A lot of people are getting excited about the trend of legalizing marijuana and looking at the area as one of the next big investment themes. You commonly hear talk about the dispensaries and growers as an easy way to play the theme. However, I think the recreational use of marijuana will be small pennies compared to the medical applications. I’m not talking about a doctor’s prescription to smoke weed but the cannabinoid infused medicines and treatments that are being developed to treat epilepsy, cancer, pain management, arthritis, concussion symptoms, etc. This is where the big money and best opportunity lies.
I think that most of the people who are against legalizing marijuana think it’s all about hippies and pot heads and are missing the medicinal benefits. It’s going to take some time for people to come around to the idea and will probably take the backing of a respected institution like the FDA. Because of this, I think we’re more likely to see cannabis approved treatments (FDA approved) before it’s legally approved for recreational use across the entire US. There are two reasons for this: 1) it costs less than most Western medicines on the market and with healthcare costs already out of control and continually rising, any way to reduce costs is a big win for politicians (and for the public), and 2) more importantly, it’s proving through testing to be more effective than current treatments and healthier for you, meaning less negative side effects, being that it’s a “natural” product.
The list of side effects that they reel off at the end of every drug advertisement is astounding. And now I’m seeing commercials for drugs to treat the side effects of drugs! The opioid epidemic alone is reason enough to consider these treatments. The side effects for cannabinoid medicines are far fewer and much less harsh. They include drowsiness, fatigue and diarrhea, which can often be eliminated by adjusting dosage.
GW Pharmaceuticals
I purchased stock in GW Pharmaceuticals (GWPH) yesterday as a long-term growth investment. GW has been researching and developing medicinal cannabinoid applications since the mid 90’s. Australia, Canada and the UK have been some of the leading countries on cannabis based research so GW found it easier to incorporate in the UK but now have their sights set on US approvals. With over 500 people on staff, they have a huge head start on the market, plus one treatment for two different types of epilepsy in children that they’re hoping to receive FDA approval on as early as this year. They’re so confident that they’re currently building out the sales team and manufacturing facilities in the US and the stock is already being valued based on expected sales.
Results have been impressive with a big reduction in the number of seizures experienced, reduced adverse events and low withdrawal rates. They’re also now testing the application for adult epilepsy as well.
In addition, GW has applications in phase 3 testing for tuberous sclerosis and infantile spasms, and early testing on glioma – all of which are not being priced into the stock. Not to mention a pipeline of additional cannabinoid candidates and patent protection on the treatment of epilepsy and formulations out to 2036.
I would not be surprised to see some of the big pharma and cigarette companies look to get a foot in the door as cannabinoid treatments become more mainstream. The key players with the intellectual property like GW would be easy takeover targets. It all adds up to the very early innings of a long-term growth story. Like most biotech/drug development companies, it’s a pretty volatile stock but over the next 5 years, I think the reward-to-risk could be 5-to-1 or higher if all goes well.
All slides are from GW Pharma’s latest investor presentation, which can be found by clicking here.
Thanks for following!
-Nick
GW Pharmaceuticals (GWPH) – 1 year
