Report…

Barring an unexpected decision from the FDA, GW Pharma, which will hear from the agency by Wednesday, will make history this week when it receives approval for Epidiolex, its oral CBD solution that treats the seizures caused by rare forms of epilepsy. While the FDA has approved synthetic THC previously, this will be the first FDA-approved drug derived from the cannabis plant.

Epidiolex approval will be not only a victory for GW Pharma but also a major milestone for the legalization movement. For years, cannabis has been seen by the federal government as dangerous and having no medical benefits, but clearly that is not the case, according to the advisory committee that reviewed Epidiolex and recommended that the FDA approve it.

We have seen some confusion about what might happen if Epidiolex is approved. After FDA approval, the DEA can take up to 90 days to schedule it, and then the company will begin to market it. Some have mistakenly concluded that the DEA must reschedule cannabis, but this is not the case. The approval of Epidiolex will have no direct impact on the current Schedule 1 status, but it sure seems like it would be great evidence in a court case should someone sue the federal government.

Investors have made bets on GW Pharma, and it’s not clear how much the approval is priced in, but the more interesting exercise is to assess how FDA approval of a cannabis-derived pharmaceutical will impact the overall industry. Some fear, incorrectly we believe, that this could be a threat to the dispensary model, but this ignores the history of fish oil, which has pharmaceutical and over-the-counter products that coexist. We think that the success of GW Pharma will spur investors to fund other companies pursuing the FDA path. This is already happening to some degree, but we think the approval of Epidiolex will accelerate the trend.