The marijuana industry has been growing at a lightning-fast pace for years now, so it's not one bit surprising to see marijuana stock investors flocking to the "green rush."
Since 2012, voters in eight states have legalized recreational marijuana, while 28 states have legalized medical cannabis over the past 21 years. States like California are expected to see total cannabis sales (recreational and medical) approach $6 billion to $7 billion annually, leading to around $1 billion in annual tax revenue for the state. Colorado, which was one of the first two states to legalize adult-use pot back in 2012, tallied more than $1.3 billion in legal weed sales in 2016 and nearly $200 million in tax and licensing revenue.
All eyes on medical marijuana
While the focus for marijuana proponents has long been making it legal nationwide, it's the potential medical aspects of cannabis that have taken center stage in recent years. A Quinnipiac University poll from April found that 94% of respondents want to see medical marijuana legalized across the country, which is no coincidence given how encouraging cannabinoid- and CB receptor-based research has been for select drug developers.
For example, GW Pharmaceuticals (GWPH), the kingpin of all marijuana stocks based on market cap, has developed an oral cannabinoid-based drug known as Epidiolex that, in phase 3 trials, demonstrated a statistically significant reduction in seizure frequency for two rare types of childhood-onset epilepsy, Dravet syndrome and Lennox-Gastaut syndrome. While nothing is ever a given with the Food and Drug Administration, it's looking to have a better than 50-50 shot at approval given its strong clinical performance.
Insys Therapeutics (INSY) is another drug developer that's making waves. In 2016, the FDA approved Syndros, an oral dronabinol solution that's essentially a synthetic version of tetrahydrocannbidiol, which you probably know best as THC. The drug was approved to treat chemotherapy-induced nausea and vomiting, as well as anorexia associated with AIDS. This new treatment option has the potential to generate $300 million annually in sales, according to Wall Street, but it's more importantly giving cancer patients a new antiemetic option during treatment.
Results like these are what give Americans hope that cannabis may offer medicinally positive benefits for certain ailments.
Can marijuana put an end to the opioid crisis in America?
Another aspect where medical cannabis could potentially make a massive impact is in fighting America's opioid crisis.
Opioids, which include drugs like hydrocodone, morphine, and fentanyl, work by interacting with opioid receptors on nerve cells in the brain and central nervous system to elicit pleasure and alleviate pain. Though these drugs do work to relieve pain, they unfortunately are also highly addictive, can have adverse impacts on the central nervous system, and led to 20,101 overdose-related deaths in 2015, per the American Society of Addiction Medicine. The issue is that there aren't many great alternatives to opioids in treating chronic pain, leaving physicians with little choice at times but to prescribe these addictive and potentially dangerous pain relievers.
Thus enters medical cannabis, which in 2015 and 2016 had no overdose-related deaths associated with the drug. Don't get me wrong: It is possible to overdose on marijuana. However, it's very difficult to die from an overdose of marijuana, based on statistical data, making it an intriguing option to replace opioids as a pain reliever.
It's also an option that the American public seems to prefer, when given the option. According to a recently published study entailing almost 2,900 medical cannabis patients, 92% preferred using medical marijuana to opioids to treat pain. It's worth pointing out that this wasn't a traditional scientific study. These were self-reporting patients, and no medical evaluation of drug efficacy was observed at any point. However, better than 9 in 10 patients preferred marijuana to opioids -- that's saying something.
The results of this somewhat-informal study give good reason for cannabinoid-based drug developers to take the time to develop alternatives to opioids. For instance, Zynerba Pharmaceuticals (ZYNE) is readying ZYN001, a THC pro-drug patch that's absorbed through the skin, for early-stage testing in patients with fibromyalgia and peripheral neuropathic pain. The advantage of Zynerba's delivery system is that it bypasses the liver initially, possibly allowing for a lower dose to achieve the desired pain relief. This could represent one of many future paths to pain relief without opioids.
Don't bet on change anytime soon
But despite clear momentum for the weed industry, don't expect the federal government or U.S. Drug Enforcement Agency (DEA) to change its tune anytime soon.
For those who may not recall, the DEA had an opportunity to review medical cannabis last year as part of two petitions that requested it be removed as a Schedule 1 drug. Schedule 1 drugs, like LSD and heroin, are defined as having no medical benefits and are entirely illegal. After review, the DEA declined to reschedule marijuana, with the regulatory agency citing a lack of clinical benefit and risk data in its decision. The DEA also noted that a lack of marijuana use oversight steered it away from rescheduling the drug.
This brings up one of the great Catch-22s of medical marijuana: The DEA wants more clinical data from Food and Drug Administration-approved trials, but researchers can't get these studies off the ground because its Schedule 1 status is so restrictive.
The federal government is also unlikely to make things easier for drug developers. Even though President Trump threw his support behind medical marijuana during his campaign, his newly appointed attorney general, Jeff Sessions, is possibly the biggest opponent on Capitol Hill of its expansion (medically or recreationally). As long as Sessions sits on Trump's cabinet, any easing of federal restrictions seems very unlikely.
So, what does this mean for marijuana stocks and patients? Probably more of the same, I'm afraid. Patients could deal with delays in getting access to medical marijuana or cannabinoid-based drugs. Meanwhile, marijuana stocks may face tax disadvantages, since weed-based businesses can't take normal corporate income-tax deductions, and banking restrictions. Most pot businesses have no access to even something as simple as a checking account.
In short, companies like Zynerba Pharmaceuticals could get the short end of the stick despite the public seeming to overwhelmingly favor what medical pot brings to the table.