This Medical Marijuana Firm Is on a Tear

GW Pharmaceuticals (Nasdaq: GWPH) is on a tear.

The stock just hit a new all-time high, $132.47.

But GW Pharma isn’t your average drugmaker.

Longtime readers know that this British firm is doing something extraordinary. The company appears to be on track to have the first FDA-approved treatment derived from marijuana.

The “drug” is called Epidiolex. It’s a highly purified extract of the cannabis plant.

Specifically, the molecule it’s using is called CBD. And there’s a very good reason I’ve been pounding the table on the potential of this molecule for more than a year.

It has the potential to treat epilepsy far better than current drugs… and with fewer side effects. (Notably, it does not get users stoned.)

And epilepsy is only the tip of the iceberg.

GW Pharmaceuticals’ Pop

GW Pharma’s shares are jumping due to positive late-stage clinical trial data. Most recently announced was a Phase 3 trial for patients with Lennox-Gastaut syndrome, a rare form of childhood epilepsy.

Epidiolex at 20 milligrams reduced seizures for 42% of patients. Side effects were generally well-tolerated.

This makes the company’s third successful Phase 3 trial.

The company’s press release included a powerful quote from Philip Gattone, president of the Epilepsy Foundation.

The Epilepsy Foundation is thrilled to learn about the recent preliminary results for an innovative new therapy from GW for LGS. LGS in so many cases is extremely difficult to treat and is an incredible challenge for children and families. We feel a tremendous sense of urgency to stop seizures and believe that the pursuit of new therapies offers hope to individuals who have no currently available therapy to effectively stop their seizures. The Epilepsy Foundation will continue to be a champion for GW’s efforts to pursue this innovative new therapy as studies progress. We thank GW and all our partners who invest in a better tomorrow for people with epilepsy.

FDA: The Reluctant Catalyst

If the FDA had had its way, these clinical trials never would have happened.

As I noted back in July, it took GW Pharma seven years to even get a meeting with the agency.

And in August, the Drug Enforcement Administration reiterated its stance that marijuana has no “currently accepted medical use.”

It’s only through the dedication of parents whose children have epilepsy that this shift is occurring.

In every state across the country, these groups are pushing their representatives for access to CBD oil.

They’ve already won in the 16 states that specifically allow medical use of the extract.

Unknowns

As bullish as I am on medical marijuana, and specifically CBD, there are still significant hurdles for companies like GW Pharma to overcome.

For one, we don’t know if insurance will cover such a treatment.

Secondly, CBD oil is readily available in many states without a prescription. For example, hundreds of families with epileptic children are moving to states with access.

As The Denver Post reported last year

The migration began just over a year ago, when CNN aired a documentary featuring a Colorado girl named Charlotte Figi, whose constant seizures caused her to stop speaking for months. While taking a form of the marijuana treatment, the seizures subsided, and she bloomed anew into a happy child seen laughing and playing in video clips.

CBD oil doesn’t work as well for everyone as it did for Charlotte Figi. But it’s a ray of hope for families that have tried dozens of addictive sedatives with poor results.

The third hurdle facing medical marijuana is of a nastier sort.

Big pharma companies who make opiate drugs like OxyContin are lobbying hard against medical marijuana. They’re joined by the prison, big tobacco and alcohol industries.

Those groups are fighting tooth and nail against cannabis legalization. Needless to say, they wield considerable influence.

But these unsavory lobbyists have an uphill battle.

Consider a study released in 2014. It showed states that have legalized marijuana have far fewer deaths from painkiller overdoses.

NewsWeek‘s headline read, “In States With Medical Marijuana, Painkiller Deaths Drop by 25%.”

More recently, a study showed that overall opiate use is lower in states with medical marijuana laws. The Huffington Post ran a headline stating, “Marijuana May Alleviate America’s Opioid Crisis, New Study Suggests.”

Another study in Jerusalem released earlier this year made the case for THC (the most well-known molecule in marijuana) as an effective treatment for chronic pain.

A majority of participants (66%) experienced improvement in their pain symptom scores after cannabis therapy, and most reported “robust” improvements in their quality of life. Subjects’ overall consumption of opioid drugs declined 44% by the end of the trial, and a significant percentage of participants discontinued opioid therapy altogether over the course of the study.

Case closed.

Medical marijuana will play a big part in the future of medicine. But if the U.S. continues to block research in this critically important field, the lead enjoyed by more progressive countries will grow.

The industry’s legal downsides are obvious.

But there is a silver lining. The vast majority of venture capitalists can’t invest in medical marijuana. Their charters forbid investments in areas that the federal government considers illegal.

In other words, it’s an angel investor’s dream come true. There are hundreds of big-potential cannabis companies seeking funding, and the majority of funding will come from individuals and family offices.

For now, companies directly involved in the sale of marijuana (even if it’s legal on a statewide basis) aren’t likely to raise money via equity crowdfunding.

Even though there’s no specific law preventing it.

This unfortunate situation is due to the Department of Justice’s “Operation Choke Point,” which aims to punish banks who transact with companies involved in medical marijuana, firearms, adult entertainment and more.

It’s more than a little Orwellian. If you think the federal government is in the wrong here, let your representatives know it.

We should all have the ability to invest in these opportunities. And we will. It’s just a question of when.

Good investing,

Adam Sharp
Founder, Early Investing