Legal medical marijuana is a white-hot market right now.
Some companies are seeing extraordinary gains on nothing more than a fancy PowerPoint presentation and vague ASX announcement. That’s concerning. But there are also a select number of stocks involved in medicinal marijuana that are truly cracking little companies.
These select few companies, in our view, will be the ones that are still entrenched in this new market opportunity five, 10, and 20 years down the track.
But before you invest in ‘marijuana mania’, you may need to change your thinking.
‘Pot stocks’ or biotech?
We’ll be first to admit that we sometimes get hyperbolic with our words. And calling these companies ‘pot stocks’ is probably one of those situations. It’s an easy way out — but we do so for a reason. When we write ‘pot stocks’, you know exactly what we’re talking about.
Weed stocks, pot stocks, dope stocks…whatever you might hear them being referred to as…you know that we’re talking about companies involved in the marijuana industry. The difference is that the companies we’ve discussed recently in Money Morning are primarily involved in medicinal marijuana.
Having been researching this industry for close to a year now, the term ‘pot stocks’ couldn’t really be further from the truth.
We view these stocks as biotechnology companies. They are pushing the boundaries in research and development; they’re paving the way for medicinal marijuana to benefit humans in the treatment of — and possibly even cure — diseases.
Take, for example, a recent story from the UK…
Deryn Blackwell is now 14 years old. When he was just 10, he was diagnosed with leukaemia. But not the typical form of the horrible blood-cancer. His was particularly aggressive. Doctors said he had the second highest white blood count they’d ever seen.
But that wasn’t the worst of it. Deryn also had his tonsils removed. These, too, were found to be cancerous. After brutal chemotherapy, doctors decided on a bone marrow transplant to try and save Deryn’s life.
The first transplant from Germany failed — his body rejected it. A second transplant also failed. The last hope was a small amount of his own bone marrow transplanted back in. If this failed, he would be switched off the antibiotics, and, with no viable immune system, he would eventually die.
It didn’t work.
They celebrated Deryn’s 14th birthday in the hospice, where they expected he would die. They also celebrated Christmas with Deryn on 14 December that year in the hospice, because they didn’t expect he would make it to 25 December.
In the meantime, Deryn’s mother and father decided that, to help ease his anxiety and pain, they would give him cannabis. They did this outside the knowledge of their doctors.
As reported by The Daily Mirror:
‘The couple tracked down a dealer, met him at a service station, who gave them some cannabis which they took home and cooked on the family hob in a pressure cooker following instructions they’d found online.
‘From it they created an oil and it was Callie who placed a tiny amount of it in Deryn’s mouth.
‘It worked and calmed him immediately.’
More importantly, Deryn didn’t die. In fact, his condition began to improve. After the chemo, bone marrow transplants and antibiotics all failed, they expected Deryn would die. He didn’t. The only thing he was taking was the cannabis oil.
Today, Deryn is a happy and healthy 17-year-old. There’s no detailed evidence that cannabis oil cured or healed Deryn. But there’s no other explanation as to how he survived, either.
His mother has gone to great lengths to imply that cannabis oil is not a cure. But Deryn is alive. And, as she was administering the cannabis, she would alter the dosage, seeing the direct effect on his blood count.
Deryn eventually was well enough to go home, and he lives a normal life now. He has not had any further complications, and is your typical 17-year-old boy.
The point of this story is not to claim that cannabis is some form of miracle cure for cancer. Rather, it’s to highlight that scientists are only just now starting to uncover the potential of this natural wonder drug.
The endocannabinoid system
Every mammal has what’s called an ‘endocannabinoid system’. It’s a part of the brain, as well as the central and peripheral nervous system.
This system is biologically configured to accept cannabinoids — in particular tetrahydrocannabinol (THC) and cannabidiol (CBD). As it just happens, the cannabis plant, cannabis sativa, produces chemicals (cannabinoids) such as THC and CBD.
Israeli scientist Dr Ralph Mechoulam discovered the endocannabinoid system in the 1990s. Our bodies actually produce cannabinoids, but the receptors that Mechoulam identified are also receptive to plant-based cannabinoids, such as THC and CBD.
The research into how this system works is still in its infancy. Science understands a lot about how the endocannabinoid system functions in humans. But there’s simply not enough research available as to how external cannabinoids, like THC and CBD, can benefit the human biological system.
A major inhibitor into prior extensive research is the prohibition of cannabis in most countries around the world. The classification of cannabis as a restricted or outlawed substance means that using it for science and research is a near-impossible task. Researchers need to jump through an incredible number of hoops, and cut through endless red tape, just to get their hands on it.
But the world is changing…fast. As countries around the world begin to realise the medical benefits that cannabis might have, access is becoming easier for scientific research.
And as researchers discover more about the potential of this ‘wonder plant’, more people are pushing for even greater access. It’s a snowflake turning into a snowball that’s turning into an avalanche.
The speed at which this industry is gaining momentum is extraordinary. And the more we research it, the more we’re beginning to understand that this is truly a new frontier for medical science.
That’s why you should view these stocks as biotech companies, and not as the admittedly catchier ‘pot stocks’. They’re medical research companies. They are the next great wave of medical technology, and they’re establishing themselves on the ASX as they open their doors to the world.
It’s an incredibly exciting industry that’s in its infancy in Australia. An industry that is starting from scratch. An industry that, with further research, development and access, could turn into the most important medical technology known to man.
In fact, the way we see it, the research and development of cannabis is as important as the discovery and application of penicillin.
Cannabis, and the medical benefits derived from it, might even prove to be more important. This is the frontier of medicine, and it’s creating an investment opportunity for smart investors the likes of which we’ve never seen before on the ASX.
Editor, Money Morning