Like many issues, Donald Trump has been all over the map on the legal marijuana question.
Way back in 1990, the president-elect said the United States needed to legalize all drugs and use the tax revenue to educate Americans about the dangers of drugs. (He may have been joking.)
[ad#Google Adsense 336×280-IA]More recently, he’s been hesitant on legal recreational marijuana but bullish on the medical kind.
“In terms of marijuana and legalization, I think that should be a state issue, state-by-state,” Trump recently told reporters. “Marijuana is such a big thing. I think medical should happen – right? Don’t we agree? I think so. And then I really believe we should leave it up to the states.”
Whatever Trump’s opinion, the overwhelming “Yes” vote on Nov. 8 just unleashed a tsunami of cash.
That tsunami is heading in the direction of marijuana companies – and in the direction of those companies’ investors.
Already, one of those medical “pot stocks” is starting to pull ahead of the pack.
That’s because it’s clear that Trump’s position on medical marijuana will boost the fortunes of companies that are working on marijuana-derived pharmaceuticals. Companies just like this one.
And you could boost your own fortune with it.
Here’s how…
The One Pharma Stock to Play the Medical Marijuana Market
Study after study has shown that up to two dozen medical conditions could be treated with marijuana.
Its two key ingredients, cannabidiol (CBD) and 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 why voters and legislators have approved medical marijuana across the United States and in many countries around the world – including voters in four states just over a week ago.
The legal market for medical marijuana exceeded $4 billion last year and will likely be a $10 billion industry within a few years, according to ArcView Market Research.
And the company I want to show you now is one of the prime players in this hot sector: GW Pharmaceuticals Plc. (Nasdaq ADR: GWPH).
This UK biotech firm manufactures pain drugs using compounds present in cannabis. GW Pharma has developed a multiple sclerosis treatment and has another drug in the works to treat children with severe epilepsy.
Just a few months ago, GW raised $252 million in funding, with Morgan Stanley, Bank of America Merrill Lynch, and Goldman Sachs serving as underwriters.
GW has a great head start in the race to build drug franchises around the healing powers of cannabis…
The Fight Against Epilepsy
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 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.
For the 3 million epilepsy sufferers in the United States (and the 62 million sufferers worldwide), relief from 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. 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 were 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. You see, 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 users have suffered only fatigue (in 17% of patients), diarrhea (17%), and sleepiness (21%) as side effects.
Based on results from several years of promising clinical data, Epidiolex may be approved by the U.S. Food and Drug Administration in early 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.
Right now, GW Pharma is looking to make its treatments available to 466,000 American children who suffer from epilepsy and another 208,000 in key European markets.
These patients now 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 2 trials with adult epilepsy patients. That’s a far larger market, as there are around 65 million adults with epilepsy worldwide.
Simply put, this 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…
The Fight Against Pain
Even as GW prepares to tackle the epilepsy market, its scientists have been testing high concentrations of CBD on patients with schizophrenia, Type 2 diabetes, perinatal asphyxia, and other types of seizure.
A variant of CBD, known as CBDV, is also showing a lot of promise in other areas, including treating certain social and repetition behaviors associated with autism.
In April 2014, GW Pharma 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. It recently hired Julian Gagnolli as president of its North America division.
Gagnolli earlier ran the North American sales operations for Allergan Plc. (NYSE: AGN), a $97 billion drug and medical supplier.
[ad#Google Adsense 336×280-IA]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 should still have around $186 million in cash by the end of 2017, according to Merrill Lynch.
The success in treating epilepsy will change the way marijuana-based drugs are perceived.
A New Way of Seeing
Once the medical community sees how key ingredients such as CBD or THC deliver better results than existing treatments, GW Pharma and other cannabis-focused stocks will be no longer be seen as outliers.
With a roughly $3 billion market cap, this pharma stock trades at $123.81 and is priced to move.
Since the Nov. 8 election, shares of GW Pharma have already made peak gains of nearly 16%.
And over the past three years, the company’s share price has rocketed from $8.50 per share in 2013 to more than $137 earlier this month – an increase of 1,500%.
GW Pharmaceuticals is losing money as it pours cash into research and development, but its real value lies in the trials currently underway. The odds of Epidiolex and/or Sativex emerging as blockbuster drugs are high.
And that would send the stock soaring much, much higher. So, if you’re building a well-rounded Singularity Era portfolio, GW Pharma is a clear choice to anchor the “How We Thrive” portion.
— Michael A. Robinson
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Source: Money Morning