Cannabis stocks were mostly higher Thursday, as investors digested the latest earnings reports from the sector and comments from the head of the U.S. Food and Drug Administration on plans for regulation of CBD.
FDA Commissioner Scott Gottlieb said public meetings will be held sometime in April to hear from relevant parties on how best to regulate CBD derived from hemp, which was legalized in December in the 2018 Farm Bill. The FDA is now responsible for regulating CBD, a non-psychoactive ingredient in cannabis that was not included in hemp legalization because of a lack of research into its longer-term effects on human health.
CBD is widely held to have wellness properties and many cannabis companies are planning to launch food, drinks and cosmetics that contain it, but the FDA has said they cannot do so without its prior approval. Gottlieb told a hearing before a House Appropriations subcommittee that the FDA will form a working group of experts to inform him on regulatory options for the substance, as reported by Marijuana Moment, a website that works with activists, industry representatives and policy makers on trends affecting cannabis.
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“I understand Congress wants there to be a pathway for CBD to be available,” he said, although he added that it was “not a straightforward issue.” The FDA has already approved a CBD medication aimed at treating a very severe type of childhood epilepsy, but that was based on traditional clinical trials, a lengthy and expensive process that companies would prefer to avoid.
Gottlieb posited that the FDA could devise a model under which CBD in high concentration would remain a pharmaceutical product, while CBD in a smaller concentration could potentially be added to food or used as a dietary supplement. That separation is needed because “we want to preserve the incentive to study CBD as a pharmaceutical product,” Gottlieb said.
The commissioner conceded that the federal ban on cannabis is sending medical cannabis research overseas. The epilepsy drug, epediolex, was developed by U.K. company GW Pharma, which has the ability to use its government license to grow cannabis specifically for drug research and development.
Also on Thursday, the Marijuana Justice Act was reintroduced in Congress, allowing lawmakers to consider policy reform that would end the current federal ban on cannabis and eliminate federal criminal penalties for possession, cultivation, manufacture, import and export of cannabis.
“Hopefully this legislation will get the serious consideration it deserves,” said Aaron Smith, executive director of the National Cannabis Industry Association, in a statement. “The country is ready and eager to move past prohibition, start addressing the impact it has had on marginalized communities, and explore the economic potential of replacing criminal markets with regulated small businesses.”
Among individual stocks, MedMen Enterprises Inc. shares MMNFF, -2.31% were down 2.7%, after the company’s second-quarter loss widened from the year-earlier. Revenue rose to $29.9 million from $3 million in the year-ago period. On its earnings call, new Chief Financial Officer Michael Kramer said he had imposed a corporate spending freeze a few weeks ago, a move welcomed by analysts.
Canopy Growth Corp. shares CGC, -0.76% WEED, +0.24% rose 4.6%. The company said it has signed up a new partner in homemaking guru Martha Stewart, who will act as adviser to develop a new line of CBD-related products. Stewart already has a TV cooking show with cannabis advocate and rapper Snoop Dogg.
John Torrens, professor of entrepreneurial practice at Syracuse University’s Whitman School of Management, said celebrity endorsements of cannabis should send a strong signal to investors that the substance is gaining mainstream credibility at a fast clip.
“This move by Canopy Growth advances the initiative to build brands in this space,” Torrens wrote in emailed comments. “CBD and other phytocannabinoids have many applications for health and wellness and we are just seeing the tip of the iceberg in terms of what will be available in the next few years. This market is ready to explode.“
Canopy has committed to investing $100 million to $150 million in a hemp industrial park in New York state that aims to be the first such facility in the U.S.
Elsewhere in the sector, Cronos Group Inc. shares CRON, +0.32% CRON, +1.54% rose 2.6%, Aphria Inc. APHA, -2.12% was up 3.1%, Tilray Inc. TLRY, -2.21% gained 2.6% and Hexo Corp. HEXO, -0.53% rose 1.2%.