The search for COVID-19 vaccines and therapies has understandably taken center stage this past year, but some market-leading biotech firms have nevertheless applied heavy intellectual and scientific firepower to unlocking the potential locked up inside the cannabis plant.
To be perfectly clear, I'm not talking about medical marijuana - the use, fully legal in 46 U.S. states and four territories, of marijuana "flower" or concentrates to treat a host of ailments.
I'm talking about biotech companies developing conventional drugs derived from the galaxy of beneficial compounds found inside cannabis. Statista estimates that these drugs, both existing and yet to be discovered, could be worth $50 billion by 2029.
Biotech and cannabis have both crushed the market recently, so it makes perfect sense for investors to put themselves smack in the middle of the "intersection," so to speak. The SPDR S&P Biotech ETF (NYSEArca: XBI) is up nearly 130% in 11 months, while the AdvisorShares Pure U.S. Cannabis ETF (NYSEArca: MSOS) has nearly doubled since its September 2020 debut.
There's one innovative company that puts you right at that intersection, but there's a catch: It was recently bought. The deal hasn't closed yet, but there may only be a few weeks left to grab these specific shares before the next lucrative stage begins.
And when it comes to $50 billion megatrends, you don't want to be left behind...
The Smartest Play in Cannabis Pharmaceuticals
AbbVie Inc. (NYSE: ABBV) holds the most cannabis patents, with some 59 at last count. But back in 2019, AbbVie made a $10 million deal with Mumbai, India-based Alkem Laboratories Ltd. to sell its groundbreaking anti-nausea cannabinoid, marinol. The sheer number of cannabis patents AbbVie holds make it a tempting target, and AbbVie could very well move back into cannabis pharma research, but it's simply not a cannabis biotech at the moment.
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The truth is Cambridge, England--based GW Pharmaceuticals Plc. (NASDAQ: GWPH) is the undisputed leader of cannabis-focused biotechs. GW is actually the oldest cannabis pharma company operating today; back in the late 1990s, it was the very first firm to apply for and receive a United Kingdom government-issued license to grow, possess, and transfer marijuana; for years it was the only firm to have one.
No surprise then that in 2010, GW Pharma was the first company in the world to receive full regulatory approval for a cannabis-derived medicine, Sativex (nabixmols). Sativex is delivered by mouth, as a spray, to treat a range of debilitating symptoms of multiple sclerosis. Since GW Pharma inked distribution and marketing deals with Bayer and Novartis, Sativex is available to patients in 28 countries around the world.
GW didn't stop there. Just a few years ago, it brought an approved cannabinoid epilepsy treatment, Epidiolex, to market in the United States. Epidiolex is, at the U.S. federal level, currently the only legal formulation of cannabidiol, or CBD. (Though, as we've talked about before, federal legalization is closer than ever.)
Since its shares were listed on the Nasdaq in the middle of the last decade, GW Pharma has really moved from strength to strength; setbacks have been few and far between, to the point where, in less than 10 years, its U.S.-listed stock is up more than 1,000%.
As CEO Justin Gover said on a recent conference call, its early-, mid-, and late-stage pipelines are shaping up nicely.
Here's Where GW Pharma Is Going
Currently, the company is targeting U.S. Food and Drug Administration (FDA) approval for its Sativex medicine, which it hopes to clinch by the middle of 2021. This approval is absolutely critical to GW Pharma's next round of growth.
Epidiolex and (global) Sativex sales helped the firm rake in nearly $526 million in revenue in 2020. One hundred and twenty-nine million dollars of that came from Epidiolex sales in the United States, and it's reasonable to expect a just as good or better performance should Sativex gain approval here.
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On the drug development front, GW is recruiting for a phase 2B study of a proprietary CBD formula for treating schizophrenia. The company is in placebo-controlled clinical trials for a cannabinoid aimed at improving the lives of folks with autism. Tantalizingly, GW is hoping to push a cannabis-derived "new chemical entity" or NCE forward into phase 1 trials; it's playing those cards close to the vest, of course.
Considering all of this, it's no wonder Dublin, Ireland-based Jazz Pharmaceuticals Plc. (NASDAQ: JAZZ) agreed to snap up GW Pharmaceuticals for a cool $7.2 billion in cash and stock. The move is a win-win-win - a plus for JAZZ shareholders, great for GWPH shareholders, and the move is particularly shrewd for Jazz. The company is edging closer and closer to the dreaded "patent cliff" with its Xyrem (sodium oxibate) narcolepsy drug, and acquiring GW Pharmaceutical's portfolio and stuffed pipeline of lucrative cannabinoids will go a long way toward easing the patent cliff's impact.
GWPH shares have skyrocketed since news of the Jazz takeover, but there are still, at most, a few months left to pick up GWPH shares and reap some upside before Jazz snaps up all the stock and GW Pharma stockholders get paid or get Jazz shares.
To be clear, I don't think this acquisition is the end of the story when it comes to cannabis biotechs. Quite the contrary: With Epidiolex and Sativex, Jazz is acquiring what will in all likelihood become "blockbuster," $1-billion-in-revenue-per-year drugs over the next five years, which would ultimately make it a savvy cannabis biotech play in its own right. But either way, it's clear that the future of cannabis-derived medicine starts right now.
Cannabis is perhaps the ultimate "big tent" sector, with potential to suit every investing style. Biotech is just one small part of it; there are cultivators, retailers, multi-state operators, geneticists, and even real estate plays. You can go right here to learn how to join the National Institute for Cannabis Investors and how to access our dossier on the three best cannabis investments to make in 2021 - there's a lot more, too.
About the Author
Don Yocham is Executive Director for the National Institute of Cannabis Investors (The Institute) and Director of Cannabis Investing Research for Money Map Press. Before starting his role with the Institute, he was the Head of Private Deals for the publication Cannabis Venture Syndicate. From his first foray into the trading pits of Chicago to introducing institutional investors to entirely new markets in the early 2000s, Don has pretty much covered the entire field of investing in his 25-year career. In the depths of the financial crisis, when the typical investor had lost more than half of their money, his portfolios were up.