For many investors looking at marijuana stocks, the name of the game is consumerism. The play is betting on legalization and growing recreational consumer use. It’s the reason why marijuana stocks like Canopy Growth (NYSE:CGC) surged on its partnership deal with Constellation Brands (NYSE:STZ). And there is a good reason to be bullish, recreational cannabis usage has the potential to be a multi-billion market over the next decades as more consumers jump onboard.
However, there may be a bigger play for investors when it comes to pot stocks. And that’s in cannabis medicine.
While medical marijuana usage isn’t new, deriving new drugs from cannabis is and there are now several biopharma’s looking into doing just that. The potential here is just as great as the consumer side. Perhaps even more so. According to research by BDS Analytics, the global medical marijuana market is projected to more than double from 2018 levels in just four short years. Cannabis medicine will be a big driver of that. Investors today have a huge runway of potential ahead of themselves.
However, the medical marijuana sector isn’t without risk. You basically are combining clinical-stage biotech investing with the volatility of marijuana stocks. But the rewards could be great.
If you have some risk capital to play with, the following three medical marijuana stocks could worth your while.
GW Pharmaceuticals (GWPH)
If you’re going to bet on the future of cannabis medicine, why not go with a sure thing. While there are many biotech firms fighting to use cannabis in their drugs, only GW Pharmaceuticals (NASDAQ:GWPH) has one approval under its belt.
Getting any drug through the Food and Drug Administration is an amazing feat and about a year ago, GWPH managed to score an approval for its cannabinoid-based drug Epidiolex. The treatment is used to prevent seizures associated with Lennox-Gastaut syndrome or Dravet syndrome.
Back in November, the drug was officially launched and so far, it has been quite successful for GWPH. During the firm’s reported first quarter, GWPH managed to see Epidiolex sales of $33.5 million. That was more than double analysts’ estimates. This puts sales on pace to rake-in more than $150 million this year. Again, that’s well above initial analyst estimates. The firm will report its next round of sales figures at the beginning of August.
And the blockbusters could keep coming for GWPH. Phase III trial data for Epidiolex and seizures associated with tuberous sclerosis complex (TSC) have recently come in extremely strong. Given the statistical significance of the data, GWPH is looking at another approval for the drug very soon. That could only boost revenues further.
Now, shares of GWPH stock are up around 60% year-to-date. But given its long-term potential and overall sales, more gains could be in store. Average analyst targets are about 37% high than its current share price.
Cara Therapeutics Inc (CARA)
Also surging around 60% this year has been marijuana stock Cara Therapeutics (NASDAQ:CARA). However, unlike GWPH, CARA’s rise has all been about the potential for approval.
CARA is going after chronic kidney disease-associated pruritus (CKD-aP). Pruritus is a fancy way of saying pain and itching. But for those who suffer from the issue, it can be pretty debilitating. And right now, there isn’t a treatment for this instance of the problem. The reason for the investors’ enthusiasm is that CARA has been able to see some big initial results from Phase I trials for its drug Korsuva. Phase III trials for the drug should wrap up later this year and given the results so far, CARA could be looking at an approval.
That could be big news for the marijuana stock. Over 30 million people have chronic kidney disease (CKD) and analysts project that Korsuva could achieve peak annual sales of more than $570 million. The drug developer has already signed up dialysis specialist Fresenius Medical Care (NYSE:FMS) as a partner to market the drug in its nearly 4,000 centers. Meanwhile, CARA is looking to expand Korsuva beyond injections and into an oral form. That could expand potential sales even further.
All in all, CARA is on a path to approval, has a big addressable market and a plan to grow sales. For investors, the clinical-stage biotech stock could be a good bet for the future of cannabis medicine.
Zynerba Pharmaceuticals Inc (ZYNE)
Zynerba Pharmaceuticals (NASDAQ:ZYNE) investors have experienced a staggering gain of 350% this year. And there is plenty of real, lasting “oomph” behind the gains.
ZYNE only has one drug candidate — Zygel –but it is a doozy. The medicine is a cannabidiol (CBD) gel being targeted toward treating seizures and behavioral symptoms associated with neuropsychiatric disorders. We’re talking autism and Fragile X syndrome.
As a gel, the potential is huge. One of the issues with oral cannabis medications is that they can cause all sorts of gastrointestinal side effects and other liver problems. These problems can build-up over time and for children it can be problematic in the future after years of medicine usage. The firm received a patent for the product last month.
Trials are ongoing as well. ZYNE should wrap-up Phase III trials for Zygel for Fragile X at the end of 2019 and file a new drug application during the first half of 2020. The biotech is also conducting phase II trials for the gel for autism. Given the size of the addressable market and the potential for the gel to be a wonder drug for symptoms, the surge in Zynerba could be justified.
It’s certainly the riskiest of the marijuana stocks on this list, but the firm does have plenty of cash on its balance sheet to make it through its current round of trials and into marketing. And with a small market-cap, there are still plenty of gains to be had.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.