|April 25, 2018
President Trump Gives Another “Green Light” to Legal Cannabis
By Michael A. Robinson
Dear Dr Karla Gottschalk,
Until recently, most folks in legal cannabis have been watching Canada.
And for good reason.
This summer, Canada will become the first developed nation to fully legalize marijuana for recreational purposes. That’s expected to add $5 billion in yearly sales to that nation’s already big medical marijuana industry.
Even without recreational marijuana in Canada or California, North American legal marijuana sales soared 33% last year to $9.7 billion. And marijuana research firm ArcView expects that trend to continue at a compound annual growth rate of 28% through 2021, when there could be $25 billion or more in North American sales.
But now, that attention is swinging back in America’s direction.
That’s because, on April 13, we learned that President Donald Trump and Sen. Cory Gardner (R-Colo.) have come to an agreement to end federal-level crackdowns on marijuana in states that have legalized it.
Not surprisingly, pot stocks took off.
More on that later, but first some backstory…
Gardner, whose state is a legal marijuana pioneer, says he sat down with Trump for a conversation about the state of the federal government’s approach to legal cannabis.
The senator had been miffed since early January, when U.S. Attorney General Jeff Sessions rescinded a portion of the Cole Memo, the executive branch-level ruling that had shielded legalized states from federal scrutiny. Sessions’ move left federal prosecutors free to once again go after cannabis operations in legalized states.
In response, Gardner started refusing to allow U.S. Department of Justice nominees to pass through the U.S. Senate.
But Gardner’s agreement with Trump changes all that.
Gardner says the president has agreed to support federal legislation to allow states to regulate cannabis without fear of federal interference – and the White House has confirmed that. In return, Gardner will now allow Justice’s nominees to go through again.
Pot stocks responded immediately…
The bellwether Horizons Medical Marijuana Life Sciences ETF (TSX: HMMJ) rose 9.2% from its low on April 13 following Gardner’s statement – and is still 4.6% higher as of this writing.
Several of our Roadmap to Marijuana Millions companies did well, too…
- Denver-based General Cannabis Corp. (OTC: CANN) spiked 52.5% April 13 and April 16, and is now up 11.5% since Gardner’s statement.
- Canada’s Emerald Health Therapeutics Inc. (OTC: EMHTF) soared 26.56% on April 13 and is up 12.5% since that day.
- Canada’s MedReleaf Corp. (OTC: MEDFF) climbed 9% April 13 and is up 4.52% since then.
As I’ve been telling you, the embrace of legal cannabis from major public figures like the president, or former House Speaker John Boehner, is big for the industry.
That’s because institutional investors, hedge funds, money managers, and other mainstream big-money players need stability before they can jump in on this opportunity to tap a brand-new marketplace.
They realize that, despite legalized cannabis in dozens of states, it’s still federally prohibited. The situation brings in a level of uncertainty to business operations that dampens enthusiasm.
But that’s changing – quickly…
A Shifting Landscape
Just take a look at what’s happened since news of the Gardner-Trump agreement surfaced.
Trump ally and longtime marijuana legalization proponent U.S. Rep. Dana Rohrabacher (R-Calif.) introduced a new bill – the Cannabis States’ Rights Act – that he says would enshrine “restraint on federal enforcement.” The bill would also loosen restrictions on conducting scientific research into the medicinal effects of cannabis.
Rohrabacher’s bill would make acts like producing, possessing, dispensing, and delivering cannabis under state cannabis laws also legal under federal law.
“Now there should be no question in Attorney General Sessions’ mind about the president’s intention,” Rohrabacher said in a statement. “This is a fundamental issue of federalism and freedom, as state after state moves to take marijuana out of the hands of the cartels and place it in a competitive market where consumers can be assured of product safety.”
Meanwhile, Senate Majority Leader Mitch McConnell (R-Ky.) fast-tracked a Senate bill to legalize industrial hemp – medical cannabis’ low-THC-level cousin. And Senate Minority Leader Chuck Schumer (D-N.Y.) says he’s going to introduce a bill to entirely “de-schedule” marijuana from its federally prohibited status.
At the state level, a California measure introduced by state Sen. Robert Hertzberg (D-Van Nuys) to license special banks to handle the billions generated by legal cannabis companies gained steam after Trump’s statement. Currently federal prohibition substantially limits banking for these businesses.
Now, these are all great ideas. But we know that getting anything passed in this Congress is going to be a challenge, even for efforts with strong bipartisan support.
But that’s looking more and more likely as a flipped House of Representatives later this year could turn things around.
If that happens, the investment floodgates are going to open up…
San Francisco Gets Less Foggy
Since the Summer of Love, San Francisco has served as the epicenter of the counterculture and rock ‘n’ roll.
And any time you went to a rock show, no matter if the band was an aging act or a fresh up-and-comer, you could count on one thing…
The smell of burning marijuana.
That’s why two recent rock concerts my wife and I attended in San Francisco really jumped out at me – not once in two evenings spanning several hours at large venues did we smell any cannabis.
However, I suspect plenty of folks were using cannabis. After all, California made recreational use legal Jan. 1 after 20 years as a medical-only state.
What we’re seeing is the rise of what I call the precision dose market for cannabis. Simply stated, folks are moving away from smoking pot in favor of edibles or vaporizing oils or “wax.”
Though they can’t at present cite meaningful data, dispensaries report growing demand for both vape cartridges and edibles. That says a lot because both forms may cost two or three times what a standard 1/8 ounce of weed, which can sell for around $45.
Part of this no doubt stems from the fact more and more people are choosing a healthier approach. Most new marijuana users, smartly, don’t want any kind of smoke entering their lungs. So, the new generation of products don’t just come smoke free – their dosage is often very exact.
As marijuana goes mainstream, users are looking to be both more discrete and more precise in their dosing.
Just look at what’s going on with baby boomers. Many of this cohort of folks that totals more than 72 million got rid of their bongs years ago as they embarked on careers and raised families. Now, with the rise of healthy options, they are using cannabis once again.
A recent report by Ohio State University notes that as much as 70% of the 50-and-older demographic is using some form of alternative medicine.
Many boomers now see cannabis as alternative medicine that helps with everything from anxiety to insomnia.
This is a powerful group of consumers. The American Association of Retired Persons says boomers account for two-thirds of U.S. disposable income and are set to inherit $15 trillion dollars in the next 20 years.
In other words, they have plenty of money to buy the very best in cannabis.
Meanwhile, cannabis-based pharmaceuticals are starting to spring up globally.
But thanks to a recent move by the U.S. Food and Drug Administration, we could soon see the first one domestically – and it could be a blockbuster.
The First Cannabis Drug to Market Is…
We’ve been patiently waiting for the FDA to approve the cannabis-based epilepsy drug Epidiolex for sale in the United States for years now.
We’ve been expecting that decision to come in June.
And we just got a big sign that decision will be one in favor of Epidiolex developer GW Pharmaceuticals PLC (Nasdaq ADR: GWPH).
On April 17, briefing documents from an FDA advisory committee meeting leaked – and they shed a positive light on GW and Epidiolex. FDA staff stated that GW had provided “substantial evidence” of the cannabis-based epilepsy drug’s effectiveness.
Moreover, the committee unanimously recommended that the FDA approve the drug when it comes up for review in June. According to my estimates, Epidiolex could become a $1.7 billion yearly seller by 2026.
Sure enough, GW’s shares have surged 13.6% since that news broke.
That’s great news for investors.
But it’s even better news for children suffering from seizures related to two rare and deadly forms of epilepsy that Epidiolex is designed to treat.
Epidiolex is derived from a marijuana plant that’s been bred by GW to produce high levels of cannabidiol, or CBD, instead of the psychoactive component of cannabis, THC. The FDA briefing noted that CBD “has a negligible abuse potential,” and that risk factors associated with the drug, such as risk of liver injury, could be managed.
Beyond epilepsy, Epidiolex is being tested on other neurological diseases. Plus, GW is also testing a drug called Sativex, which appears to provide strong relief from the spasms induced by multiple sclerosis. Sativex has already been approved for sale outside the United States, pointing the global positive response to cannabis-based drugs.
GW Pharma also has a pipeline of earlier-stage marijuana-based drugs that are focused on schizophrenia, autism, and other conditions.
The British firm should finish 2018 with roughly $400 million in the bank, enabling it to become cannabis-based biotech’s most dominant player.
Now, if you’re thinking you’ve missed your moment on explosive pot stock growth, think again.
There are many more profit “triggers” on the schedule this year – not least of which is full legalization in Canada this summer… and more states legalizing cannabis on Election Day.
So stay tuned for more on these incredible opportunities.
Cheers and good investing,
Michael A. Robinson