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Source: Flickr user Matthew Kenwrick.

The results of the midterm elections were mixed for supporters of marijuana legalization, though mostly positive.

Hopes were high that the states of Oregon and Alaska, as well as Washington, D.C., would legalize marijuana for recreational adult use. In all three instances this happened. Floridians, however, weren't as pleased. In Florida marijuana was on the ballot for use in medical situations, but since it would have required a change of the state's constitution it needed a 60% "yes" vote to pass. Ultimately only 58% of residents voted in favor of the amendment, meaning medical marijuana won't become legal in Florida anytime soon. Florida was vying to become the 24th state to approve medical marijuana.

Medical marijuana gets a mixed bag
Reviews of the benefits and risks of medical marijuana use over the years have been mixed. Recently, though, a published report in the New England Journal of Medicine took this bifurcation to a potentially new level, highlighting what could be excellent news for biopharmaceutical companies making cannabinoid-based drugs from the cannabis plant, but also striking fear that their treatment audience could be limited.

According to the study, conducted by researchers from Harvard and Northwestern universities, the benefit or risk profile of marijuana really tends to depend on your age. Specifically, researchers suggest that younger people are more susceptible to negative repercussions of marijuana use due to the fact that the average young person's brain is still developing well into their mid-20s. Conversely, the study would suggest that for older adults marijuana may actually be beneficial.

Making matters even tougher to judge is the fact that the strength of marijuana strains has been changing over the years. Better understanding of the growing process has resulted in considerably more potent strains, which as you might imagine can heighten the benefit or risk profile for the above age groups.

How medical marijuana companies could benefit
The initial implication from this mixed study is that an older generation of Americans might see significant benefits from medical marijuana use -- which is perfect for cannabinoid-based drug developers, since they're focused on a generally older patient audience anyways.

As psychologist Dr. Max Wachtel has noted, marijuana can help patients reduce stress levels and can improve sleep. Of course, it's only fair to also point out that Wachtel, who is a local correspondent in Denver, also believes that marijuana has dangerous properties, which we'll get to in a moment. 

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Source: GW Pharmaceuticals.

The two specific names that come to mind here that may benefit are GW Pharmaceuticals (NASDAQ:GWPH) and Insys Therapeutics (NASDAQ:INSY).

Insys is developing dronabinol, a synthetic THC-based drug designed to treat chemotherapy-induced nausea and vomiting. Insys' drug is currently under review by the Food and Drug Administration and could represent a substantial leap over existing therapies considering its fast-acting formulation and varying dose options.

GW Pharmaceuticals has an even more extensive pipeline, with a little more than half a dozen label indications currently being researched, ranging from cancer pain to type 2 diabetes. This is all possible because of the five dozen cannabinoids that GW Pharmaceuticals has discovered since its inception, which it plans to use to effect positive biologic change in patients.

If older adults are seeing benefits from marijuana usage it could mean one more step to getting these cannabinoid drugs to market, and may even encourage physicians to prescribe them to patients (as long as they're approved by the FDA).

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Source: Flickr user Neeta Lind.

But there's a downside
Yet, the report also suggests that there is a sizable potential for paranoia and psychosis associated with marijuana use. Dr. Wachtel notes that marijuana has the potential to adversely impact decision-making and memory over the long term in kids because their brains are still developing.

The implication could be that cannabinoid drug developers may not have much ground to stand on when it comes to getting their drugs approved for an adolescent audience. This is especially important for GW Pharmaceuticals, as it's begun testing Epidiolex as a treatment for pediatric epilepsy -- specifically for Dravet syndrome and Lennox-Gastaut syndrome. The FDA is particularly careful about allowing studies involving marijuana to be conducted with children, and it's possible additional negative safety studies on its long-term effects could wind up putting the kibosh on any chance these drug developers have of helping a younger pool of patients.

We need more data
Ultimately, as we've discussed recently, we need more data on marijuana since the majority of studies on the drug have had little to do with its medical benefit profile. With too many unknowns still on the table it's hard to put too much faith in its ongoing expansion in the medical field, especially with studies on marijuana still largely mixed.

For investors, it means investing in the marijuana space will continue to come with above-average risk and most likely a lot of volatility. In other words, it could be the perfect reason to keep your nose clean of these stocks until the data swings conclusively one way or the other.

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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