Epidolex Progresses: Will The Marijuana Drug Market Boom?

Earlier this week, GW Pharmaceuticals plc (NASDAQ:GWPH) obtained approval for its cannabidiol (“CBD”) oral solution, Epidyolex, in Europe as an adjunctive treatment for seizures associated with Lennox-Gastaut syndrome or Dravet syndrome. The drug has been available in the United States for similar indications since last year under the trade name Epidolex.

Epidolex is the first and only approved drug from the CBD class in both the United States and Europe. The drug when added to other anti-epileptic therapies in clinical studies significantly reduced the frequency of seizures in the given patient population.

Cannabidiol drugs are the talk of the town and approval of Epidolex in Europe will certainly make the issue global. Several states in the United States are legalizing marijuana or cannabis for recreational and medicinal use. Many companies are developing cannabis-based therapies and focusing on cultivation and distribution of cannabis. However, we note that cannabis is not legal at the federal level in the United States.

Medical Marijuana

Medical marijuana implies medical use of cannabis-based products with a doctor's recommendation. Currently, marijuana has been legalized for medical purposes in 33 U.S. states and for recreational purposes in 11 states and the District of Columbia. Several U.S. lawmakers are optimistic that marijuana can bring billions of dollars in revenues and are trying to decriminalize marijuana at the federal level. However, there is absence of consensus on the best approach to legalize marijuana.

Cannabidiol is a non-psychoactive compound found in some marijuana strains that has shown promise as an anti-inflammatory and as a pain reliever that is much safer than opioids. It has also shown significant relief in symptom in those who suffer from epilepsy and other neurological disorders. Though it’s early in the game, CBD has also been found to slow the progression of Alzheimer’s and many types of cancer.

Apart from cannabidiol, several cannabis-based products, which are considered as recreational marijuana, are used for medical purposes. It is claimed that these products can treat several diseases/conditions like Alzheimer's disease, appetite loss, cancer, eating disorders, epilepsy, pain and others. Medical marijuana is also claimed to reduce opioid abuse. However, these are not backed by any research.

The only FDA-approved CBD drug, Epidolex, has shown strong uptake in sales and new patient enrollments since its launch in November 2018 in the United States. It generated sales of $101.9 million in the first half of 2019. Sales of the drug grew more than 80% sequentially in the second quarter. Sales growth of the drug is expected to receive a boost with the EU approval.

Path Ahead for Cannabidiol Drugs

Zynerba Pharmaceuticals (NASDAQ:ZYNE) is developing its CBD candidate, Zygel, in pediatric patients with autism spectrum disorder. Several Canadian companies like Tilray (NASDAQ:TLRY) , Aurora Cannabis Inc. (TSX:ACB) , Cronos Group Inc. (NASDAQ:CRON) and Canopy Growth Corporation (NYSE:CGC) are involved in cultivating, producing and commercial distribution of recreational and medical marijuana. Several legal dispensaries are coming up in states in which the use of marijuana for medical purposes is allowed.

Meanwhile, the FDA, in a press release, has warned users of risks related to the use of unapproved cannabis-based products with unsubstantiated therapeutic claims. Given the interest in cannabis-based products and potential opportunities, the regulatory authority is examining potential regulatory pathways for lawful commercialization of cannabis-based products whose safety and efficacy are backed by clinical studies. The FDA has also been active in curbing illegal use of marijuana, which is a Schedule I drug with high abuse potential.

We note that there is huge untapped market opportunity for cannabis-based products, which can create the next booming industry. Per a report by New Frontier Data, illegal sales of marijuana in the United States are estimated to be $70 billion, seven times the size of the legal market.

We expect legalization of marijuana at the federal level to attract several big pharma companies into development of marijuana-based drugs, which can boost sales of cannabis-based drugs. Moreover, this will likely create new treatment options for patients, if the unsubstantiated claims are proved in clinical studies.

While GW Pharmaceuticals currently sports a Zacks Rank #1 (Strong Buy), Zynerba carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

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