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The signs are everywhere. Outside the woodstock apothecary in Woodstock, NY, an A-shaped sign blocks the sidewalk, shouting, "We have CBD !!". On 42nd Street in Manhattan, a new sign displays Uncle Bud hemp lotions.
In December, Congress legalized hemp and its soothing extract of cannabidiol, or CBD. Now the stock market can not get enough. Cannabis growers love
Cover growth
(ticker: CGC),
Aurora Cannabis
(ACB), and
Tilray
(TLRY) quickly became involved in hemp – the cannabis variety that does not contain the intoxicants that make marijuana more fun, but puts the pot on the wrong side of federal law. Shares of long-standing CBD companies have doubled in recent months, including the Charlotte Holdings websites (CWEB.Canada or CWBHF) and
GW Pharmaceuticals
(GWPH).
Unfortunately, there are no good deals among hemp or marijuana stocks nowadays.
This does not mean that the CBD will not be big. It will be. The newly released cannabinoid will soon join other additives for wellness in products ranging from skin cream to beverages to pet food. According to Cowen & Co. analysts, sales of CBD impregnated products could reach billions of dollars
And, like antioxidant fruits and coconut water, the health benefits of a touch of CBD are surpassed by enthusiasts like Martha Stewart and Gwyneth Paltrow. But that does not mean that nostrums will not sell. Hemp snacks and CBD-based tinctures will help sell to cannabis-producing companies – and many other sellers of consumer goods. However, although the CBD pie can be bulky, individual slices are likely to be thin.
"How do you differentiate the 100, 200, and 300 new DBC businesses that are on every street corner?" Says Joe Dowling, CEO of DBC Supplements Salesman
CV Sciences
(CVSI). "You will see a Wild West environment for a while."
Read our recent cover story: You have to be high to buy American marijuana stocks
The tight nature of hemp is the reason why he was the first member of the cannabis family to evade the application of the Federal Controlled Substances Act. The 2014 Farm Bill authorized states to launch hemp crop pilot projects and extract from CBD. In December, The 2018 Farm Bill released hemp and its derivatives from the shadow of the Drug Enforcement Administration.
The fuel for the hemp freedom train is the demand for CBD. For years, social media has broadcast anecdotes about its use to calm nerves and even relieve epileptic seizures. These testimonials prompted seven Colorado brothers, members of the Stanley family, to start growing high-grade CBD hemp in 2010. Their hemp extract-based oils have been the focus of their efforts. a national advertisement in 2013, when CNN announced that Charlotte Figi's epilepsy had improved after eating. their product. In his honor, the Stanley named their operation Charlotte's Web (claiming not to be associated with the book E.B. White). Hemp extract is not cheap. A bottle of one ounce of Charlotte's original CBD Formula Web Oil can cost you $ 150. Sales advanced smartly, reaching $ 70 million in 2018 compared to $ 15 million in 2016. Earnings for 2018 were $ 12 million, or 12 cents per share.
Last August, Charlotte's Web Holdings went public for seven Canadian dollars a share (US $ 5.41). Analysts reported by Sentieo predict that sales could approach half a billion dollars in 2021 and that the shares are now trading at 30 Canadian dollars. That values Boulder, Colorado, up to $ 2 billion, which is roughly equivalent to
Cheesecake Factory
(CAKE) or
KB Home
(KBH).
The hemp moment is gratifying for Charlotte's website president, Joel Stanley. "He's really growing up," he says of the hemp trade. "We'll see it in cosmetics, foods, capsules, tinctures and medications."
Data as of April 4
Sources: Bloomberg; company reports; Sentieo
Online sales account for a significant portion of its sales and the company claims that its products are now distributed in 4,000 points of sale. Other pioneers in the CBD-based supplement market include Elixinol Global (ELLXF) in Australia and CV Sciences in Las Vegas, whose PlusCBD oil is the best-selling brand in health food stores, said the CEO of CV Sciences, Dowling.
CV Sciences' revenue doubled last year to $ 48 million, generating a profit of $ 10 million, or nine cents per share. In the over-the-counter market, its price of $ 5.86 values CV Sciences at about $ 550 million. That's more than 50 times the estimated profit for 2019 – similar to the Charlotte's Web multiple.
With the blessing of the Farm Bill and the blooming CBD craze, hemp sellers have turned to the aisles of food, medicine and mass retailers. Last month, the American cannabis company Curaleaf Holdings (CURA.Canada or CURLF) announced that its hemp products would be sold in more than 800 CVS Health stores in 10 states. Initially, CVS will offer lotions and transdermal patches. Green Growth Brands (GGB.Canada or GGBXF) will create their own storage space for Seventh Sense bath lotions and bath products at kiosks in nearly 100 commercial centers managed by
Simon Property Group
.
A rapidly growing category of consumers is the "functional drink", enriched with caffeine, vitamins or antioxidants. Since Coca-Cola has spent billions to buy vitamin E and later, a piece of
Monster Drink
(NMST). The promoters of the CBD were looking for a way to get into the drinks aisle. Canadian cannabis producers started to move last year. HEXO (HEXO), a Québec company, has created a joint venture with
Molson Coors Brewing
(TAP). Beer and giant wine
Constellation Brands
(STZ) invested $ 4 billion in Canopy Growth, the leader of the Canadian cannabis group.
The Farm Bill has removed the DEA from the hemp industry, but important federal issues remain unresolved. These involve the Food and Drug Administration. Legalization of cannabis at the state level began in response to cancer patients and others who were looking for the drug to treat their ailments. But the federal government's illegality has prevented the necessary clinical tests from proving the medical claims regarding cannabis and obtaining a marketing authorization by the FDA. In 2017, the FDA warned a number of marketers against the claim that CBD could treat Alzheimer's disease, breast cancer and diabetes. One of these marketers was Charlotte's Web.
Joel Stanley said that all requests for treatment of diseases were made by clients, not by his company. Charlotte's Web cooperated with the FDA and censored customer testimonials on the company's social media. He added that the drug approval process is not suitable for plant extracts. "To be honest, the regulatory framework around Western medicine is in shambles," he says.
GW Pharmaceuticals is a cannabis company that has gone the scientific way. After placebo-controlled clinical trials published in leading journals such as the New England Journal of Medicine, the FDA has approved GW's CBD-based Epidiolex for the treatment of severe childhood epilepsy, including the the name of Charlotte Web. The patented drug is highly purified and chemically consistent, said Steve Schultz, GW Investor Relations Manager.
"Doctors and patients are looking for a fully characterized pharmaceutical product backed by insurance," says Schultz. With GW's monthly copayment at just $ 25, it's hard to justify the use of untested and unapproved CBD products.
The road to launching Epidiolex's product was expensive last November and GW recorded losses of $ 300 million in 2018 for a turnover of $ 15 million. Legions of Wall Street fans justify GW share price at 165 million euros and market capitalization of $ 5 billion with exceptional sales if Epidiolex is approved for epilepsy and other diseases of adults. David Lebowitz, an analyst at Morgan Stanley, expects a profit of $ 1.67 per share in 2025 for a $ 1.5 billion business and a goal of $ 227.
As CBD-based products proliferated, FDA ex-commissioner Scott Gottleib on Wednesday unveiled the agency's plans to regulate cannabis-derived products. The current law still prohibits the foods to which the CBD has been added, he said, but a working group of agencies will report this summer on ways of legalizing dietary supplements to the CBD. One way to shorten the elaboration of the rules, he said, could be that Congress passes a specific law for products.
CBD regulators, companies and investors still have some issues to deal with.
Write to Bill Alpert at [email protected]
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