Legal marijuana is about more - much more - than recreational use. In fact, its medicinal potential, unchained, could be worth billions more than the billion-dollar consumables market.
Study after study has shown that up to two dozen medical conditions could be treated with marijuana.
Two of its more intriguing components, non-psychoactive cannabidiol (CBD) and psychoactive tetrahydrocannabinol (THC), have a clear impact on brain function and pain management.
Glaucoma sufferers, for example, have long known that pot can reduce ocular swelling. Many people swear by pot's ability to improve lung function, counterintuitive as that may seem. And people suffering from conditions such as multiple sclerosis will tell you that this drug can greatly ease the daily pain they must live with.
Results like those are part of the reason medical marijuana has been approved in 24 states and in many countries around the world - and the reason why the medical marijuana market topped $4 billion in 2015.
Just one company, a biotech that first hit my radar in 2014 and has delivered peak gains of more than 1,100% over the past three years, is favorably positioned to make a classic "corner-the-market" move on this incredibly lucrative segment.
I'm recommending it once more today, after a round of quadruple-digit gains, because I think there's every reason for it to happen all over again...
This Company Will Dominate Cannabis-Based Therapies
Like I said, the legal market for medical marijuana exceeded $4 billion in 2015 and will likely reach $35 billion by early next decade, according to ArcView Market Research and New Frontier Data.
That got the scientists at the Cambridge, UK-based GW Pharmaceuticals Plc. (Nasdaq ADR: GWPH) thinking: If marijuana has such a broad range of potentially healing properties, and is finally receiving more respect among doctors, why not build a business around CBD and THC?
GW has an unbeatable head start in the race to build drug franchises around the healing powers of cannabis.
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You see, all the way back in 1998 - the Dark Ages, in terms of legal cannabis - this company successfully lobbied the Home Office and Department of Health for the country's first-ever "cultivation license" to grow cannabis for commercial, scientific research.
For the past five years, the firm has been cultivating strains of the plant with an eye to increasing concentrations of these two key ingredients. This effort has made it possible for GW to provide its engineers with a robust supply of the raw material they need as they ramp up research into a broad range of new drug candidates.
GW's scientists are looking to capitalize on a series of medical breakthroughs made in the 1990s, when researchers first realized that the body actually has three systems that regulate disease and pain. Two of these, the central nervous system and the immune system, were already well understood. But what researchers discovered was that our body is also regulated by proteins called endocannabinoid receptors.
THC and CBD go right to these receptors and can have a profound impact on the body's various mental and physical responses. GW Pharma has focused on the impact of CBD, which targets the brain's receptors that control mood and brain seizures.
Its research has been fruitful, showing incredible promise.
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There's a "Miraculous" Seizure Treatment At Hand
For the 3-million epilepsy sufferers in the United States (and the 62-million sufferers worldwide), relief from debilitating seizures would be nothing short of a miracle.
That's why so many of them are focused on GW's Epidiolex, which has been quickly moving through clinical trials.
A turning point came in 2012, when an 11-year-old boy named Sam was given high doses of CBD for the first time.
You see, despite having taken a dozen anti-seizure medications, Sam still suffered from more than 100 seizures every day.
Thanks to GW Pharma's CBD formulation, Sam now experiences only three to five seizures each day. Some days, he doesn't have a single one.
As you'd imagine, many families are clamoring to get their children enrolled in Epidiolex clinical trials. They soon got their wish.
By 2015, 20 separate studies were underway involving 750 children. On average, patients have experienced a greater than 50% reduction in seizures.
Fully 95% of all patients enrolled in clinical trials for this drug have stayed in the program.
That's very significant, because, typically, a combination of toxic side effects and lack of effectiveness leads 20% or more of patients to drop out of trials like this.
But Epidiolex has shown only fatigue (in 17% of patients), diarrhea (17%), and sleepiness (21%) as side effects.
Based on results from several years' worth of promising clinical data, Epidiolex may be approved by the FDA in 2017.
Following approval, GW Pharma will have exclusive sales rights to the drug for seven years in the United States and 10 years in Europe.
Those will be very profitable years.
Right now, GW Pharma is looking to make its treatments available to 466,000 children in the United States who suffer from epilepsy and another 208,000 in key European markets.
These patients currently consume tens of thousands of dollars in epilepsy medicine each year, drugs that barely make a dent in the number of daily seizures they must endure.
GW is also testing Epidiolex in Phase II trials with adult epilepsy patients. That's a far larger market, as there are around 65-million adults with epilepsy worldwide.
Simply put, sales for juveniles alone could be a blockbuster drug launch. Solely based on approval for children with epilepsy, annual sales for Epidiolex may exceed $1 billion five years from now - "official" blockbuster status.
Don't expect the pot pioneers at GW to stop at Epidiolex, either.
This Will Be One of the Most Important Biotechs on Earth
Even as GW prepares to tackle the epilepsy market, its scientists have been testing high concentrations of CBD on patients with:
- Type 2 diabetes;
- Perinatal asphyxia;
- And other types of seizure.
Another non-psychoactive compound, a homolog of CBD known as cannabidivarin (CBDV), is also showing a lot of promise in other areas, including treating certain social and repetition behaviors associated with autism.
In April 2014, the company received the coveted FDA "Fast-Track" designation for Sativex for "the treatment of pain in patients with advanced cancer." The drug had already been launched in 15 countries for the treatment of spasticity caused by multiple sclerosis.
The FDA's Fast-Track program grants a drug maker favorable treatment for the purpose of accelerating the development of a drug that both treats a deadly condition and also addresses an unmet medical need.
Ahead of its first drug hitting the market, GW Pharma is already building the foundation to become a top-tier drug maker.
For instance, it recently hired pharma veteran Julian Gangolli as president of its North America division. Gangolli earlier ran the North American sales operations for Allergan Plc. (NYSE: AGN), a $97 billion drug and medical supplier.
GW plans to hire 50 to 60 experienced sales pros that have a background in the epilepsy market and has already identified the 4,000 to 5,000 U.S. physicians that specialize in epilepsy.
This firm is well-armed to pursue an active slate of drug trials and the buildout of a sales force. It has around $250 million in cash in the bank (as of the end of the second quarter of 2016), and by the end of 2017, it should still have a very sustainable $186 million cash hoard, according to Merrill Lynch.
The success in treating epilepsy will change how the marijuana-based drugs are perceived.
We're incredibly close now, and once the medical community sees how compounds such as CBD, CBDV, and THC deliver much better results than existing treatments, GW Pharma and other cannabis-focused stocks will be no longer be seen as outliers; they'll be must-own stocks, and essential earners in savvy investors' portfolios.
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About the Author
Michael A. Robinson is a 36-year Silicon Valley veteran and one of the top tech and biotech financial analysts working today. That's because, as a consultant, senior adviser, and board member for Silicon Valley venture capital firms, Michael enjoys privileged access to pioneering CEOs, scientists, and high-profile players. And he brings this entire world of Silicon Valley "insiders" right to you...
- He was one of five people involved in early meetings for the $160 billion "cloud" computing phenomenon.
- He was there as Lee Iacocca and Roger Smith, the CEOs of Chrysler and GM, led the robotics revolution that saved the U.S. automotive industry.
- As cyber-security was becoming a focus of national security, Michael was with Dave DeWalt, the CEO of McAfee, right before Intel acquired his company for $7.8 billion.
This all means the entire world is constantly seeking Michael's insight.
In addition to being a regular guest and panelist on CNBC and Fox Business, he is also a Pulitzer Prize-nominated writer and reporter. His first book Overdrawn: The Bailout of American Savings warned people about the coming financial collapse - years before the word "bailout" became a household word.
Silicon Valley defense publications vie for his analysis. He's worked for Defense Media Network and Signal Magazine, as well as The New York Times, American Enterprise, and The Wall Street Journal.
And even with decades of experience, Michael believes there has never been a moment in time quite like this.
Right now, medical breakthroughs that once took years to develop are moving at a record speed. And that means we are going to see highly lucrative biotech investment opportunities come in fast and furious.
To help you navigate the historic opportunity in biotech, Michael launched the Bio-Tech Profit Alliance.
His other publications include: Strategic Tech Investor, The Nova-X Report, Bio-Technology Profit Alliance and Nexus-9 Network.