The FDA Makes History
The other side of the 'pot stock' debate... The FDA makes history... Conservatives and the DEA begin to change their tune... What to make of all of this...
If you thought the hype surrounding 'pot stocks' couldn't gain any more attention, you weren't alone...
I (John Engel) felt the same way... until I heard former Speaker of the House John Boehner announce he's "all in on marijuana" last month.
Regular Digest readers know this isn't the first time Boehner has endorsed the rapidly growing cannabis industry. His initial comments date back to April, when he took to Twitter to say, "My thinking on cannabis has evolved."
My colleague and Digest editor Justin Brill was all over it. (He recapped the story in the April 12 Digest.)
The debate on legal cannabis in the U.S. is going to remain in the news for the foreseeable future. During the U.S. midterm elections earlier this month, Michigan became the 10th state to legalize recreational cannabis use. Missouri and Utah joined 30 other states in legalizing it for medicinal purposes, as Justin discussed in the November 8 Digest.
Zoom out, and you can tell that the tide is slowly changing around the country. This has many folks angry.
But there's another side to the story that doesn't get the attention it fully deserves...
I'm talking about the medicinal value of marijuana. It's typical to see a state slowly legalize cannabis. First, it starts with allowing it for medicinal use only. Later, it relaxes the laws and approves it for recreational use.
Boehner claims his views on marijuana changed after speaking to a former Navy SEAL who suffers from migraines, a product of his time in combat. According to Boehner, "He started using cannabis and the migraines disappeared."
As I noted in the August 10 Digest, I study hundreds of experimental drugs every year. A one-off positive effect is hardly enough evidence on which to base an entire opinion. But after doing some background work to substantiate the medical benefits of cannabis, I have no problem with Boehner's change of heart.
Let me show you what I mean...
You might be surprised to learn that there's a ton of proof behind marijuana's medicinal benefits...
On June 25, the U.S. Food and Drug Administration (FDA) made history when it approved the first cannabis-derived pharmaceutical drug to fight epilepsy. Cannabidiol (CBD) – an oral extract from the plant – underwent extensive clinical testing against two rare and severe seizure disorders.
If you follow the pot craze, you've likely heard the term CBD before. It's just one of the 100-plus cannabinoids (or active molecules associated with cannabis) found in the marijuana plant. Likewise, most folks are familiar with tetrahydrocannabinol ("THC"), the cannabinoid that gets users high.
Although CBD shares the same classification as THC, it's an entirely different molecule. CBD doesn't have the same psychotropic effects that get people high.
Still, it does affect the brain, according to data published in the globally respected New England Journal of Medicine ("NEJM"). Earlier this year, NEJM featured clinical findings on Epidiolex, a patented CBD drug developed by British drugmaker GW Pharmaceuticals (GWPH).
The 2015 study equally randomized 225 patients to high-dose, low-dose, or placebo. (Right away, you'll notice how this differs from Boehner's "I know a guy, and it helped him" argument.)
Generally speaking, the more people in a study, the more you can trust the results...
That's why you'll often hear drug companies tout "statistically significant" results when they're talking about top-line data.
Dissecting clinical results isn't always straightforward, but my ears always perk up when I hear that phrase. It's a litmus test for trustworthy results. Here's an example from a short passage pulled from that issue of the NEJM...
During the 14-week treatment period, patients taking both doses of Epidiolex, 10 mg/kg/day and 20 mg/kg/day, had significantly greater median reductions in monthly drop seizures of 37.2% (p=0.002) and 41.9% (p=0.005), respectively.
What this means is that most of the 150 patients receiving Epidiolex suffered fewer seizures... and about one-quarter of them (all in the high-dose group) saw the frequency of their seizures fall by nearly half (more than 42%).
That's a big deal. Not only did the vast majority of patients taking the drug improve, but the higher their dose, the better they responded.
Still, that paragraph doesn't explicitly tell you that the results are statistically significant. For that, you have to look at what's called the probability value ("p-value"). Don't worry about how it's calculated. What's important is that it equaled 0.002 for the low-dose group and 0.005 for the high-dose group. That's well below the threshold of 0.05 – what's generally regarded as the cutoff for trustable data.
Statistical significance is incredibly important, and Epidiolex met those requirements. Nonetheless, what really stood out were the clinical effects.
A month of treatment decreased drop seizures – the type of seizures that causes temporary loss of muscle control – by half. At 14 weeks, it maintained those effects, indicating that it has a long-term benefit.
Let me put this data into perspective for you...
Lennox-Gastaut syndrome (LGS) – the type of epilepsy being studied – is a crippling condition that begins around the ages of 3 to 5. Sadly, some forms of LGS are resistant to approved anti-epileptic drugs. The patient population in GW Pharmaceutical's clinical trials against LGS were not fully benefiting from available anti-epileptic drugs... yet more than half of them responded to treatment on cannabis-derived Epidiolex.
What did the experts think of these results?
The 13 scientific and medical experts on the FDA advisory panel voted unanimously in favor of approving Epidiolex. That's a level of certainty you don't see often.
As an aside, my last two trips to FDA committee meetings ended in fragmented decisions. The FDA is notoriously staunch when it comes to approving new drugs. It's brutally objective because it's not only the specialists' reputation on the line... it's the lives of people who get prescribed the drug.
The experts the FDA called on to evaluate Epidiolex included a department head from the Medication Discovery and Toxicology Branch at the National Institutes of Health (NIH), a professor of neurology from Mayo Clinic, and a professor from the Department of Psychiatry and Behavioral Sciences at the Johns Hopkins University School of Medicine.
The medical benefits of marijuana are just too obvious to ignore once you learn more about drugs like Epidiolex.
But marijuana's conservative opponents aren't the only ones who are changing their tune...
The first wave of drug-enforcement easing is already in motion.
The U.S. Drug Enforcement Administration (DEA) is changing drug scheduling based on new evidence provided by Epidiolex. Epidiolex won approval under Schedule I classification – the most harmful group of controlled substances that includes heroin, meth, and LSD.
While marijuana remains a Schedule I drug, the DEA re-classified Epidiolex as one of the least-harmful controlled substances. It's labeled under Schedule V – a classification with low abuse potential, like cough syrup.
Epidiolex is just the first cannabis-derived drug to break through the FDA. More will likely follow, as politicians and scientists reevaluate the plant's medicinal values. Plus, it's encouraging new research for drugs used predominantly on the street... drugs that might also have legitimate medicinal use.
So, what's next for street-drug innovations?
On the heels of the first approved cannabis pharmaceutical, the FDA awarded an unusual breakthrough therapy designation to a street drug known as psilocybin, the active chemical in hallucinogenic "magic mushrooms."
Surprising as it is, this drug is under testing in early clinical trials as a treatment for major depression. And already, it's performing better than available treatments. That's why the FDA intends to expedite its development and review by placing it under the "breakthrough" designation.
A small startup based in London intends to bring psilocybin to market. The company has already attracted big-name investors like PayPal founder Peter Thiel, fund manager Mike Novogratz, and film producer Sam Englebardt.
As Justin has noted in previous Digests, we haven't been eager to get involved in the 'pot stock' craze to date...
Once the mania subsides, we expect many of these companies will be valued for the low-margin commodity producers they actually are.
But with cannabis-derived drugs like Epidiolex now gaining support from the FDA – and more likely to follow – our team is now getting interested for the first time. Expect to hear much more from us on the subject in early 2019.
New 52-week highs (as of 11/15/18): CME Group (CME) and Procter & Gamble (PG).
We know marijuana is a controversial topic. What's your stance on it? Let us know at feedback@stansberryresearch.com.
Regards,
John Engel
Baltimore, Maryland
November 16, 2018