The cannabis markets have been quite jittery for the past few days. Anticipating a major Senate hearing that will weigh in on banking regulations that tie into the sector, it’s created an emotional environment in the marijuana market that is sensitive to news, whether good or bad.
Tuesday saw a couple of adverse developments in the market which sent shares of companies falling across the board. The biggest move came from the U.S. Food and Drug Administration (FDA), which gave a stern warning against Curaleaf (OTC: CURLF) to dial down on the health claims it has been making for its cannabinoid (CBD) products.
Curaleaf on the hot seat
The FDA sent a warning letter to Curaleaf, saying that the company is “illegally selling unapproved products containing cannabidiol (CBD) online with unsubstantiated claims that the products treat cancer, Alzheimer’s disease, opioid withdrawal, pain and pet anxiety, among other conditions or diseases.”
The agency asked for a response from the company with 15 business days on how they will address the violations and correct this supposed mistake. “Failure to correct the violations promptly may result in legal action, including product seizure and injunction,” said the letter.
This is the first time the FDA has made such a major move against a multi-state operator and is expected to have ripple effects throughout the entire sector. CBD is widely believed to have significant health benefits, but companies are waiting for clearer regulations from the FDA on how they market their products before selling them to the public.
The agency views CBD not as a food ingredient but as a drug since it’s the main component in the only cannabis-based drug it has approved, Epidiolex, which treats severe childhood epilepsy.
Until then, the FDA has told companies that they can’t add CBD to edibles, but they would be willing to accept it in topical products as long as they didn’t make significant health claims. However, some experts have dismissed the impact that his letter from the FDA will have.
Seaport analyst Brett Hundley went so far as to say that the letter was a “non-event” for the company and that now the stock is a good buying opportunity after falling on Tuesday. He doubled down on his “buy” rating for Curaleaf, with a target price of $11, up around 50 percent from its current levels.
In response to the warning from the FDA, Curaleaf tumbled by around 7.3 percent and was among the worst losers in the sector today. The past few months haven’t been that great for the company, whose shares have almost doubled from $6 to $11.28 by late April before tumbling back down and giving back almost all of those gains.
Curaleaf is still considered one of the top MSOs in the U.S., and will likely bounce back from what’s, for the most part, a temporary setback.
Curaleaf Company Profile
Curaleaf is headquartered in Wakefield, Massachusetts, and cultivates and sells medicinal and recreational cannabis in the U.S. The company has operations in 19 states, including the assets from the Cura Select and Grassroots acquisitions.
Curaleaf offers multiple products under three brands: Curaleaf, Curaleaf Hemp, and UKU Craft Cannabis. The company does not currently export into the global medical market as Canadian cannabis producers typically do. – Warrior Trading News