There’s a growing movement for cannabis legalization in the U.S. and around the world. And an essential part in winning regulators over is in showing them that the market can be depended govern itself. Nevertheless, the problem for the industry is that there’s excessive excitement surrounding its development potential customers, and this is when companies in some cases lose sight of whatever else.
Here are a couple of examples where the industry’s been doing itself more damage than excellent.
1. Making claims that aren’t accurate or backed by strong information
Patients take cannabidiol (CBD) for its health benefits. Marijuana business GW Pharmaceuticals ( NASDAQ: GWPH) has gained from strong demand for its Epidiolex drug, which can deal with kids with 2 unusual forms of epilepsy– Lennox-Gastaut syndrome and Dravet syndrome. The U.S. Food and Drug Administration (FDA) authorized the drug in2018 It’s the first and only cannabis-based drug authorized by the FDA.
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The growing appeal and approval of Epidiolex has led to substantial growth for the company.
There might be a lot more growth for the business now that the European Commission likewise approved the drug, a decision that stands in all the countries in the European Union.
And so there’s a lot at stake for business to persuade consumers that CBD is helpful. The problem is that in some cases, companies have actually been making claims that might be deceptive. In November, the FDA sent cautioning letters to 15 cannabis companies that were in infraction of its rules, ranging from marketing items as dietary supplements, to adding CBD to food, and to merely making unapproved claims.
Multistate marijuana operator Curaleaf Holdings ( OTC: CURL.F) received a warning letter last July, with the FDA keeping in mind a number of circumstances where the business was making unapproved claims. Amongst the claims the FDA alleged Curaleaf was making was that CBD might be reliable in treating Parkinson’s illness and Alzheimer’s, which it “worked in killing human breast cancer cells.”
While there might be small-scale research studies where a connection’s apparent between CBD and a particular disease, one of the issues with cannabis research is that in many cases, it’s far from conclusive, and claiming otherwise is not a clever service relocation.
2. Not doing enough to avoid marketing to kids
The one thing that there’s general agreement on in the market is that pot ought to be off-limits for kids.
More egregious examples of the industry’s recklessness have happened in the branding department. Last year, a Canadian animation studio sued a dispensary in Oklahoma for infringing on its logo. The Treehouse Dispensary was utilizing an image that resembled Treehouse TELEVISION, a channel that airs kids’s shows in Canada. The animation studio won a default judgment versus the cannabis company.
More recently, in Canada, a Vancouver-based dispensary entered difficulty for using a name and logo comparable to popular toy business Toys “R” Us, called Herbs “R” Us. A judge ordered the dispensary to ruin anything that had the offending logo design on it and pay damages of 30,000 Canadian dollars to the toy business.
Even if the shops would not have sold their products to kids, these circumstances show that pot companies aren’t making major attempts to restrict their advertising and marketing of marijuana to grownups.
Why should financiers care?
Financiers may scoff at these issues, thinking they’re just legal issues that any industry deals with.
Even more, the industry’s public image can go a long way in forming attitudes that are important in moving legalization forward. These examples are tips of how far the market still needs to go in legitimizing itself and winning over the electorate.
Financiers ought to care about these issues since the longer the market’s seen as high-risk, the more speculative and volatile it’ll be. And that makes pot stocks unsightly buys for long-term investors seeking stability and predictability in their returns.
While these problems will not take away from the success that a business like GW’s delighted in hence far, the industry’s image certainly isn’t doing the stock any favors.
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.”>