Cannabis Stocks Tumble After FDA Finds Conflicting Views on CBD

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Cannabis stocks on the whole have been holding their breath since late last week when the U.S. Food and Drug Administration (FDA) began a hearing on whether cannabinoids (CBD) should be used as an ingredient in consumables.

Stocks overall dipped on both Thursday and Friday, ending the month of May on a further decline. While the industry as a whole hoped that the hearing could prove fruitful, it appears that the end results were rather mixed.

After conducting their first-ever hearing on cannabis as well as CBD all day on Friday with over 100 speakers offering their viewpoints on the subject, including health professionals, researchers, manufacturers, and critics, the end result of the hearing has been rather neutral.

Many in the industry had expected that CBD would be legalized alongside hemp with the 2018 Farm Bill. While industrial hemp production did pass into effect, CBD wasn’t included in the law and was instead placed under the jurisdiction of the FDA, a move that disappointed cannabis enthusiasts.

While the compound is widely believed to have wellness properties, mainly treating inflammation, anxiety, chronic pain, and other conditions, there still is a lack of solid clinical evidence verifying this in the mainstream medical community.

Although the FDA did say they vied CBD as a drug, meaning that it can’t be added to food or beverages, they were willing to throw a bone to the industry and say that due to strong levels of public interest, the agency would consider other pathways to regulatory approvals.

The main reason why CBD falls under the FDA’s jurisdiction came down to the fact that it was the main ingredient in the only cannabis-based drug that received the agency’s approval, GW Pharmaceuticals (NASDAQ: GWPH) Epidiolex, a treatment for childhood epilepsy.

Overall, the hearing ended up highlighting “the messy state of the industry, with widespread use of CBD products with minimal standardization, evidence for benefit and understanding of safety profile,” said Evercore ISI analyst Josh Schimmer in a note according to MarketWatch. He added that the discussion at the hearing was “at times quite absurd with outlandish claims, inconsistent messages and an undercurrent of potential safety concerns. Considering the extent to which the CBD cat is out of the bag, it remains to be seen how the FDA will regulate this industry; it might not have adequate resources to fully monitor and police it.”

Without the good news that the industry so sorely hoped would emerge from the hearing, cannabis stocks tumbled today. Tilray (NASDAQ: TLRY) was among the largest losers, falling 8.8 percent. Aurora Cannabis (TSE: ACB)(NYSE: ACB) dropped a drastic 6.1 percent, while Green Growth Brands (CNSX: GGC) lost almost 15 percent.

Other major declines came from Aphria (TSE: APHA)(NYSE: APHA), which fell 5.6 percent while the benchmark’s for the industry, The Horizons Marijuana Life Sciences ETF and the ETFMG Alternative Harvest ETF, both were down 3.4 and 2.7 percent respectively.

Overall, it was a poor start to the month of June, which added to the significant losses already seen by the industry in May.

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