Want a Pure-Play Marijuana Stock? Your Choices Are Few
A decision by the Drug Enforcement Administration to keep marijuana a Schedule I drug is a setback for the pro-marijuana movement, yet industry watchers maintain that state-by-state decriminalization will lead to dramatic revenue growth for marijuana companies. Unfortunately, investors hoping to profit from the marijuana industry's growth have few investment options to choose from.
In this clip from The Motley Fool's Industry Focus: Healthcarepodcast, analyst Kristine Harjes and contributor Todd Campbell discuss two companies that are developing marijuana-based medicine.
A full transcript follows the video.
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This podcast was recorded on Aug. 17, 2016.
Kristine Harjes: Themarijuana industry sounds like it would be really lucrative for investors. There'sresearch out there that estimates 30% annual growth in thecannabis industry for the rest of the decade. Legalmarijuana sales hit an estimated $5.4 billion in 2015. This trend lookspoised to continue with58% of respondents to aGallupPoll supportingnationwide legalization. So,I totally understand why you have investors out theresalivating at the prospects of getting in on this industry.
Todd Campbell:Right, this would be like us talking about alcohol during the Prohibition. What will happen if they repealed Prohibition? And, of course, we ended up with huge companies,CoorsandBudweiserand the like, that were investment-worthy, if you will.
Harjes:Exactly. And we do currently have a couple of companies that areoperating legally and are in this industry. But, of course, it is also very much a speculative industry at this point.
Campbell:It'sa Wild West. I wouldn't recommendthat any investor goes out for all marijuana stock, per say. There are two drugmakers that are doing FDA-qualityresearch and conducting programs, and those are:GW Pharma(NASDAQ: GWPH)is one of them, andInsys Therapeutics(NASDAQ: INSY)is the other. Those are two companies that investors can consider. They have pros and cons to them. But those are, at least, two real companies with real potential chances to get FDA productapproved that are based on marijuana,and be able to generate revenue and profitability someday down the road.
Harjes:And Insys, I'll point out,is not primarily focused on marijuana. GW Pharmaceuticals is pretty much your only bet if you want a pure-playmarijuana stock that's not trading on the pink sheets for pennies.
Campbell:Right. They'redoing research into the use of CBD, which is achemical compound found within the marijuana plant. CBD has beendemonstrated in early -- and now in some late stage trials --to be very helpful in the use of controllingepilepsy, epileptic seizures inepilepsy patients. There could be a filing for FDA approval for this drug as early as 2017. We'llhave to continue to keep an eye on them. But you're right, they are the only pure-play company of substance thatI think investors ought to consider. But, of course, there's other risks there. They're not profitable yet, they'respending money on this researchand they have nothing to show for it yet.
Harjes:Of course. Interestingly, I think this DEA ruling could actually benefit GW Pharmaceuticals. When you think about a Epidiolex, it is made from this liquid form ofsomething that you extract from marijuana. It's not just, "Here, take themarijuana leaves and smoke them." It's completely other side of the ballpark from that. So, if the DEA had announced that all of the sudden, everybody can start studying marijuana in its natural form, in a smoked form, something like that,then you could potentially get these studies coming outsaying that marijuana, in its natural state, is just as good as Epidiolex. And that woulddestroy its pricing power. So this is actually kind of good news.
Campbell:Buy fromCharlotte's Web Dispensary, rather than having to get prescribed Epidiolex from your doctor.
Kristine Harjes has no position in any stocks mentioned. Todd Campbell owns shares of Insys Therapeutics. The Motley Fool recommends Anheuser-Busch InBev NV. 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.