The marijuana industry has truly blossomed before our eyes in a relatively short period of time. As recently as 2005, just a third of people polled by Gallup wanted to see cannabis legalized in the United States. But as of October 2018, 2 out of 3 people now feel that legalization is the appropriate path for marijuana.

And it's not just that two-thirds of all U.S. states have given the green light to pot. We've also witnessed Canada end nine decades of recreational weed prohibition. In October, it became the first industrialized country in the world, and only the second overall behind Uruguay, to have legalized adult-use marijuana. This followed Mexico, which, in June 2017, gave the OK for legal sales of medical pot. Our southern neighbor is also considering legislation in 2019 that could make it the third country worldwide to have legalized adult-use cannabis.

A physician with a stethoscope around his neck holding a cannabis leaf between his hands.

Image source: Getty Images.

No longer is the marijuana industry considered taboo. Now, it's a legitimate business model and a potentially intriguing investment opportunity. This big question is: What stocks to buy?

While direct players -- i.e., companies that come in direct contact with the cannabis plant -- are often touted as the most attractive, there are a number of ancillary and indirect players that are equally, if not more, exciting. One such stock that continues to captivate investors' attention is cannabinoid-focused drugmaker GW Pharmaceuticals (GWPH).

However, the stock market isn't a popularity contest, and valid arguments can be made from both sides of the aisle that GW Pharmaceuticals may or may not be worth buying. Let's take a closer look at a handful of compelling arguments from each side.

GW Pharmaceuticals has the tools to make you a rich person

The most obvious reason investors should consider GW Pharmaceuticals as a solid investment opportunity is that the company earned the first-ever cannabis-derived drug approval from the U.S. Food and Drug Administration (FDA) this past June for Epidiolex. To be clear, it had gained approval in the EU for Sativex, a cannabinoid-based medicine for the treatment of spasticity associated with multiple sclerosis, years earlier, but Sativex was never approved in the United States.

Epidiolex, a cannabidiol (CBD)-based oral solution, handily ran circles around the placebo in multiple late-stage trials for two rare types of childhood-onset epilepsy, Dravet syndrome and Lennox-Gastaut syndrome. In studies, Epidiolex led to seizure frequency reductions of roughly 30% to 40% from baseline, which was significantly better than the placebo arm. Epidiolex launched in early November, with Wall Street calling for revenue to soar from close to $15 million in 2019 to $118 million by 2020.

A vial of Epidiolex, next to its packaging box and two droppers.

Image source: GW Pharmaceuticals.

Secondly, investors are going to be pleased with the momentum behind medical cannabis in the U.S., as well as Epidiolex's scheduling from the U.S. Drug Enforcement Agency (DEA). An April 2018 survey from the independent Quinnipiac University found that 93% of surveyed adults favored the idea of a physician being able to prescribe medical marijuana. Also, when the DEA scheduled Epidiolex -- as it's required to since it contains a federally regulated substance (CBD) -- it gave the drug the lowest possible classification (Schedule V). This should create little-to-no restrictions when attempting to prescribe the drug and should help Epidiolex's sales shoot out of the gate.

Third and finally, GW Pharmaceuticals is the hands-down leading developer of cannabinoid-based therapies. While there are other drugmakers dabbling in synthetic cannabinoids, or dealing with one or two cannabinoid-based products, GW Pharmaceuticals has two approved products, as well as eight ongoing mid-stage or late-stage trials to expand existing label indications or test brand-new compounds (GWP42006). There's certainly a premium that could be paid for the uniqueness that GW Pharmaceuticals brings to the table. 

Three arguments that'll send you running away from GW Pharmaceuticals

Then again, there are plenty of reasons that investors should be leery of GW Pharmaceuticals. Arguably the top reason is that the company's first-mover advantage in Dravet syndrome, where no other drug is currently approved to treat the disorder, isn't a guarantee of success.

Case in point: Vertex Pharmaceuticals (VRTX 0.16%). Today, Vertex is a powerhouse drugmaker best known for its line of cystic fibrosis medicines. But back in 2011, it was all the talk when it brought a brand-new medicine to market known as Incivek to treat hepatitis C. In less than four months following the launch of Incivek, it had brought in almost $500 million in sales, with the drug delivering $1.16 billion in revenue for 2012. But more intriguing hepatitis C medicines from Gilead Sciences and AbbVie hit pharmacy shelves and pushed Vertex's Incivek to the wayside. By August 2014, just a year and a half removed from reporting $1.16 billion in sales for its then-lead drug, Vertex discontinued sales of Incivek. It's possible that Epidiolex could have its own sputtering-out moment if other, more intriguing medicines were to find their way onto pharmacy shelves. 

A female pharmaceutical lab technician closely examining a capsule in her hand, with a male colleague making notes on a clipboard in the background.

Image source: Getty Images.

A second point that should raise concern among investors is the strong likelihood that GW Pharmaceuticals will soon face competition in Dravet syndrome. Zogenix (ZGNX) shocked Wall Street in September 2017 when it reported stellar data for ZX008, which is now known as Fintepla, as a treatment for Dravet syndrome. Then, in July 2018, Zogenix again dazzled with late-stage data, showing that its drug had met the primary endpoint of a statistically significant reduction in seizure frequency for Dravet syndrome patients when compared to the placebo. More specifically, it led to a nearly 55% reduction in seizure frequency from baseline. Assuming the FDA likes what it sees from a safety standpoint, Zogenix's lead therapy could hit pharmacy shelves near the end of this year, ending GW Pharmaceuticals' run as the only choice for Dravet syndrome patients. 

Lastly, pessimists could easily harp on GW Pharmaceuticals' valuation. This is a company that's not expected to be profitable on a recurring basis until 2022, and may see sales for its lead drug peak between $500 million and $700 million, especially with competition from Zogenix on the horizon. That means investors are willingly paying for a $4.6 billion market-cap stock that could be trading for seven to nine times peak sales, and won't be profitable for at least three more years. Even with the arbitrariness of biotech and pharmaceutical stock valuations, seven times peak sales is pricey.

Now that you've heard both arguments, the only question left to ask is what side of the aisle do you find yourself on?

Check out the latest GW Pharmaceuticals earnings call transcript.