By Omar Sacirbey and John Schroyer
MassRoots lands in financial hot water, GW Pharmaceuticals takes a step closer to winning U.S. approval for its marijuana-based drug, and a political veteran urges caution heading into the elections.
Here’s a closer look at some notable developments in the marijuana industry over the past week.
MassRoots in hot water?
That’s the assessment of Nic Easley, the CEO of Denver’s 3C Consulting. He looked closely at the company’s situation following news that the cannabis-themed social network failed to make almost $1 million in payments to creditors. MassRoots also shed 14 of 33 full-time jobs.
Easley was skeptical.
“I can’t imagine a turnaround by the end of the year. Their claim that they’re going to be able to do that … is not feasible,” he said.
“It’s only going to get worse before it gets better for them,” Easley predicted. “They do a great service that nobody else does, so there’s always the chance that some other bigger group buys them up and uses them as a subsidiary, and that would be the best way to appease their shareholders. Because then they’ll have at least some sort of return.”
MassRoots should serve as a warning to other cannabis companies, Easley said: Think long and hard before going public, as MassRoots did in April 2015, less than two years after its founding. Complying with Securities and Exchange Commission requirements can often cost around $250,000 a year, he said.
“Running a public company requires greater resources and a demand for significant costs. It’s like two companies at once,” Easley said.
That means the upside – greater access to capital – often isn’t enough to offset the difficulties of running a public company.
“You use the right tool for the right job. And when they went public, it was like using a mallet to crack eggs,” Easley said.
The first MJ-based drug?
Epidiolex, the cannabis-based epilepsy drug being developed by GW Pharmaceuticals, took a key step toward receiving U.S. Food and Drug Administration approval.
The drug could be available to the public in 2018. If so, Epidiolex could be the first marijuana-based drug to win U.S. regulatory approval.
U.K-based GW said its CBD-based drug significantly reduced seizures in children with Lennox-Gastaut syndrome – a rare and hard-to-treat form of epilepsy – during phase 3 FDA-approved trials. The company’s stock soared.
GW is expected to file a marketing application with the FDA in the first half of 2017. After that, the DEA has three months to give Epidiolex a drug Schedule designation.
Maxim Jacobs, a health-care analyst for New Jersey-based Edison Research, is confident the DEA will classify Epidiolex so it will be available to the public.
“If they can put heroin in a pill, why not cannabis,” Jacobs said, referring to opiate-based painkillers like Fentanyl.
A new question is whether another company will buy GW. It’s considered an acquisition target.
GW Pharma is a relatively small player that would be affordable for pharmaceutical companies.
“It wouldn’t be terribly expensive in the grand scheme of things,” Jacobs said, noting that Pfizer just paid about $14 billion for Medivation, a U.S. biopharmaceutical company.
The most likely suitors are companies with a “neurology salesforce” that targets neurology departments and physicians, Jacobs said.
“If they already have a salesforce that’s hitting these doctors for other drugs, you can just put this in their bag and it needs very little additional spending,” Jacobs said.
What companies might be possible suitors? Pfizer, Novartis, Eisai, and Valeant Pharmaceuticals, among others, Jacobs said.
“There’re a lot of companies that would be interested in them,” Jacobs added.
Marijuana legalization advocates received a flurry of polls showing voter support for recreational marijuana legalization referendums in three states and medical marijuana ballot measures in two others. But with Election Day looming on Nov. 8, the battle is just heating up.
“It would be a mistake to assume any of these are a sure thing in either direction,” Mason Tvert, communications manager for the Marijuana Policy Project, said.
The polls were similar in the three states voting on rec.
In Nevada, according to a KTNV-TV 13 Action News/Rasmussen Reports study, 53% of voters support Question 2, as the legalization effort is known, 39% oppose it, and 8% are undecided. In Maine, those numbers were 53%, 38% and 10%, respectively, according to the Portland Press Herald, while in Massachusetts they were 53%, 40%, and 7%, according to a WBC/UMass Amherst Poll.
The Massachusetts poll is notable: It’s the second in less than three weeks to show voters backing the legalization measure. Just a few months ago polls showed voters split over the measure or rejecting it.
On the medical front, nearly 69% of Florida voters said they back a legalization measure there, while in Arkansas, voters were split 49% for and 43% against one legalization measure, while a second MMJ ballot initiative garnered only 36% support.
Tvert warned against complacency among legalization advocates. In Florida, anti-referendum forces have received millions of dollars in donations from wealthy opponents like casino magnate Sheldon Adelson and supermarket heiress Carol Jenkins Barnett.
Arizona also is getting flooded with anti-legalization money, Tvert added.
“This is the time to step up because it’s going to come down to the wire and in some of these states it’s going to be incredibly close,” Tvert said.
Omar Sacirbey can be reached at firstname.lastname@example.org
John Schroyer can be reached at email@example.com