There’s growing sentiment among industry insiders that the FDA may approve its first cannabis-based pharmaceutical this year. If that turns out to be the case, then 2017 will be an inflection point for the medical marijuana industry. The drug at the forefront of the FDA’s approval process is Epidiolex, a CBD-based extract which is used to treat a few different types of seizures that effect children, namely Dravet Syndrome (“DS”) and Lennox-Gastaut Syndrome (“LGS”).
A number of other bio-pharmaceutical companies stand to benefit from GW Pharma’s landmark approval. One of those companies, GB Sciences, Inc. (“GB”), has patents filed on numerous complex mixtures of cannabis-based compounds, including CBD and other complementary plant-based molecules for the treatment of neurological and inflammatory disorders. The Epidiolex approval would serve as precedence for approvals of other cannabis-based formulations within the FDA. For three years, GB has been developing its proprietary cannabis-based mixtures including CBD, as well as other cannabinoids and terpenes. They will be in position to begin their own clinical trials in the next twelve months. GW Pharma’s persistence in obtaining an FDA approval will almost certainly ensure the future approval of other cannabis-based drugs, which will directly benefit GB.
But the approval of Epidiolex carries more immediate implications for the medical marijuana industry and the nutraceutical industry. According to GB’s Chief Scientific Officer, Andrea Small-Howard, PhD, MBA, if the FDA approves Epidiolex, the market for CBD-based nutraceuticals would undergo a significant transformation. In fact, the FDA has already issued warning letters to many nutraceutical manufacturers advertising CBD-based products on the internet. However, once the FDA approves Epidiolex, companies will most likely be prohibited by law from selling a CBD-based product that contains a higher level of CBD than the lowest dose of Epidiolex. Dr. Small-Howard points out that recent history provides a corollary that may prove to be the blueprint for the way this unfolds. In 1996, the FDA approved Lipitor, which contains an active ingredient derived from red yeast rice. Prior to Lipitor’s approval, red yeast rice supplements could be readily purchased as a nutraceutical for patients with cholesterol problems. Once Lipitor was approved however, the market shifted and manufacturers of red yeast rice supplements were forced to standardize production, and accurately measure dosages in each unit to keep their dosages below that of Lipitor.
In contrast, the impact on state-regulated medical marijuana dispensaries in the wake of an approval for GW Pharma’s Epidiolex is more difficult to predict. CBD-based products are routinely sold in medical marijuana dispensaries, according to Dr. Small-Howard. The regulation of cannabis-based products sold through these medical marijuana dispensaries varies from state-to-state (where medical marijuana is legal). The state medical marijuana regulations that are in place have not been reviewed by the appropriate federal agency, the FDA. Dr. Small-Howard points out that when the FDA starts regulating CBD as an Active Pharmaceutical Ingredient, medical marijuana companies making and selling CBD-infused dispensary products may no longer be protected under the laws governing those state-regulated medical marijuana programs.
If the approval of Epidiolex creates a market shift in the nutraceutical industry the way Lipitor did in the market for red yeast rice supplements, then GB is in perfect position to benefit from the industry evolution. As mentioned above, they have patents filed on CBD-containing complex mixtures for neurological and inflammatory indications that they could take through the traditional FDA biopharmaceutical market approval process.
Additionally, the company has a method for extracting, purifying and manufacturing cannabis-infused products that is controlled, efficient, and accurate. In practical terms, this means that other cannabis companies looking to tighten up their production standards can simply outsource their dispensary production to GB. In turn, GB would co-brand the dispensary products with the manufacturer so that consumers (and regulators) would know that the quality and consistency could be trusted. It’s the “Intel Inside” business model. GB also has the requisite medical marijuana cultivation and production licenses in the state of Nevada, so the company could produce and distribute a dispensary product entirely under its own brand.
The key takeaway, is that GB can generate significant cash flow through the sale and distribution of dispensary products, while the company works its drugs through the FDA approval process.
The implications of pending Epidiolex’ approval are indeed vast, and we believe GB is uniquely positioned to benefit from the change in market dynamics.