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Cannabis May Show Promise in Treating COVID-19. Here's What It Means for the Pot Industry.

By Zhiyuan Sun - May 13, 2020 at 5:55AM

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Researchers in Alberta have discovered cannabis may become a surprising addition in the global battle against the coronavirus.

A recent study from the University of Lethbridge shows that certain strains of cannabis can inhibit viral activity caused by the novel coronavirus. Do the results point to a potential treatment for the ongoing COVID-19 pandemic, and, if so, will it act as a catalyst for the cannabis industry?

Like all other respiratory viruses, coronavirus is transmitted through tiny respiratory droplets ejected during a cough or sneeze from an infected patient. After a healthy patient inhales such droplets, the virus facilitates its entry into its new host by attaching itself to cellular receptors in lung, intestinal, and oral tissues via angiotensin-converting enzyme II (ACE2). Recently, the scientific community has reached a consensus that ACE2 is the main cellular receptor responsible for COVID-19's entry into host cells. 

Doctor investigating medical marijuana.

Image source: Getty Images.

In the Lethbridge study, researchers injected different extracts of sativa (narrow-leaf varieties of cannabis, thought to have energizing effects) into artificial human tissues containing ACE2. The results were promising, as some strains reduced viral receptor activity by 73%, leading to less likelihood of becoming infected. The difference between ACE2 activity in certain tissues before and after the extracts were administered was statistically significant.

According to the study:

The extracts of our most successful and novel high CBD C. sativa lines, pending further investigation, may become a useful and safe addition to the treatment of COVID-19 as an adjunct therapy. They can be used to develop easy-to-use preventative treatments in the form of mouthwash and throat gargle products for both clinical and at-home use.

Such products ought to be tested for their potential to decrease viral entry via the oral mucosa. Given the current dire and rapidly evolving epidemiological situation, every possible therapeutic opportunity and avenue must be considered.

It's important to note the study is preclinical and has not yet been peer-reviewed. Medical cannabis, however, is gaining traction as a potential therapy in combating COVID-19 after initial suspicion from experts that using marijuana could exacerbate COVID-19 and its spread. For example, scientists in Israel are now conducting three clinical trials to test the effects of cannabidiol (CBD) in repairing cells damaged by COVID-19, citing the plant's well-known anti-inflammatory properties. 

Are these efforts promising?

In my opinion, the researchers' efforts could make sense because the vast majority of severe cases of COVID-19 lead to fatalities based on a phenomenon called cytokine storms. In these cases, the coronavirus induces extraordinary levels of immune response from the body, causing white blood cells to attack and destroy healthy tissues (especially those in the lungs).

Coincidentally, there were studies conducted on the effects of cytokine activity in cells due to cannabis before the COVID-19 outbreak occurred. In these studies, it was determined one active ingredient in cannabis, tetrahydrocannabinol (THC), inhibited cytokine activity. In fact, medical marijuana is already being used to treat for autoimmune diseases (where cytokine storms are one symptom of the condition). For example, GW Pharmaceuticals' (GWPH) Sativex, a cannabinoid, was approved in 2010 to treat spasms in patients with multiple sclerosis. However, further studies regarding the use of cannabis in treating COVID-19 are needed before we can make claims on its efficacy. 

Is this good news for cannabis stocks?

Currently, all major producers of high-CBD, low-THC hemp variants, such as GW Pharmaceuticals and Charlotte's Web (CWBHF -0.34%), have some form of liquidity on hand to initiate clinical trials should they decide to investigate the potential of cannabis to treat COVID-19. These companies already have ongoing clinical investigations of their medical cannabis products. 

Unfortunately, the outlook has been grim for the sector as investors have been selling their holdings en masse. Whether it was due to earnings disappointment, CEO resignations, or halts in new store openings, nobody seems to be optimistic about the sector's future. 

The potential for cannabis for treating COVID-19 may fuel a comeback. With no vaccines available and just one treatment with confirmed efficacy against COVID-19, a huge opportunity exists in the global effort to combat the outbreak. Shareholders would no doubt witness ample capital appreciation should any of the major companies listed decide to pursue testing their cannabis products to target the virus. 

Takeaways for investors

In all, I think certain cannabis companies are a buy regardless of whether cannabis can help prevent COVID-19. The stress-relieving properties have proven invaluable during times of quarantine and has resulted in skyrocketing sales in nearly every cannabis store online. Moreover, if cannabis does demonstrate in clinical trials that it can decrease the likelihood of the getting COVID-19, then there isn't anything to prevent customers from ordering the applicable strains online before any cannabinoid-specific drugs enter commercialization. 

In the next round of earnings reports in fall, cannabis investors will likely be rewarded as increasing demand and new opportunities in the sector receive widespread coverage. For those wishing to hedge their exposure to individual company risk, the ETFMG Alternative Harvest ETF (MJ 0.30%) is a valuable option. The ETF contains 36 cannabis companies, none of which accounts for over 10% of its assets. 

Zhiyuan Sun owns shares of Canopy Growth. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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