Perhaps nothing caught the eyes of speculative investors more than marijuana stocks in 2014, but just because marijuana stocks put up significant returns last year doesn't mean that they can do it again in 2015. We asked our Motley Fool contributors to share their thoughts on whether there are any marijuana stocks investors might want to buy this year. Read on to learn what they think.
Insys is developing a slate of therapies based on the marijuana cannabinoid CBD, but it's already got a fast-growing, top-selling pain medication on the market that's throwing off shareholder-friendly profits. That drug is Subsys, a fentanyl-based opiate that's prescribed to treat breakthrough cancer pain. Sales of the drug jumped 105% year over year in the third quarter to $58.2 million, which led Insys to report adjusted EPS of $0.63. Thanks to Subsys, Insys is debt free, with the financial firepower necessary to advance its marijuana therapies through trials. The company expects to launch CBD trials in both Dravet Syndrome and Lennox-Gastaut Syndrome patients early this year, but it's also been awarded orphan drug designation to study CBD in glioma, a tumor of the brain or nervous system; glioblastoma multiforme, the most common and most aggressive malignant primary brain tumor in humans; and pediatric schizophrenia. Although Insys' research into CBD is at a very early stage, it should also soon be refiling its application for FDA approval of oral dronabinol, a new formulation of the long-standing marijuana-based chemotherapy drug Marinol. With one top seller already, another possibly coming soon, and a slate of intriguing CBD drugs in its pipeline, Insys is a stock investors may want to own.
Dan Dzombak: Sorry to be the buzzkill that ruins your investing high, but there are currently no marijuana stocks worth buying in 2015.
The only two marijuana stocks Motley Fool writers will even consider are GW Pharmaceuticals (NASDAQ:GWPH) and Insys. GW Pharmaceuticals has a market cap of $1.55 billion, trading for 35 times its sales of $45 million. Insys is better in comparison but still trades at a whopping 8 times sales and currently has only one product.
If the federal government legalizes marijuana, there will be huge business opportunities to be had. I think you would be far better off putting your money into starting a marijuana-related business rather than investing in some medical marijuana businesses at 35 times sales.
Seriously, if you're willing to put a few thousand dollars into a business at 35 times sales, why not corral a few of your friends and start a business? Marijuana is currently legal in some form in 23 states. Move to one of them, learn the business, and you'll be ready to capitalize when full legalization happens.
Even better, you'll own a huge percentage of that business compared with the 0.000001% you would own by buying stock, and if you make it even semi-successful, there are enough people willing to invest at 35 times revenue that you'll make a killing selling it to them years down the road.
We'll be waiting. Just be sure to send me a note, and some shares in thanks for the inspiration, when you go public.
Leo Sun: I disagree a bit with Dan on this. I think GW Pharmaceuticals is a marijuana-related stock that investors should keep an eye on.
GW Pharmaceuticals' only approved cannabinoid drug, Sativex, has been launched in 15 countries and approved in 12 others (mainly in Europe) for the treatment of severe spasticity caused by multiple sclerosis. Last year, Sativex revenue doubled year-over-year to 4.4 million pounds ($6.65 million), accounting for nearly 15% of GW's top line. The remainder of GW's revenue comes from license fees and milestone payments.
Most of those fees come from Otsuka, GW's Japanese marketing partner, which is trying to get Sativex approved in the United States. Others come from Novartis (NYSE: NVS), Ipsen Biopharm, Neopharm Group, Almirall, and Bayer (NASDAQOTH: BAYRY), which hold global marketing agreements for Sativex.
Looking ahead, another promising drug is Epidiolex, GW's drug for two kinds of treatment-resistant epilepsy -- Dravet and Lennox-Gastaut Syndrome. The drug is currently in a phase 2/3 trial for the Dravet indication, and additional phase 3 trials for both indications will commence in the first quarter of this year.
Make no mistake -- GW is a highly speculative biotech that is heavily dependent on a single drug. However, rising sales of Sativex, potentially positive developments regarding Epidiolex, and support from top pharmaceutical companies suggest that the stock might still have room to run. Now, there are appropriate concerns about valuation -- but I'm excited about the potential and think the company's worth keeping on your watchlist (although it's definitely speculative for my taste). Most importantly: be careful out there, do your homework, and be on the lookout for clinical trial data on these pipeline candidates!
Dan Dzombak, Leo Sun, Todd Campbell, and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.