Regular readers know that one of my personal “holy grails” is to find the ultimate medical marijuana investment.
I think cannabis is the next big thing in medicine*, and I’m looking for a few good companies (public or private). I’ll explain why I’m so bullish in detail a bit further down.
First, I want to talk about GW Pharmaceuticals (Nasdaq: GWPH), a company I mentioned back in March.
The U.K.-based biotech is attempting what most thought impossible a few years back: FDA approval of marijuana-based drugs.
Today we’re looking at a GW drug candidate called Epidiolex. Initially, the company is going for approval to treat rare forms of epilepsy.
Their drug is based on a compound called cannabidiol (CBD), which is found naturally in marijuana. CBD has strong anticonvulsive effects and has proven effective in treating epilepsy for many patients.
GW has been granted orphan drug status – a designation enabling patent exclusivity – for Epidiolex by the FDA. And just this week, Phase 3 clinical trial data showed a 44% reduction in seizures among patients who received the CBD compound, compared with a 22% reduction in the placebo group. (Side note: Isn’t the placebo effect amazing?)
These are among the first U.S. clinical trials of CBD. (The FDA rejects the vast majority of trial proposals.)
Meanwhile, the anecdotal evidence keeps piling up. Here’s CNN’s Dr. Sanjay Gupta:
Take the case of Charlotte Figi, who I met in Colorado. She started having seizures soon after birth. By age 3, she was having 300 [seizures] a week, despite being on seven different medications. Medical marijuana has calmed her brain, limiting her seizures to two or three per month.
I have seen more patients like Charlotte firsthand, spent time with them and come to the realization that it is irresponsible not to provide the best care we can as a medical community, care that could involve marijuana.
We have been terribly and systematically misled for nearly 70 years in the United States, and I apologize for my own role in that.
This is a big deal. Severe forms of epilepsy are extremely difficult to treat. Existing options are mostly addictive sedatives, as I’ve pointed out before.
The FDA Buckles Under Pressure
GW Pharmaceuticals was founded in 1999. It took the company seven years to even get a meeting with the FDA.
Its leading product, Sativex, is also marijuana-based. It’s approved to treat multiple sclerosis spasms and cancer pain in more than 22 countries (but not the U.S.).
Despite setbacks, GW co-founder Geoffrey Guy and his team strongly believed in CBD and other cannabinoids. So they pushed on and continued their research.
They weren’t the only ones studying CBD. In U.S. states where medical uses were legal, CBD was taking off.
Parents with epileptic children were demanding access to CBD. Over the years, these cases led to many of the statewide legalization successes.
Finally, the FDA started to come around. The U.K. newspaper The Telegraph explains:
A perfect political storm provided the catalyst for GW’s rise to prominence in the U.S. last year. Parents of severely epileptic children were flocking to illegal cannabis growers, desperate to get hold of an extract known as cannabidiol, or CBD, which had been shown to dramatically reduce seizure frequency.
Slowly, progress is being made. It will be a bumpy road, and we don’t know how exactly it will turn out. There will be fierce battles fought over patents and ultimately over who can sell CBD.
But the long-term trajectory remains the same. We’re headed toward full legalization of marijuana.
If and when it happens on a federal level, investors would be wise to learn about the medical potential of this plant.
Background on Why Cannabis Could Revolutionize Medicine
CBD is one of more than 100 chemical compounds found in marijuana known as “cannabinoids.”
Our bodies naturally produce the same types of compounds, known as endocannabinoids when made internally. They help regulate important processes like inflammation, stress response, pain sensitivity, energy, appetite, sleep, immune response, social interactivity and more.
Marijuana can be selectively bred to contain higher levels of certain cannabinoids. For example, there are already hundreds of cannabis strains with high levels of CBD and virtually zero THC (the psychoactive component of marijuana). Since there’s almost no THC, users don’t get “high.” They only get the targeted medicinal effects. In CBD’s case, it works great for epilepsy.
That’s why I’m so interested in this field. Molecules to treat potentially hundreds of different ailments, all from one plant.
Only a handful of cannabinoids have been properly explored. The future is full of medical uses for many of them. Here’s a chart showing some of the more interesting ones:
As you can see, the medical potential of cannabinoids is far-reaching.
GW is the most interesting medical marijuana stock I’ve found so far. There certainly is a lot of “regulatory risk” with this one, but the upside looks substantial.
GW is already a $2 billion company (up from $1.7 billion when I wrote about it in March). As you can probably guess, I prefer much earlier-stage.
I’ll keep watching GW, but my hunt for the ultimate cannabis investment continues.
Tonight, I’ll be speaking with the founder of a private company called Phylos Biosciences. The Portland-based firm’s tagline is, “Accelerating the evolution of cannabis.” Sounds like it’s right up my alley…
Know of any promising cannabis companies? Drop a comment into the discussion thread of this article.
Have a great weekend.
Founder, Early Investing
P.S. *The other “next big thing” in medicine I’m watching is the microbiome field. The study of all the tiny organisms that live in and on our bodies. I’ll do a dedicated piece on that in a few weeks. If you’re interested in learning more, read this article in Nature.