Epidiolex: One Drug to Push Marijuana Biotech Stocks Even Higher…

A Historic FDA Decision

When I talk to people about cannabis-related drugs, they either roll their eyes or else wink in a knowing way. No one takes it seriously. However, one drug in the U.S. Food and Drug Administration (FDA) pipeline could change that completely—it is called the “Epidiolex” drug.

Made by GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH), Epidiolex carries the fate of all other marijuana-related drugs on its shoulders. You might remember that marijuana is bizarrely classified as a Schedule 1 drug under the Controlled Drugs and Substances Act, meaning that cannabis companies have to cut through a lot of red tape.

Epidiolex found a tiny loophole.

It uses cannabidiol (CBD), a marijuana extract that helps with pain, rather than THC, a marijuana extract that gets you high, in order to create the drug.

GW Pharma hoped this semantic difference would help Epidiolex avoid legal challenges at the federal level. And guess what. It’s working. A committee within the FDA unanimously recommended that Epidiolex receive the rubber stamp, which means that you might see it at a drug store near you.

So what, you ask? Well, consider the implications.

Gaining FDA approval on a new drug would obviously benefit GW Pharma stock, because it gives the company an added source of revenue. Anyone can see that. But what’s even more important is the precedent set by Epidiolex. It gives the green light to other CBD oil companies, allowing them to submit their rival drugs for FDA approval without fear of rejection.

The takeaway: In a direct, tangible way, this is good news for all marijuana biotech stocks.

Jeff Sessions vs. Marijuana Biotech Stocks

For decades, the U.S. government has insisted that marijuana is not a legitimate form of medicine, despite an avalanche of studies that say otherwise. It’s like the Justice Department wants to deny everything we know about cannabis. For instance:

• We know marijuana is less addictive than cigarettes.
• We know it’s less harmful than cigarettes.
• We know it’s less destructive (to society) than alcohol.
• We know the “War on Drugs” is an utter disaster.
• We know Americans incarcerate more citizens per capita than any country on Earth, including authoritarian regimes like China and Myanmar.

Despite the overwhelming arguments in favor of marijuana legalization, the federal government continues to keep it in the shadows of commerce. Why? The Pew Research Center shows that 61% of Americans think marijuana should be legalized, up from 31% in the early 2000s. (Source: “About six-in-ten Americans support marijuana legalization,” Pew Research Center, January 5, 2018.)

So, it’s clear that public opinion isn’t a roadblock. State governments and the business community are on board as well.

States like Colorado and Oregon acted quickly on this shift in public opinion, holding referendums to justify their moves toward legalization. Once those states pulled in billions from marijuana licensing fees, other states saw the light.

They realized weed legalization could help raise tons of cash, and, by extension, plug holes in their annual budgets. Plus cannabis royalties could ease the financial burden placed on their correctional facilities, so it’s a double win for those governments.

Ultimately, there’s only one thing holding back marijuana legalization: Attorney General Jeff Sessions.

As the head of the Justice Department, Sessions has broad control over marijuana enforcement actions. He used these powers to reverse the “Cole Memo,” a decision by his predecessors to ignore weed distribution in states that legalized marijuana.

Put another way, he singlehandedly decided that federal law is more important than state law.

Analyst Take

FDA support for Epidiolex might give marijuana biotech stocks a way around Jeff Sessions.

After all, if the “drug-like” properties of marijuana are removed and the “medicinal” properties remain, then CBD-based drugs are no different from all other pharmaceuticals.

This could have a profound impact on GWPH stock.

We might see shares explode to the upside. Heck, I wouldn’t be surprised to see a $200.00 price tag on GWPH stock if the FDA follows through on its commitment. And what’s more, I think other marijuana biotech stocks would be close behind.