Marijuana stocks were down Friday as the Food and Drug Administration began its first public hearing on CBD with a cautionary note.
XThe hearing is a listening session, and public comments are being taken through July 2 as the FDA gathers evidence on how effective food products infused with the nonintoxicating compound are. But it could take years for a regulation on CBD to be drafted and implemented.
CBD is claimed to have therapeutic benefits. It has been touted as being able to treat medical issues such as inflammation and epilepsy. Indeed, drugstore giants CVS Health (CVS) and Walgreens Boots Alliance (WBA) are putting CBD products on shelves. But research on CBD's exact therapeutic qualities is scarce.
Many people use it for its mellowing, anti-inflammatory, nonpsychoactive effects. Along those lines, more cannabis businesses have also made CBD for pets.
But Acting FDA Commissioner Ned Sharpless began with a warning about the products and questioned how safe they are.
"There are real risks associated with (THC and CBD), and critical questions remain about the safety of their widespread use in foods and dietary supplements, as well as other consumer products — including cosmetics, which are subject to a separate regulatory framework," Sharpless said in a transcript of his prepared remarks obtained by CNBC. "Given the new interest in marketing cannabis products across the range of areas FDA regulates, we will need to carefully evaluate how all these pieces fit together in terms of how consumers might access cannabis products."
He pointed out that while there has been an "explosion of interest" in products containing CBD, the actual knowledge on their effects is "scant." Sharpless also said there are important reasons drugs are generally prohibited from being put into food, such as regulation of dosages. He said making an exception for CBD would be "new terrain" for the administration.
Aurora Cannabis (ACB) sank 5% on the stock market today. Among other marijuana stocks, Tilray (TLRY) fell 2.8%, Cronos Group (CRON) tumbled 5.5%, and Canopy Growth (CGC) gave up 4.6%.
Innovative Industrial Properties (IIPR), a profitable cannabis-focused REIT, ended essentially flat. The ETFMG Alternative Harvest ETF (MJ) lost 3%, and the AdvisorShares Pure Cannabis ETF (YOLO) eased 3.6%.
FDA Hinted At Path To Legalization
Former FDA Commissioner Scott Gottlieb said last year the agency is looking for "pathways" to legalize the sale of CBD oil and other compounds derived from marijuana in food, beverages and supplements. He made the comment after President Donald Trump signed the farm bill, which legalized hemp last December.
Hemp was removed from the Controlled Substances Act, but the FDA's authority to regulate products was retained.
Principal Deputy FDA Commissioner Amy Abernethy tweeted last week that while the agency is working to determine a potential regulatory path forward for CBD products, it is also looking to "better understand potential risks of CBD" to children, adolescents, pregnant and lactating women, and animals.
Marijuana Stocks Make CBD Plays
Market research firm Brightfield estimates that U.S. CBD sales will stretch 55% higher to $648 million in 2019. There has been a swell of interest in CBD, and marijuana stocks have been rushing to consolidate and offer new products.
Earlier this month Canopy Growth said it is buying This Works, a London-based skin care company, for around $55 million. Canopy Growth stock and other marijuana stocks mostly rose. The all-cash purchase will bolster its plans to sell more hemp-derived, CBD-based wellness products to consumers. The company has been trying to stretch that business across more parts of the world, including the U.S. and elsewhere.
Last month, the firm also said it had secured a facility in New York as part of its plans to build a hemp-production park in the state. The company plans to invest $100 million to $150 million in its production efforts in those states. It has also secured the rights to acquire U.S. cannabis company Acreage Holdings if marijuana is federally legalized in the U.S. Acreage is famous for having former House Speaker John Boehner on its board.
Earlier this month Aurora Cannabis said it had worked out a CBD research deal with mixed martial arts company UFC. Studies into CBD products will be conducted at the UFC's Performance Institute in Las Vegas. It will be carried out in collaboration with the MMA organization's sports performance team and athletes who choose to participate in the studies.
Tilray, a rival of Canopy in Canada, already has plans to help put CBD-infused beauty products and other health products in mainstream retail stores in the U.S. Stores like Barneys New York and mall operator Simon Property Group (SPG) have also worked out deals to sell CBD beauty or personal care products.
Marketing company Level Brands (LEVB) last year said it would launch CBD supplements under entrepreneur and former model Kathy Ireland's Health & Wellness brand.
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