Few industries today can match the growth rate of legal cannabis, and marijuana stock investors have certainty taken notice. A quick scan of the largest marijuana stocks (those with market caps of $200 million, or higher) finds that many have doubled or tripled in value over just the past year.

Why such bullishness from investors? Look no further than the rapidly changing public opinion surrounding legal weed and the estimated sales growth.

According to an April survey conducted by CBS News, an all-time high 61% of respondents want to see recreational pot legal across the country.  This coincides well with Gallup's October 2016 finding that 60% of Americans want to see cannabis legal nationally. Support for medical marijuana is even higher, with a recent Quinnipiac University poll finding an overwhelming 94% of those surveyed in favor of patients having legal access to cannabis. 

A person holding a cannabis leaf amid a commercial grow farm.

Image source: Getty Images.

The result of this changing tide of public opinion is that a growing number of states have legalized medical (28 states) and recreational (eight states) weed, and legal sales growth has exploded. Marijuana Business Daily's latest report, "Marijuana Business Factbook 2017," highlights the expectation for $5.1 billion to $6.1 billion in legal U.S. sales this year, and more than $17 billion in estimated sales by 2021. That's roughly 300% growth between 2016 and 2021.

And we wonder why investors are flocking to marijuana stocks.

Yikes! This marijuana stock lost 32% of its value last week

Unfortunately, not all marijuana stocks are created equally -- nor are all marijuana stocks entirely dependent on the marijuana industry for 100% of their business.

Take clinical-stage drug developer Cara Therapeutics (NASDAQ:CARA) as a perfect example. Cara has two drugs currently in its development pipeline: CR845 and CR701. CR845 is a kappa-opioid receptor agonist that's being tested as a treatment for moderate-to-severe itching caused by chronic kidney disease (known as uremic pruritus) and various types of chronic pain. CR845 is the company's current lead drug, but it has nothing to do with the cannabis industry. CR701, on the other hand, is a cannabinoid receptor agonist that's designed to reduce pain. This is where Cara Therapeutics gets its association with the marijuana industry.

Late last week, following a monstrous two-week run, Cara's stock absolutely imploded. Shares of the budding marijuana stock cratered 40% on Friday and lost 32% on the week after the company released phase 2b trial results for oral CR845 as a treatment for patients with osteoarthritis of the hip or knee.

A doctor speaking with a patient about her hip X-rays.

Image source: Getty Images.

The trial had three doses being tested (1 mg, 2.5 mg, and 5 mg) twice daily over an eight-week period in patients experiencing moderate-to-severe pain in their hips or knees. Patients in the 1 mg and 2.5 mg groups did not achieve a statistically significant reduction in mean point pain score, while the 5 mg did, with a catch. Patients with osteoarthritis of the hip exhibited a mean joint pain score reduction of 39%, which is just barely statistically significant based on the p-value (a measure of chance) of 0.043. Anything below 0.05 is considered acceptable for the purpose of measuring statistical significance. The 5 mg dose for patients with osteoarthritis of the knee or hip exhibited a 35% mean joint pain score reduction, but the p-value of 0.111 means chance appears to have played a notable role, thus making the overall results not statistically significant. 

The reason these results were so disappointing is that while Cara has had success in treating uremic pruritus with CR845 in clinical trials, pain is by far the bigger patient pool indication, and thus offers far more potential for Cara's bottom line. If CR845 doesn't deliver as expected in treating pain, top-line sales projections and price targets for Cara are likely to come way down.

However, we should also point out that the struggles CR845 exhibited in this phase 2b study doesn't mean investors should give up hope that it can be an effective chronic pain treatment. In fact, the independent data monitoring committee (IDMC) recommended the continuation of a phase 3 study involving intravenously administered CR845 as a treatment for postoperative pain on June 21. The IDMC wouldn't have recommended the study continue if it felt that CR845 didn't have a shot at reaching its primary endpoint. Certain drugs can react differently in different formulations and in treating different ailments, so hope is not lost at this point.

Nevertheless, this is a disappointing setback for Cara Therapeutics and its shareholders.

A doctor holding a bag of cannabis buds in one hand and cannabis-infused capsules in the other.

Image source: Getty Images.

What of CR701?

The other question we have to ask at this point is what's going on with CB-receptor agonist CR701? The experimental drug was tested in rodent models in preclinical trials and found to have reduced both hyperalgesia and allodynia, as measured by thermal and tactile stimuli, leading to the very early assumption that CR701 could have a future as a treatment for neuropathic pain. 

Why is there so much emphasis on a drug that targets the CB2 receptor of the natural cannabinoid receptor system in our bodies? Simple: the opioid epidemic in America. No one denies that opioids like morphine, hydrocodone, and fentanyl work to reduce pain, but they're also highly addictive medicines that, as a group, led to 20,101 overdose-related deaths in 2015. By comparison, marijuana and cannabinoid-based medicines led to zero overdose-related deaths the same year. As such, there's serious research and discussion ongoing that cannabinoid-based drugs and drugs that target the CB receptors in our bodies could be a viable and much safer substitute to treat chronic pain than opioids.

What's a bit of a head-scratcher at this point is why Cara hasn't moved forward with CR701. It's possible the company is merely focused on the expenditures associated with its CR845 clinical programs and waiting for those outcomes before moving CR701 into clinical studies. But, marijuana stock investors are anxious to invest in a company that demonstrates promise in potentially replacing opioids as a treatment for pain, and the longer Cara waits, the likelihood grows that another CB-receptor-focused drugmaker could beat it to the punch.

For now, your best bet with Cara Therapeutics is likely to stick to the sidelines and wait patiently for its postoperative pain trial data for I.V. CR845. Considering the importance of pain to Cara's future growth prospects, good results will be needed to bolster the company's valuation and restore confidence among investors.

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