Only A Few Public Companies Really Focus On Developing Medical Marijuana: Here's A List

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Includes: CARA, CBIS, CNAB, CNBX, GBLX, GWPH, IMLFF, NMUS, OWCP, OXIS, PMCB, VRCI
by: Lorin Cohen

Summary

Marijuana is the next multi-billion-dollar emerging market.

Medical marijuana generated $4.2 billion in the US in 2015, forecast to surpass $10 billion by 2020.

Of the 167 companies listed in the MJIC Global Marijuana Index, only 12 are involved in real medical marijuana research.

Only A Few Public Companies Really Focus On Developing Medical Marijuana - Here's a List

The concept of marijuana as medicine in the modern era is relatively new, despite its 1000s of years of history as a popular treatment for conditions from gout to gonorrhea. That all changed about a century ago when prohibitionists collaborated with politicians to execute one of the most effective smear campaigns ever created, implicating marijuana use in all that was evil in the world. Sadly, some of the tenets of that effort remain part of the general discourse, with many in the US still believing the drive for medical marijuana is simply a plot by recreational users looking to skirt the laws.

We have a young Israeli doctoral student to thank for today's multi-billion-dollar medical marijuana industry. Dr. Raphael Mechoulam - considered by many to be the father of medical marijuana - began investigating cannabis in an effort to determine why it affects us. Working with the help of a grant from NIDA, Mechoulam and his team identified CBD, THC and other cannabinoids in the early sixties, and he hasn't stopped since. In the late 1980s, Dr. Mechoulam's research contributed to another breakthrough, the discovery of the endocannabinoid system, the mechanism through which marijuana effects our health and well-being.

Since that discovery, researchers have determined that, not only is the endocannabinoid system influential in a number of physiological and pathological functions, it appears to have a real impact on the treatment of a range of conditions and diseases, from pain and inflammation to cancer, and many others. While not the panacea that some proponents would have us believe, most scientists agree that cannabis-centric medicine offers substantial potential, which at the very minimum, warrants further research.

Unfortunately, and primarily for political reasons, the vast majority of marijuana research sanctioned in the United States has focused on proving its negative effects, primarily addiction and the degradation of mental capacity. Further, the U.S. still classifies marijuana as a Schedule I narcotic with "no currently accepted medical use and a high potential for abuse." Further, because cannabis remains illegal at the federal, and thus national level, cannabis remains the third rail for traditional pharmaceutical companies, leaving most research to be conducted internationally and through private entities, universities and hospitals.

These obstacles have spawned a market for the development and testing of synthetic cannabinoids. Designed to mimic those found in the cannabis plant and deemed suitable by the FDA and other federal agencies, synthetic cannabinoids have proven to be somewhat effective in treating disease, however the vast majority of cannabis researchers favor investigating the plant's natural components.

The good news is that a handful of scientists are taking up the cause, and they are making headway. This is in large part thanks to the research being conducted in Israel, where the government continues to support marijuana research. And as word of their progress spreads, several U.S. patient populations are calling for change, led at the grass roots by the parents of children suffering from intractable epilepsy and veterans with post-traumatic stress disorder (PTSD). These two groups are hard to ignore, if for no reason other than the potential negative publicity for doing so, and they too are making headway.

In 2015, the FDA loosened the reigns on marijuana research, indicating a willingness to allow research on human subjects. That being said, those who wish to implement clinical trials must still get approval from the FDA, Drug Enforcement Agency and the National Institute on Drug Abuse, so the change did not result in a groundswell of activity.

How To Participate As An Investor

Despite the above-mentioned hurdles to operating in the sector, medical marijuana generated more than $4.2 billion in revenue in the U.S. in 2015, according to ArcView Market Research, and they forecast it will surpass $10 billion by 2020, as regulations continue to loosen and patient access increases.

Investors interested in marijuana have a number of opportunities to participate in the sector's growth. The MJIC Marijuana Global Index, the industry's principal composite, includes 167 public companies, however the vast majority of those companies are service providers - greenhouse growers, security, extraction, edible producers, etc. Just a dozen companies in the Marijuana Global Index are actually involved in the research and development of cannabis-based pharmaceuticals.* Most investors are familiar with GW Pharmaceuticals, the only public company that has secured FDA approval for clinical trials, but there are other companies worth examining as well. Following is a listing of the medical dozen, and over the following weeks I will provide more in-depth review of each.

*Note -- two other companies included in the index- Insys Therapeutics Inc. and Zynerba Pharmaceuticals Inc. - are categorized as medical research companies, however they work with synthetic cannabinoids, and thus have not been included here.

Name

Symbol

Location

Disclosed Focus

       

Cannabics Pharmaceuticals Inc

CNBX

US/Israel

Malignancies

Cannabis Science Inc

CBIS

Colorado

Skin Cancers, HIV-AIDS, Neurological Disorders

Cara Therapeutics Inc

CARA

Connecticut

Pain, Inflammation and Pruritus

GrowBLOX Sciences Inc

GBLX

Nevada

Neurological and other Diseases

GW Pharmaceuticals Plc

GWPH

United Kingdom

MS Spasticity, Cancer Pain, Childhood Epilepsy

InMed Pharmaceuticals Inc

IMLFF

Canada

Dermatology and Ocular Disease

Nemus Bioscience Inc

NMUS

California

Glaucoma, MS Spasticity, Anxiety, Epilepsy, Methicillin-resistant Staphylococcus aureus (MRSA)

OWC Pharmaceutical Research Corp

OWCP

Israel

Psoriasis, Multiple Myeloma, Fibromyalgia

Oxis International Inc

OXIS

Florida

Targeting multiple myeloma, triple-negative breast cancer, non-Hodgkin's lymphoma

PharmaCyte Biotech Inc

PMCB

Maryland

Pancreatic cancer, breast cancer and diabetes

United Cannabis Corp

CNAB

Colorado

Nervous system, immune system, cancer

Verde Science Inc

VRCI

Texas

Huntington's Disease.

Conclusion

Regulations have significantly restricted medical marijuana research in the United States, but there is a small universe of institutions and companies that are making progress by taking a clinical approach to develop cannabis-based pharmaceuticals. Investors should expect mid-term sector growth as easing regulation lowers the barrier to entry for new participants, and the mounting scientific evidence mitigates the risk associated with product development. In the nearer term, there are a limited number of public vehicles for investors interested in true research into medical marijuana. If these companies can maintain their head-start within the industry they offer investors the opportunity for substantial growth in value.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

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