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Wednesday, December 14, 2016

Cannabis Industry Should Benefit From The 21st Century Cures Act

On December 7, 2016, the U.S. Senate passed the 21st Century Cures Act. President Obama said he plans to sign the bill into law as soon as it hits his desk. The Act, which is designed to facilitate FDA approval of new drugs and medical devices, is a major win for the Pharmaceutical and Medical Device industry, and its supporters such as PhRMA and AdvaMed. Industry spokespersons praise the Act as a way bring about more innovation and get treatments to patients faster. The bill passed by an overwhelming 94-5 and 326-24 majority.

The 21st Century Cures Act will enhance current FDA programs and allow for a quicker path for breakthrough pharmaceutical products targeting debilitating diseases with limited alternative treatment options.The measure aims to benefit people with chronic diseases, with areas of mental illness and opioid addiction / chronic pain getting specific attention. The U.S. NIH will get $4.8 billion in new funding to specifically focus on new cures and innovations in biomedical research.

A Big Win For The Cannabis Industry

Importantly, the Act directs the U.S. FDA to make decisions based on the use of “real world evidence” for approval of new indications for FDA-approved drugs. The use of observational studies, patient input, anecdotal data, and other retrospective research greatly reduces the cost and time to market compared to conducting large randomized clinical trials. This should increase the odds of success as the FDA may focus less on objective measures and prohibitively expensive placebo-controlled randomized clinical trials.

The cannabis industry should benefit greatly from the passing of the Cures Act. The medical benefits of marijuana, or more specifically, cannabinoids, are real. There is no shortage of literature supporting the medical benefits of cannabinoids. Hundreds of peer-reviewed publications exist linking therapeutic benefit in the treatment of mental health disorders like PTSD, Parkinson's, Huntington's, restless leg, epilepsy, multiple sclerosis, and traumatic brain injury. However, the most common uses of cannabinoids or medical marijuana are in glaucoma and in chronic and neuropathic pain. In fact, so accepted is the antiemetic effect of medical marijuana that it is now common practice for many terminally ill cancer patients.

That being said, despite the overwhelming real-world, observational, and anecdotal evidence of therapeutic effect to marijuana, U.S. FDA approval of synthetic cannabinoids tallies only two products and less than $200 million in sales. These are the antiemetic drugs Marinol® (dronabinol) by AbbVie and Cesamet® (nabilone) by Valeant/Meda. By signing the bill into law, President Obama is directing the FDA to look at therapeutic options like medical marijuana and synthetic cannabinoids and decide, "Is it safe and do people feel it works? If so, let's get it approved and to patients as soon as possible!"

A Tremendous Opportunity

According to the Kim Foundation, 26% of American's over the age of 18 suffer from some sort of mental health disorder, including depression, anxiety, OCD, PTSD, schizophrenia, bipolar disorder, and ADHD. That's 60 million people! These are areas where medical marijuana is commonly used in the U.S. In fact, many states already approve the use of medical marijuana for conditions such as insomnia, epilepsy, depression, anxiety, and PTSD. The passing of the 21st Century Cures Act will allow biopharmaceutical companies to take this type of real-world data and expedite new or abbreviated drug applications for synthetic or purified cannabinoids targeting this enormous market.


According to data from the 2012 National Health Interview Survey (NHIS), 11.2% of American adults (~25 million people) have experienced some form of pain every day for the past three months. The study also found that even more people, nearly 18%, suffer from "severe levels" of pain. The NIH estimates over 2 million Americans take opioids on a daily basis. Nearly 80% will suffer from abdominal and GI related issues. The American Society of Addiction Medicine estimates 25% of chronic opioid users become addicted to the medications and suffer debilitating long-term health consequences.

As noted in the bar graph above, chronic pain is the most common use of medical marijuana in the U.S. today. The 21st Century Cures Act earmarks specific funding to fight the U.S. opioid epidemic and find new, innovative medications for patients suffering from chronic pain. I think cannabis will be at the center of this focus. 

Conclusion

The U.S. government is making an effort to streamline the drug approval process for "known safe and effective" medications by passing the 21st Century Cures Act. Target areas of benefit are cancer, mental health disorders, and chronic pain. These are among the core areas of focus for many legitimate biopharma companies in the cannabis industry. The Cures Act provides a roadmap to get these medications that are used today by millions of patients for perhaps off-label or unapproved indications through the FDA process in an expedited manner. This potentially lowers the bar for approval and certainly reduces the cost and time small biopharma companies must spend to get through this process. 

The benefits of cannabinoids and medical marijuana are known throughout the world, and in the households of patients living in states with approved medical marijuana use in the U.S. I believe the best area for investment in this industry is with biopharma companies working on safer, more effective purified and synthetic cannabinoid products. Congress just sent a bill to the President that will allow these compounds an expedited path through the FDA approval process. That is very exciting for cannabis investors.

For an investment idea in the cannabis industry, see my article on Vitality Biopharma (VBIO):
Vitality Biopharma Taking Cannabinoid Research To The Next Level


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We hold no position in shares of VBIO as of this article.

7 comments:

  1. How do you justify investing in marijuana companies if marijuana is becoming legal across the USA? Why wouldn't people just smoke pot instead if it really works?

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    1. Well, that's a really interesting and very good question!

      Firstly, there's a huge difference between marijuana and cannabinoids. Cannabinoids are a diverse class of chemical compounds found in the cannabis leaf, but not all cannabinoids are therapeutically relevant. Take Stevia as perhaps the perfect example. The Stevia leaf can be used to sweeten drinks but it's incredibly inefficient and if you've ever chewed on a Stevia leaf you'll find it to be more bitter than sweet. The sweet part of Stevia is Reb-A, so when you are seeing things sweetened by Stevia you are actually just likely consuming purified Reb-A. All the other junk (the bitter tasting stuff) is purified out.

      Cannabis is similar. There are dozens of chemicals in cannabis. Do a wikipedia search for cannabinoids and you'll learn more about THC, CBD, CBG, CBE, CBL, and CBT. Not all are therapeutically relevant and some may be more relevant in pain while others are more relevant in epilepsy, glaucoma, or inflammation. Importantly, when you smoke (or consume) cannabis you are getting all these chemicals. Some may argue this is better because it might be a combination or synergistic effect that leads to the medicinal properties. That holds some water, but if scientists can identify the exact cannabinoid that works for a specific indication, then it would surely be better to just take the purified molecule or synthetic. Case in point, no oncologist recommends chewing on the bark of the Pacific yew tree because that's where they originally found paclitaxel. Similarly, no endocrinologist recommends injecting the saliva of a gila monster because that's where they found exenatide. Drugs come from a lot of different places. They do not have to be made synthetically in a lab to be therapeutically important. I personally think things like CBD hold tremendous promise, but I don't recommend anyone with IBD or chronic pain just start smoking pot.

      Beyond the lack of efficiency is the fact that THC is what gets you high. So while that “side effect” is desirable to some, it is not desirable to all and clearly the U.S. FDA probably would be hesitant to approve a medication that has side effects that get you high. So if a company can purify out THC and only administer CBD or CBE depending on what indication they are targeting, that’s far more likely to receive approval and gain wide use in the medical community.

      The final reason is insurance coverage. Medical marijuana might not be covered by most plans. OTC personal marijuana is absolutely not covered, but a purified and FDA approved cannabinoid for a specific indication will probably be approved. Drugs that target the CB1 receptors are becoming more common (see Corbus) and once the thing gets on the market most patients will not even know it was a purified or synthetic cannabinoid.

      This is why I like the biopharma approach more than the growers or med-technology plays. I think the real breakthroughs with MM and cannabinoids will be made in the lab and purified chemicals will be made synthetic or in cell culture. Remember when Eli Lilly used to farm and harvest pigs to produce insulin!!? That sounds insane right now but it is what they used to do; that is, until they cloned the gene and started to produce recombinant insulin. That is the path cannabinoids are going and I think we are on the ground floor.

      Thanks for reading!!
      Jason

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    2. Jason, one mistake there. Corbus is targeting cb2, not cb1.

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    3. I know you have covered 22nd Century Group in past, with a focus on their tobacco related IP. Have you looked into their cannabis related IP? They have the ability to control the level of THC, much like they are doing with nicotine in tobacco. How important do you think this IP can be?

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    4. Hey Evan,

      I love the XXII technology for the OTC and medical marijuana market. I need to learn more about it to see if it makes sense from a Rx side. Companies have genetically-engineered Stevia plants to produce more Reb-A and those strains are commonly grown now in China for Reb-A purification, so XXII's platform has precedent for sure, but those are OTC / GRAS use. Maybe I'll give HS a call and speak with him on where XXII is heading with this platform from the Rx side.

      Jason

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    5. Thanks Jason. I would be very interested to hear what you think after speaking to HS. I'm invested in XXII for their tobacco IP, and don't know much about the cannabis space - would very much value your opinion.

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