Few industries have grown as quickly or consistently in recent years as the marijuana industry. Mexico legalized medical cannabis last year, while a burgeoning Canadian medical weed industry and an expanding number of legalized U.S. states have lifted results significantly. According to cannabis research firm ArcView, legal weed sales in North America soared 33% in 2017, to $9.7 billion, and they're on track to grow by 28% on a compound annual basis through 2021.

However, the primary catalyst of late is the upcoming legalization of recreational marijuana in Canada. Slated to go on sale on Oct. 17, 2018, adult-use sales and subsequent medical cannabis exports could add $5 billion in annual sales to the Canadian pot industry. As a result of the Cannabis Act officially passing on June 19 and the euphoria leading up to this event, marijuana stocks, in general, had a very good second quarter.

A frustrated stock trader clasping his head and looking at losses on his computer monitor.

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These pot stocks were buzzkills in the second quarter

But not every pot stock participated in the fun. A quick review of cannabis and cannabis-related stocks with a market cap in excess of $200 million found four that plunged by at least 17% during the second quarter. In ascending order in terms of worst performance, here are the marijuana industry's buzzkills of Q2.

Corbus Pharmaceuticals: Down 17.2%

Among drug developers, none had a more disappointing quarter than small-cap, clinical-stage company Corbus Pharmaceuticals (NASDAQ:CRBP), which fell more than 17%. Corbus is associated with the marijuana industry through its lead drug lenabasum (formerly anabasum), which is an oral endocannabinoid-mimetic drug that binds with naturally occurring CB2 receptors expressed on fibroblasts and immune cells. In particular, lenabasum is being targeted at four indications: systemic sclerosis, cystic fibrosis, dermatomyositis, and systemic lupus erythematosus.

It would appear that two factors are responsible for pushing Corbus Pharmaceuticals lower during the second quarter. For starters, the clinical update Corbus provided signals that its most important trials -- the phase 3 systemic sclerosis study and a phase 2b in cystic fibrosis -- aren't due to read out until the first half of 2020. Even with data from its phase 2 dermatomyositis study due out before the end of this year, it appears as if investors are antsy while they play the waiting game for clinical data.

A doctor with a stethoscope around his neck holding a small bag of dried cannabis in one hand, and cannabis oil-filled capsules in the other.

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The other issue was likely the company's first-quarter operating results, released on May 10. Generally, clinical-stage companies are given a free pass when reporting quarterly results since losses are expected. But the $11.7 million net loss recorded by Corbus in the first quarter worked out to $0.21 per share, which was $0.07 wider than Wall Street had expected. The concern is that if Corbus is burning through its cash on hand faster than expected, it may require additional dilutive capital raises, which could hurt existing shareholders. 

Long story short, the waiting game continues with Corbus.

Namaste Technologies: Down 18%

Sometimes lofty expectations don't get met, which is likely what happened with Namaste Technologies (NASDAQOTH:NXTTF) during the second quarter.

Shares of the online medical cannabis retailer dipped 18% following what looked to be decent fiscal second-quarter operating results. Sales for the company practically tripled, to 5.6 million Canadian dollars from the prior-year period, with gross profit rising by 150%.

Namaste is in the process of building out its NamasteMD online portal, which will be supplied by wholly-owned grow farm Cannmart. It witnessed substantial growth outside the U.S., with its Australia business exploding to CA$1.23 million in sales from CA$0.09 million in the year-ago quarter. 

A tipped over prescription bottle with dried cannabis spilling out onto a doctor's prescription pad.

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However, behind this growth was a CA$3.2 million loss, which had doubled from the previous year. A near-tripling in selling expenses and a doubling in administrative costs doomed Namaste to a loss, despite its rapidly rising revenue.

Additionally, like many of the company's peers, Namaste has seen its outstanding share count rise considerably over the past year. The company's financial report filing with SEDAR in Canada lists more than 246 million shares outstanding, up from 114.4 million in the year-ago quarter. Though bought-deal offerings that led to this increase have been critical to providing the capital needed to acquire the pieces of the puzzle that could make Namaste successful one day, a higher share count has also diluted existing shareholders and could make delivering a meaningful per-share profit that much harder down the road. 

Auxly Cannabis Group: Down 29%

Formerly known as Cannabis Wheaton Income Corp., the newly named Auxly Cannabis Group (NASDAQOTH:CBWTF) delivered miserable results in Q2 for investors, with shares of the company dropping by 29%.

On the surface, Auxly Cannabis Group looks as if it's primed for success. It's primarily a royalty and streaming company in the cannabis space. This means that it provides upfront capital to small, medium, and large growers looking to expand their capacity -- companies that might otherwise be struggling to secure the capital to do so. In exchange, it receives a percentage of production from its licensed partners for a long period of time and purchases this marijuana at a well-below market rate. Auxly then sells the product it receives at the going market rate and pockets the difference as profit.

A magnifying glass being held over a balance sheet.

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But there are two issues with this business model that've been exposed recently and are likely the downside catalysts for Auxly Cannabis Group in the second quarter.

First, just like other marijuana businesses, Auxly has had to raise cash via bought-deal offerings in order to provide the upfront capital that its licensed partners are seeking. By issuing common stock, Auxly has raised capital, but also significantly increased its outstanding share count. There are few cannabis stocks that have diluted investors more than Auxly has since the beginning of the year.

The second downside catalyst appears to be concerns about the company's costs. Though Auxly's business model looks to be low cost given that it can purchase cannabis at a below-market rate, it's unable to take advantage of economies of scale like traditional growers. It's been countering this recently by somewhat abandoning its streaming model and purchasing small-tier growers, which should help push its long-term per-gram costs modestly lower. But it remains to be seen if Auxly can keep its costs low enough to be significantly profitable if dried cannabis becomes commoditized and per-gram prices fall.

Emerald Health Therapeutics: Down 29.5%

However, the "doobie-ous" honor of worst-performing marijuana stock in the second quarter goes to British Columbia-based cannabis grower Emerald Health Therapeutics (NASDAQOTH:EMHTF), which shed nearly 30% of its value.

What's interesting about this move lower for Emerald Health is that there isn't any specific news event that caused its share price to sink considerably. Rather, its share price consistently dropped throughout the quarter. If I had to venture a guess as to why Emerald Health Therapeutics delivered a stinker of a quarter, I'd pin it on the company's first-quarter operating results and share offering in late May.

An indoor commercial cannabis grow farm.

Image source: Getty Images.

On May 29, the company reported revenue of CA$373,218 for the quarter ended March 31. Though this was an 85% increase from the prior-year period, it's peanuts compared to what some of its peers have produced in quarterly sales. What's more, Emerald Health produced a net loss of CA$5 million, which more than quadrupled its year-ago net loss. The company's joint venture with Village Farms International, known as Pure Sunfarms, has the potential to be a top-tier production facility when at full capacity. But in the meantime, it's costing an arm and a leg to retrofit. 

On May 23, the company also closed on a prospectus sale that raised CA$16.8 million. It consisted of the sale of 4 million shares, each of which had an accompanying warrant. As we've seen with each of the previous poor performers above, dilution has been a problem and will likely be a problem for years to come with warrants, stock options, and/or convertible debentures still to be accounted for. 

Until Pure Sunfarms is producing at a relatively high rate, Emerald Health Therapeutics' stock may struggle.

Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.