1.42%)
-14.97%)
Back
5 MIN READ
Although the biotech sector will be one of the greatest beneficiaries of the legal cannabis movement, the sector has recently been under pressure and this weakness has created significant opportunities for investors.
The iShares Nasdaq Biotechnology ETF (IBB), which is often used to measure the strength of the biotech sector has fallen more than 15% since late September. We expect to see further weakness in the near term as investors continue to take money off the table on account of the presidential election, weakening oil prices and a slowing global growth environment.
Although the market continues to hear how growth around the world has slowed as companies report weaker-than-expected earnings, the cannabis industry has grown at a remarkable rate and this is a trend that should accelerate over the next decade.
Cannabis Biotech Beneficiaries
Although the biotech sector will be one of the greatest beneficiaries of the legal cannabis movement only a few publicly traded biotech companies are focused on developing treatments from the cannabis plant.
Unlike other sectors, biotech trades on FDA results, not earnings; and favorable results can serve as a major catalyst and send the price of the company’s stock considerably higher.
We are favorable on the biotech sector of the cannabis industry because these companies will benefit from event-driven catalysts as they report the results of FDA clinical and pre-clinical trials. We want to highlight some biotech focused cannabis stocks that investors should have on their radar.
GW Pharmaceuticals (GWPH: Nasdaq): During the last month, GWPH has fallen more than 14% and we have kept a close eye on the shares as we continue to view GW Pharma as the top long-term cannabis investment opportunity.
Yesterday, GWPH traded as low as $110.65 before the shares bounced higher and ended the day at $113.29. Over the last month, momentum has moved significantly lower as GWPH has fallen more than 21% from its all-time high on October 7th.
GW Pharmaceuticals continues to make advancements in its pipeline of cannabinoid products. The company has a deep pipeline of products that are in various stages of FDA testing. We expect this pipeline to create catalysts for GWPH for years to come. We remain buyers of GWPH and see significant upside to current levels. We will continue to monitor price movements for an opportunity to add to Technical420’s position in its Mock Portfolio.
Insys Therapeutics (INSY: Nasdaq) is a stock that we have been cautious with and we are on the sidelines for the following reasons: 1) Its continues to miss earnings and revenue estimates due to a significant drop in demand for its opioid products, 2) The company guided lower for future sales of its Subsys product and we expect to see management further lower its expectations in future quarters, 3) The company’s search for a new CEO has not been fruitful, and 4) Its $500,000 contribution against legal cannabis in Arizona has negatively impacted market sentiment.
INSY has fallen 12.5% in the last month and the shares are down 64% so far this year. The shares are trading near oversold territory and it is trading below its 20, 50, and 150-day moving average. The main difference between INSY and GWPH is that INSY is developing treatments from synthetic cannabis while GWPH develops treatments from the actual plant.
Zynerba Pharmaceuticals, Inc. (ZYNE: Nasdaq) focuses on developing and commercializing proprietary synthetic cannabinoid therapeutics formulated for transdermal delivery. Zynerba’s product candidates include ZYN002, which is in Phase I clinical trial for the treatment of refractory epilepsy, Fragile X syndrome, and osteoarthritis; and ZYN001 which is in the preclinical stage for the treatment of fibromyalgia and peripheral neuropathic pain.
In mid-October, ZYNE provided a development update for its two product candidates, ZYN001 and ZYN002.
- ZYN001: Expects to be in Phase 1 clinical trials in the first half of 2017, with Phase 2 trials expected to start in the second half of the year.
- ZYN002: Three Phase 2 trials are on track to report results in the first half of 2017 with its Phase 2 trial for Fragile X Syndrome expected to start before the end of 2016.
Although we continue to view GWPH as the top investment opportunity in cannabis biotech sector, we are favorable on ZYNE and see upside to current levels.
Important Investor Disclosures
Disclosure. Compensated Affiliate. This report was authored by and is property of StoneBridge Partners LLC. All information and data relied upon in drafting this report is publicly available. The author believes and considers its sources to be reliable, but does not guarantee the accuracy or completeness of any information contained in this report. Any and all information, data, analyses and opinions are provided for informational purposes only and is not intended, in any manner, as investment advice. Any projections or other information generated by StoneBridge Partners LLC regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. None of the material contained in this report is intended as a solution or offer to sell or purchase a specific stock or any other investment. This report is not directed to, or intended for distribution or use by, any person or entity that is a citizen, resident or located in any municipality, state, country or other jurisdiction where the distribution, publication, availability, or use of this report is contrary to any governing law or regulation. The securities discussed in this report may not be eligible for purchase and/or sale in certain jurisdictions or by particular individuals. It is important that you check any and all governing laws and/or regulations that may be applicable in your jurisdiction. Investing in securities of issuers organized outside of the United States, including ADRs, entail certain risks. The securities of non-United States issuers may not be registered with, nor be subject to the reporting requirements of the United States Securities and Exchange Commission. Please contact a Financial Advisor for professional advice regarding any and all securities investments. This report is intended for informational purposes only. StoneBridge Partners LLC’s officers, directors, employees, affiliates, or subsidiaries may have positions in securities covered by StoneBridge Partners LLC. StoneBridge Partners LLC receives compensation from the company and/or has a position in the securities mentioned in this report.
All good -- no spamming here.
Get the Latest Cannabis News & Stock Picks.
Comments