4 Words That Could Change the Future for Marijuana

By Markets Fool.com


Source: Flickr user Brett Levin.

Continue Reading Below

To put it mildly, the marijuana industry is rapidly evolving before our eyes. What seemed like a long shot to succeed a decade ago is quickly becoming a flourishing industry.

Over the last decade, we've witnessed the pendulum swing from 75% of those surveyed by Gallup being against the legalization of marijuana to 58% of respondents being in favor of its legalization as of 2013. The implications, as we've previously discussed, are twofold.

Marijuana's benefits and big risk
First, marijuana sales for both recreational and medical marijuana tend to be taxed at an exceptionally high rate, which brings in tax revenue for states where the drug is currently legal. This tax revenue can curb budget deficits and save jobs, and it's a great tool for sparing all residents of a state a tax hike. Only those who purchase medical or recreational marijuana are subject to the tax.

Source: Flickr user Heath Alseike.

Continue Reading Below

The other implication is that legalization of marijuana from a medical perspective could allow researchers to study in greater depths whether or not marijuana has medically beneficial properties. We already see it prescribed for cancer pain and glaucoma in most of the 23 states where medical marijuana is legal, but there could be a number of additional indications where marijuana may be the answer.

Of course, the one thing continually standing in the way of marijuana's nationwide expansion is the fact that the federal government views it as a schedule 1 drug. As such, marijuana is defined on a federal level as illicit and believed to possess no medically beneficial properties. Thus far, the federal government has allowed individual states to manage their own marijuana policy, but there are no guarantees that this will forever remain the case, particularly if the regulations within each state aren't being adhered to.

But, there could be good news for marijuana proponents -- specifically medical marijuana supporters -- following comments made by the new U.S. Surgeon General, Dr. Vivek Murthy.

Four words that could change everything
In a recent interview with CBS This Morning, Dr. Murthy had this to say when asked about whether or not marijuana should be legalized:

My position is we have to see what the science tells us about the efficacy of marijuana, and I think we're going to get a lot more data on that. We have preliminary data showing that for certain medical conditions and symptoms that marijuana can be helpful, so I think we have to use that data to drive policymaking, and I'm very interested to where that data takes us.

Source: Flickr user Frances Ellen.

The four words that could change marijuana's future, especially the path that medical marijuana takes, are "marijuana can be helpful." No prior Surgeon General has admitted that marijuana could have beneficial medical properties, and it suggests a possible future softening in the federal government's stance toward marijuana if the studies conclusively show benefits associated with the drug.

Yet, another way to consider this is we've already seen a softening from the federal government that has stayed in the background and allowed 23 states to manage their own medical marijuana facilities and four states to legalize the recreational use of the drug. It's possible even more "softening" of federal policing of marijuana could be in the offing.

But, before you start betting on a sweeping nationwide approval of marijuana, keep in mind that Dr. Murthy also told the Senate during a confirmation hearing that, "Just like other drugs, I don't recommend marijuana, and I don't think it's a good habit to use marijuana. If I had kids, I would tell them not to use it." In other words, don't expect a recreational marijuana sweeping reform bill anytime soon.

GW and Insys lick their chops
If Dr. Murthy's comments did anything, it excited investors in the medical marijuana space such as those currently eyeing GW Pharmaceuticals and Insys Therapeutics .

Insys' pipeline is focused on developing two cannabinoid-based drugs (cannabinoids are derived directly from the cannabis plant). It's currently developing an oral solution of dronabinol using the cannabinoid THC for the treatment of chemotherapy-induced nausea and vomiting, which is in phase 2/3 studies, and an early-stage CBD-based oral solution for the treatment of rare types of epilepsy known as Lennox-Gastaut syndrome and Dravet syndrome.


Source: GW Pharmaceuticals.

GW Pharmaceuticals has a significantly broader research pipeline for cannabinoid therapies. GW Pharmaceuticals has one approved drug known as Sativex to treat spasticity associated with multiple sclerosis in more than a dozen overseas markets (not in the U.S.), and is developing an additional six drugs if you also include Sativex's other additional studies.

GW Pharmaceuticals is looking at what cannabinoids may be able to do for people with schizophrenia, type 2 diabetes, glioma, and epilepsy, to name a few indications. Although Sativex is already approved in select overseas markets, it's Epidiolex for those aforementioned rare childhood-onset epilepsies, Lennox-Gastaut syndrome and Dravet syndrome, that holds the most promise. In prior clinical studies, Epidiolex reduced seizure frequency for Dravet syndrome patients by 56%, while providing a 52% reduction in seizure frequency for those with drop seizures, a symptom often associated with Lennox-Gastaut syndrome.

If clinical studies verify that marijuana has medicinal benefits, it could be a completely new world for these drug developers. It also would likely put these companies on the radar of big pharmaceutical companies that are looking for new sources of growth.

Caution is still warranted
Yet, in spite of the Surgeon General's encouraging words for marijuana supporters, it's worth playing things cautiously.

For example, GW Pharmaceuticals' initial phase 3 study involving Sativex for cancer pain missed the mark, and even if Epidiolex breezes through its clinical studies, we're likely looking at bottom-line losses for GW throughout the remainder of the decade. Insys is at least profitable, but that's only because 99% of its revenue comes from Subsys, a non-cannabinoid based drug.

In short, the marijuana industry is still very much in its infancy and probably isn't worth your investment dollars -- at least not right now. It's certainly worth monitoring the progress of new studies, which Dr. Murthy seems to believe we're going to "get a lot more data on," but when it comes to betting on marijuana, it's a smarter play, in my opinion, to stick to the sidelines.

The article 4 Words That Could Change the Future for Marijuana originally appeared on Fool.com.

Sean Williamshas no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen nameTMFUltraLong, track every pick he makes under the screen nameTrackUltraLong, and check him out on Twitter, where he goes by the handle@TMFUltraLong.The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.