This article was updated on Feb. 5, 2018, and originally published on Jun. 9, 2017.

Forgive the pun, but the legal cannabis industry is growing like a weed, and marijuana stocks investors are beginning to take notice.

Regardless of your source, legal pot sales are soaring. Cannabis research firm ArcView is projecting growth in North American legal sales to around $22 billion by 2021 from $6.9 billion in 2016, while Marijuana Business Daily's latest report, "Marijuana Business Factbook 2017," is calling for approximately a tripling in U.S. legal weed sales to more than $17 billion by 2021. Considering how much marijuana is still being sold on the black market, investors view this opportunity to sway consumers to legal channels as a steady future growth source.

A man smelling the leaves of a potted cannabis plant.

Image source: Getty Images.

Unfortunately, there are also dozens of marijuana stocks for investors to choose from. Considering that emotions surrounding these stocks are running high, investors could be buying in for all the wrong reasons, or worst of all, without fully understanding the risks plaguing the weed industry.

With this in mind, we're taking the time to dissect one marijuana stock each week until we've covered all of the major players (i.e., those with $200 million market caps or higher). Here are the weed stocks we've discussed so far:

Today, we're going to take a closer look at Axim Biotechnologies (NASDAQOTH:AXIM).

What Axim Biotechnologies does

New York-based Axim Biotechnologies continues an ongoing string of cannabinoid-based drug developers that we're examining. Its research primarily revolves around the treatment of pain, spasticity, and inflammation, though it has studies concerning multiple sclerosis (MS) and Parkinson's disease as well.

Axim is attempting a number of delivery methods to get cannabinoids into the body, including via chewing gum, floating capsules, topical applications, ophthalmic preparations, and even a suppository for inflammatory bowel disease (IBD) patients.

A cannabis bud on a doctor's script pad.

Image source: Getty Images.

Promise and opportunities

The promise Axim brings to the table can be seen in the breadth of its pipeline. While we've examined a number of cannabinoid-based drug developers that have just a single compound in development, Axim has around a half-dozen products in development being tested in 16 separate preclinical and clinical studies. A majority of these indications are wide-ranging, meaning an approval from the Food and Drug Administration would mean access to a large pool of patients. Diseases like MS, IBD, psoriasis, Crohn's disease, restless less syndrome, dementia, Parkinson's, glaucoma, dry eye, and so on have huge patient pools and large marketing potential.

Axim also has a very large investor in its corner, Medical Marijuana, Inc. (NASDAQOTH:MJNA), that could provide added know-how to help Axim get its product portfolio off the ground. Medical Marijuana, Inc., the first publicly traded marijuana stock, owns 22.67 million shares of Axim, or about 43% of the company. Therefore it has some pretty big sway in determining where Axim's research is headed next. For instance, in March 2017, Medical Marijuana, Inc. and Axim announced that they had contracted out Ora to run the company's upcoming preclinical development and clinical trials for glaucoma and dry eye for AX-1603 and AX-1606, respectively. 

Public opinion also favors Axim. According to the independent Quinnipiac University Poll in August 2017, some 94% of respondents favor the national legalization of medical cannabis compared to just 4% who oppose the idea. With such overwhelming support, and a need to crack down on an opioid epidemic in the U.S. that claimed more than 20,100 lives in 2015 via prescription opioid overdose deaths, Axim's research into cannabinoid-based medicines could be cheered on by investors and Wall Street.

A biotech lab researcher in a white coat taking notes in the middle of a cannabis grow field.

Image source: Getty Images.

Risks and concerns

However, no marijuana stock is perfect, and Axim has plenty of potential concerns.

Probably the most glaring concern is Axim's current balance sheet. Even with a sizable investor in Medical Marijuana, Inc., it ended its most recently reported quarter with less than $3.1 million in cash on hand and a product pipeline filled with more than a dozen-and-a-half aggregate pharmaceutical and nutraceutical trials. It would appear that Axim has nowhere near the capital needed to run its clinical studies, which probably means dilutive share offerings will eventually be needed to shore up its balance sheet  

Secondly, Axim's share price has risen by nearly 900% over the trailing two-year period, yet we haven't seen much of anything in the way of efficacy from its clinical studies. All but three of its 16 studies are preclinical in nature, with one early stage and two midstage studies ongoing. Its most advanced trial is its phase 2 study evaluating the effectiveness of its CanChew Plus cannabidiol (CBD)-based chewing gum for irritable bowel syndrome. The study has just 40 patients, who will receive either six pieces of gum containing 50 mg of CBD per day or a placebo. Essentially, investors are buying blind at the moment.

Another clear concern is that Axim is trading on the over-the-counter (OTC) exchanges. To be fair, the OTC exchanges have done a better job of beefing up reporting standards in recent years, but it's still not perfect. Finding up-to-date financial information on pot stocks like Axim can be tough at times. What's more, even though it's fully legal if disclosed (which it was), Axim paid an investment firm in 2017 to initiate coverage on its stock. Again, while perfectly legal, seasoned investors often frown upon such a move, which is seemingly designed to "pump up" a company's valuation.

Rolling dice that say buy or sell.

Image source: Getty Images.

Should you buy Axim Biotechnologies?

Of course, the big question at the end of the day is, should you buy Axim Biotechnologies?

On one hand, you get what's arguably the deepest pipeline of the bunch among cannabinoid-based drug developers. You also get a number of different applications, which is what I believe gives Axim such an allure to investors. Not to mention it has Medical Marijuana, Inc. in its corner.

On the other hand, it has nowhere near enough capital to run its clinical trials, and will likely be losing money for the intermediate future. There's also little empirical evidence that any of Axim's intellectual property actually works. We haven't really seen what its experimental therapies can do in human studies, which means a lot could still go wrong.

While this Fool is pretty set on suggesting you stay on the sidelines with all marijuana stocks for the time being, I'm particularly concerned about Axim and its lack of funding and early stage pipeline. I believe investors are playing with fire here and would urge serious caution.

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.