By Todd Harrison |
February 15, 2018
January did not lack for excitement in the cannabinoid-wellness space as volatility arrived early and often. Between the decision by Jeff Sessions to repeal state cannabis protections to the brief-but-tenuous government shutdown, it was a politically-charged headline-driven month for our strategy.
The Attorney General’s decision to rescind the Cole Memorandum will allow attorney generals across the country to use their own discretion to enforce the Controlled Substances Act, even in the face of state laws to the contrary. While this introduced risk to our thesis, we made the decision to buy into the wave of selling that immediately followed the announcement.
That decision was based on several premises; the first was that, as noted in a recent Quinnipiac poll, over 90% of the US constituency supports medical marijuana and the mid-term elections are in November. The people have spoken, and the politicians have listened; cannabis reform has emerged as one of the few, if not only, bipartisan endeavors on the Hill; a position that’s galvanized in recent weeks.
There’s the matter of states’ rights and respecting the will of the voters. States have generated billions in tax revenues, added much-needed jobs, lowered crime rates and most importantly, helped reduce opioid dependency. While it’s difficult to forecast when conventional wisdom will perceive cannabis as a gateway away from that deadly epidemic, we believe that’s precisely what it is.
It also has been our view that over the next decade, cannabis will transition from drugs from state dispensaries to medicine prescribed by doctors and covered by insurance. The FDA will make that determination once medical efficacy is demonstrated, which could happen as early as June.
That’s when GW Pharmaceuticals is expected to receive FDA approval on Epidiolex, their epilepsy medication that’s been shown to reduce seizures in children by 40-50%. While it is possible that the FDA reclassify CBD only—the non-euphoric cannabinoid—there are other clinical trials slated to follow that should alleviate such distinctions.
Our strategy remains positioned for the emergence of efficacy-driven cannabinoid wellness. Our companies include licensed producers, strategic dispensaries, GMP-compliant laboratories, extraction facilities and biopharmaceutical companies; in the future, we also expect have exposure to industrial hemp & farming, pet supplements, and cosmetics & vanity.
Given our discussions with medical doctors, biotech CEOs and big pharma Wall Street analysts, who were dubious of our thesis, we continue to think that the Street is viewing cannabis through the wrong lens; we don’t agree it should be modeled as a discretionary vice. We attribute this confusion to the fact that the endocannabinoid system, first discovered in the late ‘80s, was never taught in U.S. medical schools until this year.
Interestingly, the same morning that the U.S. Attorney General rattled markets with his announcement, the headlines vying for the news cycle, which hit the wires about an hour earlier, were from Australia and Canada, both of whom announced their respective intention to dominate the global [medical] cannabis market.
As we doubt elected leaders would aggressively pursue pro-stoner policies, we can only assume that they too believe cannabis will reshape healthcare and reward those who take the initiative to act. We obviously agree, which isn’t to say this journey will be easy; frontier markets require courage, discipline, determination, and focus.
We have extended our global footprint beyond the U.S. and Canada; adding exposure to Australia early and often throughout the month. We also established South American and European exposures and began positioning for Japan, which we believe will evolve into a large market. Prime Minister Shinzo Abe has been reported to regularly take CBD and his wife is one of the nation’s leading hemp advocates.