Finding a marijuana penny stock with the potential for gains of 1,000% is nothing short of an investing "holy grail."
Returns like that - 10 times your initial investment - are rare. But it does happen, and in some sectors, it's more likely than in others.
One of those sectors is biotech. And the marijuana penny stock I’m talking about happens to be a biotech with a lot of potential.
Don't be surprised if you haven't heard of it. Unlike many other pot stocks, it has remained under the radar despite the intense interest in marijuana-related investments these days.
Maybe that's because it's so tiny right now. It's a micro-cap stock with a market cap of just $48 million. It has no products, no revenue, and no earnings.
And yet, I believe this penny stock has a solid chance to rocket much higher. As I'll explain shortly, it has several advantages that in time will have it punching above its weight.
Did You Miss It? Former Speaker John Boehner just joined the cannabis industry's biggest players to cover everything you need to know about America's next unstoppable economic revolution. Watch the rebroadcast...
We've spotted these kinds of opportunities before, and they've delivered some extraordinary profits...
How Picking the Right Biotech Stock Can Pay Off
We have a knack here at Money Morning for picking biotech winners.
In March 2014, Money Morning Defense and Tech Specialist Michael A. Robinson recommended a name that pot stock investors should recognize - GW Pharmaceuticals Plc. (NASDAQ: GWPH) - even though it had already soared 65%.
While steering Money Morning readers away from five "pretender" marijuana-based biotech stocks, Robinson praised GW Pharma's drug pipeline and partnerships with large drug firms.
"With its solid science, multiple uses for its main cannabis-based biotech product, and strong alliances with global drug leaders, GW Pharmaceuticals should leave investors richly rewarded," Robinson wrote.
When that article was published in Money Morning, GW Pharmaceuticals closed at $60.26 a share. Today GWPH is trading at about $143, for a gain of 137%. But just a month ago, the stock reached a high of $179.65 - an increase of nearly 200% from where Robinson recommended it.
Money Morning Executive Editor William Patalon, III, who writes the daily Private Briefing column, has several great calls on several other small biotechs.
In April 2012, he recommended Pharmacyclics Inc. to his readers, suggesting that the company was a prime takeover candidate. When pharma giant AbbVie Inc. (NYSE: ABBV) bought Pharmacyclics in March 2015 for $21 billion, subscribers who heeded his advice pocketed a stunning 818% gain.
And Patalon's very first Private Briefing pick in August 2011, Galapagos NV (NASDAQ: GLPG), has increased more than 1,100% (from $8.60 to $105) since he recommended it. (When GLPG hit an all-time high last month, it was up nearly 1,300%.)
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Earlier this month Patalon interviewed the CEO of the company and was very impressed with what he heard.
Not Your Garden-Variety Marijuana Penny Stock
The biotech stock I’m talking about is Nemus Biosciences Inc. (OTCMKTS: NMUS). And the CEO is Dr. Brian Murphy, whose credentials are first-rate – a key component for a biotech with lofty goals.
He has more than 15 years of experience in drug development and evaluation, having served as Chief Medical Officer of Eiger Biosciences, and prior to that, Valeant Pharmaceuticals International. Dr. Murphy also served as Medical Director, then Vice President of Marketing and Commercial Strategy of Hepatology for InterMune Inc. And before that he was Medical Director of North America for Antivirals/Interferons at Hoffmann-LaRoche (OTCMKTS: RHHBY). He has an MPH (Master of Public Health) from the Harvard School of Public Health and an MBA from the Columbia University Graduate School of Business.
As a biotech veteran, Dr. Murphy knows only too well what the widespread legalization of cannabis could mean to the pharmaceutical industry.
"When you're dealing with cannabinoids, I would say that this is really a once in a generation opportunity, both from the researcher perspective and from the investor perspective," Dr. Murphy said in his interview with Patalon.
Dr. Murphy also noted that research in cannabinoid-based drugs figures to take less time than typical drug research where 10 years is often the norm before a compound reaches the market.
"This is a class of drugs that has been studied since the 1960s," Dr. Murphy said. Decades of scientific investigation means that researchers already know a great deal about how cannabinoid compounds react with the human body - information that would otherwise take years to collect.
Dr. Murphy also pointed out that several cannabinoid drugs have previously won regulatory approval (one of which, Cesamet, he worked on while at Valeant), both in the United States and the European Union. This provides a regulatory "road map" for the kind of cannabinoid-based drugs Nemus hopes to bring to market.
In Dr. Murphy, Nemus already has an expert "insider" who knows how to navigate the often treacherous waters of biotech.
The company also has forged a partnership with the University of Mississippi, which operates a world-class cannabis research program. In fact, the university (with Nemus) is the only U.S. entity permitted to grow cannabis for research - quite an advantage.
It gets better. The Nemus licensing agreement with the University of Mississippi covers certain compounds they create together and grants the company "worldwide exclusive access in perpetuity" - giving the company a leg up in regard to patents.
And if that wasn't enough, Nemus' carefully thought-out strategy and strong drug pipeline offer even more compelling evidence that this penny stock will make early investors rich...
The Nemus Bioscience Path to Blockbuster Returns
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Perhaps the biggest key to success for any new biotech is financing. The company must be able to survive long enough to get its first marketable drug out the door.
In its early years, Nemus had little trouble securing venture capital, including $2 million of Series F preferred stock financing last November.
But earlier this month, Nemus scored a major financing deal with Emerald Health Therapeutics (OTCMKTS: EMHTF) that will go a long way toward carrying the company to the debut of its first drug. Emerald, itself a producer and seller of cannabis, set up a $20 million credit facility for Nemus, which doesn't mature until October 2022 and committed to buying up to 10 million shares of NMUS stock in the open market.
That money will help Nemus bring its first drug, the very promising glaucoma-treating NB1111, to market.
It's long been known that marijuana is effective in treating glaucoma, but previous efforts to create a specific eye drop--based treatment have failed. Nemus has developed new compounds to change the equation.
These new compounds are what set Nemus apart, Dr. Murphy said. The company isn't just extracting compounds from marijuana, but reengineering them.
That's a step beyond what even successful cannabis biotechs like GW Pharma are doing, he said.
In testing on rabbits, Dr. Murphy said N1111 has shown the ability to overcome previous stumbling blocks, such as keeping the THC localized to the eye as well as keeping the drug active there for longer periods of time than is possible for patients who smoke cannabis.
The drug is targeted at a very large market...
This $8 Billion Market Is Just the Beginning
"There are roughly 37 million prescriptions written a year just in the United States," Dr. Murphy said. "The market in the United States for glaucoma is approaching $3 billion. Globally, the market is expected to reach roughly $8 billion by the early 2020s."
This drug is expected to enter human trials early next year. Should it succeed and ultimately win FDA approval, N1111 would help finance the other drugs in the Nemus pipeline.
Two of the other four drugs Nemus is developing are aimed at much bigger markets. NB2111 has the potential to produce cannabinoid-based analgesics that would address the $30 billion global pain market.
And NB2222 could evolve into treatments for a range of ocular diseases, from dry eye syndrome to macular degeneration - a $22 billion market.
Drugs like these will turn Nemus into a profit powerhouse. That could translate to the big gains I've been talking about. Trading at just $0.36 a share, only one or two successful drugs could easily push NMUS shares up by a factor of 10 or more.
Nemus could also become a takeover target. With older patents expiring, Big Pharma has been on a mission to snap up biotechs like Nemus to gain sources of new profits.
Still, Nemus is a very young company, and something could go wrong. So don't go overboard snapping up NMUS shares.
This is the sort of play Money Morning Chief Investment Strategist Keith Fitz-Gerald refers to as a "rocket rider." These are higher-risk stocks with a great deal of potential. Fitz-Gerald recommends that investors keep this class of stocks to no more than 10% of your total portfolio.
An investment in Nemus would be a portion of that 10%, so you want to invest much less than that - something in the 1 to 2% range. And stay patient!
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About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.