Cannabis stocks fell Friday, weighed down by the selloff in the broader market after President Donald Trump opened a new front in his trade war, this time with Mexico, and as a key hearing aimed at creating a regulatory framework for CBD kicked off.
The Dow Jones Industrial Average DJIA, -0.78% tumbled 321 points in early trade, while the S&P 500 SPX, -0.76% was down 37 points, after Trump said he would impose tariffs on imports from Mexico until that country takes measures to stem the flow of immigrants into the U.S. from bordering countries. The news came amid reports that China is planning fresh retaliatory moves against the U.S.
For more, see: Stock futures tumble amid Trump tariffs on Mexico, fresh China trade threat
Against that backdrop, the first speakers were addressing an FDA hearing seeking information and data on cannabis and its ingredients that will last until 6 p.m.
The FDA will hear from all of the parties looking for clarity on the rules for CBD, which is widely believed to have wellness benefits, especially in dealing with inflammation, pain and anxiety. But the substance hasn’t been deeply researched and is viewed by the FDA as a drug, because it is the key ingredient in the only cannabis-based drug to receive FDA approval, GW Pharmaceuticals GWPH, +0.40% pidiolex, a treatment for severe forms of childhood epilepsy.
Read now: An entire industry is being built around CBD, but we really don’t know that much about it
Adding to the complication, CBD, which can be derived from the cannabis plant or from hemp, was expected to be legalized along with hemp in last year’s Farm bill. But instead, regulation of CBD was moved over to the FDA, which immediately told companies it cannot be added to food nor drink.
Friday’s hearing is expected to field evidence on the merits of CBD from those companies that are hoping to launch edibles and beverages containing the substance, as well as from makers of topicals and cosmetics. The FDA has been cracking down on companies making claims that it can help to treat serious illnesses, as those aren’t backed by science, but many Americans are using forms of CBD to treat a range of ailments, and in some cases are buying it from mom-and-pop stores.
See: This company wants to be the Bacardi of cannabis — and it has plans for an IPO
Former FDA Commissioner Scott Gottlieb has said if the FDA is unable to come up with regulations quickly, it would be up to Congress to create a framework. Friday’s hearing isn’t expected to yield immediate results and the FDA is set to create a working group to continue the effort, but speakers will include cannabis industry pioneers, entrepreneurs, politicians, scientists and doctors, many of whom have played a role in legalizing cannabis and hemp.
See also: In ‘the marijuana ghetto’ at Davos, Canopy Growth found its American pot partner
One of the early speakers, Philip Blair, a family physician who serves as an adviser for CBD products company Elixinol LLC, told the hearing he has treated patients using hemp-derived CBD for more than five years.
“High-quality, full-spectrum, hemp-derived CBD has been absolutely safe for all my patients over the last five years, while providing significant benefit,” he said, though he did acknowledge that some patients had mild side effects like temporary headache and fatigue.
Among individual stocks, Green Thumb Industries shares GTBIF, -1.40% rose 0.7%, after the company reported earnings late Thursday with revenue that slightly topped the consensus estimates and per-share losses that met expectations. The company reported first-quarter net losses of $9.7 million, or 6 cents a share, compared with losses of $1.6 million, in the year-ago period. It did not provide a per-share figure.
Revenue rose to $27.9 million from $10.9 million in the year-ago period. Analysts surveyed by FactSet had estimated revenue of $27.4 million. Three analysts polled by FactSet modeled first-quarter losses of 6 cents a share.
Benchmark analyst Mike Hickey said the report was better than expected and that he’s expecting the proposed acquisition of Integral Associates to be a strong contributor to earnings. That deal is expected to close in fiscal 2019.
“We believe continued retail rollout, acquisitions and related national operational scale will drive sales and profitability growth,” Hickey wrote in a note to clients. The analysts rates the stock as buy with a $17 price target that is about 55% above its current trading level.
Don’t miss: Where Aurora sees cannabis opportunity beyond selling buds in Canada
At GMP, analyst Robert Fagan agreed. He highlighted the company’s advantage as one of fewer than three multi-state operators to be awarded a license for retail in Massachusetts recreational channel with the first sales already taking place in May at its Amherst location.
“Management indicated performance is strong thus far with business doubling from its prior medical base,” Fagan wrote in a note to clients. “While growth could slow over the summer due to the migration of Amherst’s student population, we expect robust sales in the Fall as GTI is one of only three stores in the surrounding area which includes the Five College Consortium.” Fagan also rates Green Thumb as a buy.
Curaleaf Holdings Inc. shares CURLF, -7.29% slid 5%, after the company posted weaker-than-expected revenue for its first quarter. Curaleaf logged first-quarter net losses of $10.2 million, or 2 cents a share, compared with losses of $2.3 million, or a penny a share, in the year-ago period.
Revenue rose to $35.3 million from $9.1 million in the year-ago period. The company reported managed revenue, which the company defines as including revenue from entities that Curaleaf has management contracts, rose sequentially to $40.7 million from $34.9 million in the fourth quarter.
The three analysts polled by FactSet estimated first-quarter losses of 2 cents a share and four analysts polled by FactSet modeled revenue of $37.5 million.
Elsewhere in the sector, Tilray Inc. shares TLRY, +0.36% fell 3.8%, Aurora Cannabis Inc. ACB, -2.31% ACB, -2.31% was down 3.6% and Cronos Group Inc. CRON, -2.21% CRON, -3.28% was down 0.8%.
Valens GroWorks Corp. VGWCF, -3.73% was up 1%, Organigram Holdings Inc. US:OGRMF was down 3.7% and Aleafia Health Inc. ALEF, -1.35% ALEF, -1.35% was down 1.6%.
GW Pharma PLC GWPH, +0.40% was down 0.2% and Green Growth Brands Inc. GGBXF, -3.24% was down 2.9%. Aphria Inc. APHA, -2.17% APHA, -1.82% was down 1.9%. Canopy Growth Corp. WEED, -2.90% was down 4%.
Read: How living near a marijuana dispensary affects your home’s price
The Horizons Marijuana Life Sciences ETF HMMJ, -2.28% was down 3.6%, and the ETFMG Alternative Harvest ETF MJ, -1.23% was down 2.9%.
Don’t miss: Facebook won’t allow marijuana sales on its platform
Cannabis Watch: See more of MarketWatch’s coverage of cannabis companies
Max A. Cherney and Sarah Toy contributed to this article
Add Comment