Wednesday was already a rather bad day for cannabis companies overall, with most shares tumbling thanks to disappointing quarterly results. This trend seems to have continued through to Thursday as marijuana stocks continued to drop as more financial results were announced.
However, one development that has markets worried is a key hearing from the U.S. Food and Drug Administration (FDA), which will be making a ruling in the future on cannabinoids (CBD) as an ingredient.
“The Food and Drug Administration is announcing a public hearing to obtain scientific data and information about the safety, manufacturing, product quality, marketing, labeling, and sale of products containing cannabis or cannabis-derived compounds” read an announcement from the FDA’s official website. The agency will be hearing from a number of parties looking for clarity on how the department will be legislating CBD. While the compound is widely believed to have wellness properties, with even the World Health Organization commenting on this, there still is a lack of in-depth, clinical research on the subject.
Currently, the FDA treats CBD as a drug, mainly because it’s the key ingredient of the only cannabis-based drug to receive approval from the agency, GW Pharmaceutical’s (NASDAQ: GWPH) Epidiolex, which treats rare forms of childhood epilepsy.
This is something of a setback for the cannabis industry, which expected CBD to be legalized alongside hemp in the U.S. Farm Act. However, the decision to rule on CBD’s status was moved over to the FDA, which went on to say that companies can’t add the compound to food or drinks.
Former FDA Commissioner Scott Gottlieb has gone on to say that should the agency fail to come up with a regulatory scheme quickly for CBD, it will end up falling to Congress to create a framework, something which could take a while. While Friday’s hearing isn’t expected to yield any immediate results, the agency’s attitude will be watched by many in the markets closely.
In a worst-case scenario, legalization of CBD could be pushed back so far that Canada, whose government has confirmed that CBD-edibles will be legalized in a new legislative package in October 2019, would legalize the compound first.
While cannabis stocks didn’t fall as much on Thursday as they did the day before, they did drop slightly. MedMen Enterprises (CNSX: MMEN) was among the largest losers, falling 5.6 percent after the company said it would drastically cut executive salaries in an effort to cut down on costs. Overall, the company saw fiscal third-quarter net losses of $63.1 million, a worrying increase from the $16.8 million from the same time a year ago.
Tilray (NASDAQ: TLRY) also fell by 4.23 percent, while Aurora Cannabis (TSE: ACB)(NYSE: ACB) and Cronos Group (TSE: CRON)(NASDAQ: CRON) fell by 1.5 percent and 2.2 percent respectively. Green Growth Brands (CNSX: GGB) was among the largest losers of the day, however with a 6.9 percent dip on Thursday.
Overall, the past month has been a mediocre one for the cannabis sector overall, with many companies giving back much of the impressive gains they’ve made in Q1 2019.