There’s a growing motion for cannabis legalization in the U.S. and around the globe. And a key part in winning regulators over remains in revealing them that the industry can be trusted to govern itself. The issue for the industry is that there’s too much enjoyment surrounding its development prospects, and this is when companies sometimes lose sight of everything else.
Here are a number of examples where the market’s been doing itself more harm than excellent.
1. Making claims that aren’t accurate or backed by strong data
Patients take cannabidiol (CBD) for its health benefits. Cannabis company GW Pharmaceuticals ( NASDAQ: GWPH) has actually gained from strong need for its Epidiolex drug, which can treat kids with two unusual forms of epilepsy– Lennox-Gastaut syndrome and Dravet syndrome. The U.S. Food and Drug Administration (FDA) authorized the drug in2018 It’s the first and only cannabis-based drug approved by the FDA.
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The growing appeal and approval of Epidiolex has led to considerable development for the business. In 2019, its sales amounted to $3113 million, up from just $127 million in the previous year. And during the first quarter of financial 2020, sales of $1206 million were triple the $392 million that GW produced in the prior-year period.
There might be a lot more growth for the company now that the European Commission likewise approved the drug, a decision that stands in all the nations in the European Union.
And so there’s a lot at stake for companies to encourage customers that CBD is practical.
Multistate cannabis operator Curaleaf Holdings ( OTC: CURL.F) got a warning letter last July, with the FDA noting numerous circumstances where the business was making unapproved claims. Amongst the claims the FDA declared Curaleaf was making was that CBD might be efficient in dealing with Parkinson’s disease and Alzheimer’s, which it “was effective in killing human breast cancer cells.”
While there might be small-scale research studies where a connection’s obvious in between CBD and a specific disease, one of the problems with marijuana research is that oftentimes, it’s far from conclusive, and claiming otherwise is not a clever service relocation.
2. Not doing enough to avoid marketing to kids
The something that there’s basic consensus on in the market is that pot must be off-limits for kids. However that can be an issue when it concerns edibles. Marijuana edibles frequently look similar to sweet, which obviously appeals to kids.
More egregious examples of the industry’s recklessness have taken place in the branding department. In 2015, a Canadian animation studio sued a dispensary in Oklahoma for infringing on its logo. The Treehouse Dispensary was utilizing an image that looked like Treehouse TELEVISION, a channel that airs kids’s programming in Canada. The animation studio won a default judgment against the marijuana business.
More just recently, in Canada, a Vancouver-based dispensary entered problem for using a name and logo similar to popular toy business Toys “R” Us, called Herbs “R” United States. A judge ordered the dispensary to ruin anything that had the upseting logo design on it and pay damages of 30,000 Canadian dollars to the toy company.
Even if the stores would not have actually offered their products to kids, these circumstances show that pot companies aren’t making severe efforts to restrict their advertising and marketing of marijuana to grownups.
Why should investors care?
Financiers may scoff at these issues, thinking they’re just legal problems that any industry deals with.
Even more, the market’s public image can go a long way in shaping attitudes that are essential in moving legalization forward. These examples are reminders of how far the industry still needs to go in legitimizing itself and winning over the electorate.
Investors should care about these issues because the longer the market’s viewed as high-risk, the more speculative and volatile it’ll be. Which makes pot stocks unappealing buys for long-term financiers looking for stability and predictability in their returns.
While these issues will not take away from the success that a business like GW’s taken pleasure in hence far, the market’s image definitely isn’t doing the stock any favors.