Welcome to my interview with Scott Chan, chief analyst for Investing in the real world and The complete investor. Scott is an expert at identifying emerging global “megatrends” in investing, and just days before the U.S. midterm elections, I decided it was time to get a sense of … marijuana.
Yes, marijuana. Cannabis mainstreaming is one of the most profitable investment trends you will see in your lifetime. On November 8, proposals to legalize weed will be on five state ballots.
First, a quick word about my colleague Scott (photo).
Scott Chan moved to the United States from China with his family when he was 10 years old. He received undergraduate degrees from New York University, followed by an MBA from the Zicklin School of Business at Baruch College. Scott reads and speaks Mandarin and Cantonese Chinese fluently. My questions are in bold.
Scott, from your perspective, how popular is marijuana legalization with the American public?
Who said Americans can’t agree on anything? According to the latest polls, public support in the United States for marijuana legalization has reached almost 70%, including the majority of Republicans and Democrats.
Given the political divisions in this country, support north of 60% is quite broad. In the United States, the use of cannabis for medical purposes is legal in 38 states. When the November 8 midterm elections are over, we will see legal pot in a few more states, due to ballot initiatives.
Efforts to legalize marijuana federally for medical and recreational use have stalled in Congress. What are the short-term chances of federal legalization?
Hope is not lost. The Democratic-controlled US House of Representatives is sympathetic to the cause. The roadblock, the 50-50 Senate, is currently working on several bills to lift restrictions against pot at the federal level.
Of course, if the GOP takes one or both chambers in the election, pot legalization will face a more difficult road. But states are not waiting for Uncle Sam to act. And in the long term, I would say federal legalization of weed is inevitable.
Regardless of your opinion on recreational use, cannabis has been clinically shown to have medical benefits. There is a lot of money to be made in the field of pharmaceutical cannabinoids, which are drugs derived from marijuana ingredients. Can you suggest a case study along these lines?
Yes I can. GW Pharmaceuticals made history in 2018 when its epilepsy drug Epidiolex became the first cannabinoid to be approved by the United States Food and Drug Administration (FDA).
GW Pharmaceuticals was acquired by Jazz Pharmaceutical (NSDQ: JAZZ) last year for $7.2 billion, a pivotal deal that sent shockwaves throughout the marijuana industry and sparked a wave of consolidation among cannabis companies.
Epidiolex generated over $460 million in sales in 2021. It treats epileptic seizures associated with Lennox-Gastaut Syndrome (LGS), Dravet Syndrome (DS), and Tuberous Sclerosis Complex (TSC).
The drug contains cannabidiol (CBD), which is a purified substance extracted from marijuana, and it has been deemed safe enough by the FDA to be used by even toddlers.
Both LGS and DS are genetic disorders causing epilepsy that usually start showing symptoms in early childhood. They are very difficult to treat, but the use of Epidiolex turns out to significantly reduce the frequency of seizures.
TSC is another genetic disease. It causes non-malignant tumors to grow on the brain or other vital organs, which can lead to seizures, intellectual and behavioral problems, and other serious health problems. Epidiolex helps manage seizure symptoms.
What other major marijuana-related drugs are occupying the pipeline?
Jazz is currently working on treating other disorders with cannabinoids, including schizophrenia and autism. For the price it paid, Jazz will certainly be looking to squeeze more money from GW’s assets.
So far, Epidiolex is the only FDA-approved drug that contains marijuana-derived ingredients, but with ongoing research, there will likely be more such drugs on the market in the years to come.
Additionally, there are two FDA-approved synthetic cannabinoid drugs on the market. This means that they are man-made chemical drugs designed to mimic the effects of real cannabis.
There is Cesamet, owned by Bausch Health (NYSE: BHC), which treats nausea and vomiting in cancer patients caused by chemotherapy.
The second drug, Marinol, is owned by an Indian company Alkem Laboratories, also treats nausea and vomiting caused by chemotherapy. Additionally, it is approved to treat anorexia and weight loss in HIV patients.
It seems that lucrative opportunities in marijuana investing await us.
Oh yes. As Epidiolex shows, cannabinoids derived directly from the plant can be lucrative. It’s almost halfway to $1 billion in sales per year and could very well become a blockbuster (i.e. $1 billion or more).
There are around 30 late-stage clinical trials looking at cannabinoids, so over the next few years we could see an explosion in the market. Note that the most common medical use of marijuana is to manage pain, and so far there is no approved marijuana medicine for pain yet.
So, the marijuana market is not just about planting and supplying the plant. Derivative products, including drugs, are also poised to become billion-dollar opportunities. The time has come for investors to embark on the “green rush”.
Editor’s note: My colleague Scott Chan has just provided you with valuable information on the earning potential of marijuana.
On November 1, I’m hosting a special investment town hall called “The Marijuana Millionaire Countdown.”
As the U.S. midterm elections loom on the calendar, I’ll explain why federal legalization of marijuana is inevitable…and why so many states are on the verge of creating new legal markets.
The state’s new legal markets equal new growth for well-positioned marijuana companies. Now is the time to invest in marijuana stocks, before political catalysts propel them higher.
During my online Town Hall, I will reveal the one simple marijuana trade that could dump tons of money into your brokerage account, before midterm votes are even counted.
There’s still time to jump on board for this event, which after November 1st will be archived for easy 24-hour access. Click here to get your free spot!
John Persinos is the editorial director of Invest daily.
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