Pharmaceutical companies have six cannabis related drugs in various stages of clinical trials and the FDA approval process. The bulk of positive results from the extensive research is further evidence that cannabis does have medical value.
Some of the evidence is circumstantial as it comes from research on drugs related to two of the main ingredients in marijuana and not on the use of the herb itself.
GW Pharmaceuticals plc (NASDAQ: GWPH) is a leading biopharmaceutical company that develops cannabinoid prescription medicines using botanical extracts derived from the Cannabis plant. The company has two drugs seeking approval from the FDA.
Epidiolex is a proprietary oral solution of pure plant-derived cannabidiol or CBD. GW’s development program concentrates on treatment-resistant epilepsy syndromes including Lennox-Gastaut syndrome, Dravet syndrome, Infantile Spasms, and Tuberous Sclerosis Complex. Epidiolex is the first drug based on CBD.
The Company recently announced the US Food and Drug Administration (FDA) has agreed to a Priority Review of GW’s New Drug Application (NDA) for Epidiolex. The NDA is for its use as a treatment for seizures associated with Lennox-Gastaut syndrome and Dravet syndrome. The estimated date for completion of the FDA review of the Epidiolex NDA is June 27, 2018.
Analysts expect that Epidiolex treatments at the cost of up to $50,000 per year could produce annual revenue of more than $1 billion. These forecasts depend on how the Drug Enforcement Administration (DEA) schedules Epidiolex and how the FDA deals with the conflicts between classifying cannabidiol as a prescription drug and the more than $200 million CBD oil business that sells it either as an herbal supplement or a medical marijuana product.
Anecdotal evidence of CBD’s effectiveness in reducing infantile seizures has parents leaving states that do not allow CBD sales to resettle in states that do. The battle between the expensive prescription drug and the affordably priced over-the-counter CBD products will be an additional front in the war between the federal government and cannabis activists.
Sativex is another drug from GW Pharmaceuticals. Sativex is an oral spray containing CBD and THC in a 1:1 ratio. Sativex is in use for the treatment of spasticity due to Multiple Sclerosis in 30 countries including Canada, Germany, the United Kingdom, and Switzerland. It is not currently available in the U.S.
GWPH is the largest of the direct cannabis pharmaceutical stocks, and one of the most recommended investment plays. GWPH has a market cap of $3.4 billion and trades slightly below the 5-year high of 135.62 set on Dec 22, 2017.
GWPH has no P/E ratio as it consistently operates at a loss. The stock price is a total bet on drug approval and future revenue potential. GWPH faces a possible crude awakening if a competing non-cannabis drug from Zogenix, Inc. (NASDAQ: ZGNX) clears trials and obtains FDA approval. Fortunately for GWPH, it has at least a couple of years head start.
Cannabidiol Oral Solution
Insys Therapeutics Inc (NASDAQ: INSY), the maker of the FDA-approved synthetic THC drug Syndros, is developing a Cannabidiol Oral Solution (COS). The COS product is in stage 2 trials for the treatment of childhood epilepsy and infantile spasms.
The company recently received Fast Track from the FDA for using the drug to treat the genetic disorder Prader-Willi syndrome. Stage 1 trials are to begin this year, so final approval is years away.
Dronabinol For Inhalation
Insys is a developing an inhalation delivery system for dronabinol (THC). We will skip the obvious jokes.
The inhalable dronabinol product is in the pre-clinical stage and a few years away from possibly be becoming a salable product.
The buzz around INSY comes from its developing line of cannabinoid-based products, but the reality is that INSY is primarily a marketer of opioid drugs. INYS’s marketing of its spray fentanyl drug, SUBSYS, has gotten the company into a pile of trouble. People heralding INYS probably have not read the 10-K filing.
INYS most recent 10-K discloses a vast number of lawsuits against the company. The company has set aside $150 million to cover its anticipation of adverse verdicts. There is a possibility that this is an insufficient amount.
INYS’s 10-K shows that it is under investigation by the Department of Justice (DOJ).
INYS is a money-losing company with declining revenues. You need to give some serious thought before investing in this stock. Better alternatives with less legal risk exist.
Zynerba Pharmaceuticals, Inc. (NASDAQ: ZYNE) is developing a CBD Gel with the working name of ZYN002. The pitch for the drug’s uniqueness is its patented gel-based transdermal delivery of pharmaceutically-produced CBD bypasses the digestive system for faster and safer absorption into the bloodstream. The CBD in ZYN002 is synthetic and not derived from the cannabis plant.
The FDA has given ZYN002 Orphan Drug Designation for the treatment of patients suffering from Fragile X syndrome. Orphan Drug Designation speeds up the processes leading to FDA approval but does not guarantee approval.
ZYN002 has completed phase 2 trials for Fragile X syndrome. It is in phase 2 trials for the treatment of Adult Refractory Focal Epilepsy, and Epileptic Encephalopathies.
THC Pro-Drug Patch
Zynerba’s ZYN001 is a patch to deliver a time-release synthetic THC into the bloodstream. A Pro-Drug is an inactive form a drug that converts into a more active form through natural metabolic processes.
ZYN001 is for the treatment of neuropsychiatric disorders including Tourette Syndrome. The drug is only in phase 1 trials. Upon approval, Zynerba will need to prove that their transdermal delivery systems provide superior results to any medical marijuana products available without a prescription.
ZYNE is a small pharmaceutical research company with a market cap of only $150 million. The stock is trading in a sideways pattern with no prospect of breaking out until there is new positive news concerning higher levels of trials or drug approval.
Non-cannabinoid drugs are being developed to treat the same diseases. Approval of any of these medicines would weigh heavily on the stock price.
On the upside, Zynerba does not have any legal baggage to tote around. The trendiness of cannabis has few other pharmaceutical options suitable for investment.
A few other small companies are in the very early stages of researching other drugs based on cannabinoids, but they are many years removed from entering the market.
All the current drugs in advanced stages of development are based on the two primary cannabinoids, THC and CBD. Cannabis contains almost 100 other cannabinoids ripe for research.
Regarding the medical use of marijuana, there would not be all this smoke if there was no fire.
Disclosure: The author has no direct investment in GWPH, INSY, ZGNX, or ZYNE. The author may have an indirect stake in GWPH, INSY, ZGNX, or ZYNE through ownership of shares of the Fidelity Select Biotechnology Portfolio (FBIOX).