You'd never know it by the way marijuana is demonized by many politicians and the media, but it's a potent treatment for various ailments, with fewer side effects than conventional pharmaceutical remedies.
Accordingly, the increasing legalization of recreational and medicinal marijuana is one of the biggest business trends unfolding today. Pot is becoming a multi-billion dollar industry, with profound implications for consumer society.
The legalization of cannabis and hemp has the potential to revitalize farming communities, create jobs in economically depressed urban centers, foster new innovations for pharmaceuticals and nutraceuticals, and ignite a manufacturing boom.
Some of the most exciting innovations are occurring in the small-cap realm, where there is tremendous room for future growth. Here are several promising small-cap plays on the cutting edge of "pot medicine."
Zynerba Pharmaceuticals ZYNE
Zynerba develops synthetic cannabinoid therapeutics for transdermal delivery to patients. The company is currently checking product candidates under patent protection - ZYN002 and ZYN001. While ZYN002 as a gel treats refractory epilepsy, Fragile X syndrome, and osteoarthritis, ZYN001 will be administered as a patch on patients with fibromyalgia and peripheral neuropathic pain.
After biotech firm GW Pharmaceuticals GWPH announced success with treating epilepsy through Epidiolex, Zynerba's ZYN002, being similar, may be the next in line to succeed in treatments. Some analysts also expect drug exposure with Zynerba's transdermal system to be superior to GW's oral administration. According to estimates, ZYN002 could touch$500 million in revenues for refractory epilepsy.
Even on the lower end of estimates, the Thomson Reuters Analysts consensus expects the stock to touch at least$25 over the next 12 months, representing an upside of over 280% from current levels. There is a mean recommendation of 1.4 on the stock, with 1 being a Strong Buy and 5 being a Sell.
High-risk penny stocks
With limited analysis and estimates available for penny stocks, the following recommendations are not for the faint-hearted. However, as approvals come through for these companies and the industry as a whole, they are bound to have the first-mover advantage.
Maryland-based PharmaCyte Biotech PMCB and Florida-based Oxis International OXIS are two of the few companies in the 167-member MJIC Marijuana Global Index that can claim involvement in the hands-on R&D of marijuana-based pharmaceuticals. While PharmaCyte's focus is on pancreatic cancer, breast cancer, and diabetes, Oxis targets multiple myeloma, triple-negative breast cancer and non-Hodgkin's lymphoma.
Vancouver-based Veritas Pharmaceuticals Inc. VRTHF is a development-stage medicinal cannabis biotechnology company. It mainly focuses on identifying cultivars, or plants, of cannabis whose growth can be controlled by some level of human intervention and then breeding the ones which are found useful for treatments of ailments.
Veritas focuses on finding treatments for post-traumatic stress disorder, epilepsy, tumors and chronic pain. Thanks to its virtual R&D approach which makes use of existing research facilities like hospitals and labs, Veritas is likely to speed up the identification of cultivars. Virtual R&D is the hottest area of drug research today and Veritas is making good use of the technique.
Terra Tech Corp. TRTC is a company that is associated with every stage of cannabis medication from cultivation, to extraction, to branding, and now, even retail. The company already has two medical marijuana dispensaries with three more expected to open soon. Even without considering its most recent acquisition of Blum, which will help it in retail sales, Terra doubled revenues in 1Q 2016.
As marijuana evolves from stigmatized past-time to Big Business, investors have a chance to jump onto the pot bandwagon early, before inevitable consolidation takes hold.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.