A Biotech Future for Marijuana?

It is often thought that the economic future for recreational marijuana is relatively limited. The people who use it for fun will eventually move from the black market to the legal market and perhaps into other forms of consumption, but the absolute number will not necessarily increase.

Marijuana’s pharmaceutical future, on the other hand, is a largely unexplored world. Research has been stymied in the U.S., but tantalizing clues hint at great potential for both medicine and investors.

Chemistry 101

The chemistry of cannabis was largely unexplored until 1964 when Israeli scientists Raphael Mechoulam, Yechiel Gaoni and Habib Edery first isolated THC.

THC is only one of what we now know to be between 80-100 cannabinoids in marijuana. They have the effects they do on human beings because of our unique cannabinoid receptors in the brain and immune system. The existence of these natural receptors also appears to reduce the risk of side effects, like respiratory or cardiovascular failure that may be caused by other therapeutic drugs.

For all their variety, cannabinoids fall into three basic types: endogenous cannabinoids produced in the bodies of humans and animals, synthetic cannabinoids produced in the laboratory and herbal cannabinoids that occur uniquely in the plant.

Synthetic Cannabinoids

Most of the biotech development to date has involved synthetic cannabinoids. Marinol, a product of Solvay Pharmaceuticals (SOLB), contains synthetic Dronabinol. The drug was first approved by the FDA in 1985 for treatment of nausea and vomiting in chemotherapy patients. Insys Therapeutics (INSY) now markets a generic equivalent to Marinol. Only synthetic Dronabinol has been rescheduled as a Schedule III drug under the Controlled Substances Act.

Herbal Cannabinoids

Drug development based on herbal cannabinoids has been slow in the U.S. largely because of the scheduling issue and reluctance of the National Institute on Drug Abuse to approve research studies. A great deal of the current dispensary-based knowledge about the uses and efficacies of various strains has been the product of popular trial and error, a potentially dangerous and irreproducible way to approach science.

To date, medical research has been largely the province of GW Pharmaceuticals (GWPH), a British company, listed on both the NASDAQ Global Market and AIM, a market of the London Stock Exchange.

Its two signature products, Sativex and Epidiolex, actually begin with cannabis plants, carefully selected and genetically manipulated to maximize production of the desired compound.

Sativex, which contains THC and CBD, is used for the treatment of spasticity in multiple sclerosis patients. It has been approved for use in 27 countries and is currently in FDA-approved Phase III clinical trials in the U.S.

Epidiolex, the major component of which is CBD, is not FDA approved but has been recently granted orphan drug status, which may expand patient access.

Other biotech companies being watched by marijuana investors include Abattis Bioceuticals (ATTBF) and Nemus Bioscience (NMUS). Abbatis, a Canadian company with a controlling interest in Phytalytics, a Washington laboratory, is working to improve controls around testing of strains for specific diseases and medical conditions. Nemus, a Nevada corporation, has an exclusive partnership with the University of Mississippi to grow marijuana for the development of various medical products.

Biotech investors are eyeing marijuana with increasing interest, but the development of research in the U.S. depends in large part on legal reform. Until then, U.S.-based partnerships with overseas companies may be the best alternative.

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