurora expects its profit margins to increase when it can offer these types of products.

International medical marijuana markets are even more important for Aurora's long-term growth prospects. Aurora is already the top Canadian marijuana exporter to Germany. The company also has a presence in more than 20 other countries spanning five continents.

Estimates vary for just how big the global marijuana market will be. However, it's not unrealistic to expect a market size of at least $100 billion within the next 10 to 15 years. Aurora Cannabis would only need to capture a small slice of such a large market opportunity for its share price to continue to zoom higher.    

The case for GW Pharmaceuticals

GW Pharmaceuticals' growth prospects hinge primarily on one product. Last year, Epidiolex became the first plant-based cannabis drug to win approval from the U.S. Food and Drug Administration (FDA). The cannabidiol (CBD) drug was approved for treating two rare forms of epilepsy, Dravet syndrome and Lennox-Gastaut syndrome (LGS).

Some predicted that Epidiolex could reach more than $1 billion in annual sales, with one analyst even projecting peak sales of well over $2 billion. It's too early to know if these estimates will be achieved. However, there's no question that the initial commercial launch for Epidiolex has gone very well.

GW reported Q4 sales for Epidiolex that were well above what most analysts expected. The company appears to have done a great job of reaching out to healthcare providers and payers. As of earlier this year, GW's sales team had interacted with roughly 70% of targeted physicians. Epidiolex is already covered for more than 80% of Americans with private health insurance, 99% of state fee-for-service Medicaid members, and around 90% of Managed Medicaid members.