Why Big Pharma May Not Be Cashing in on Medical Marijuana

Prohibition against marijuana seems to be soon nearing an end, partially motivated by Colorado’s tax windfall since its passage of Amendment 64, reporting over $3.5 million in revenue for February from recreational and medical dispensaries alone. Attorney General Eric Holder stated on Friday he is willing to discuss downgrading marijuana from its current status as a Schedule I drug and Maryland is poised to be the latest state to decriminalize small amounts of possession. As international healthcare giants Bayer and Novartis (NYSE:NVS) see its profit potential rise from its distribution partnerships with GW Pharmaceuticals (NASDAQ:GWPH), maker of cannabinoid-based nasal spray Sativex, why haven’t major American pharmaceuticalcompanies joined the “green rush?”

While Sativex is still in Phase 3 testing with the FDA and not yet available in the U.S. (it has inked a deal for future domestic distribution through Japanese pharmaceutical company Otsuka), it is currently approved for use in 23 other countries. Two other cannabinoid-based drugs, Marinol and Cesamet, have been prescribed for years to combat nausea brought on by chemotherapy, but neither have caused as much of a market stir as Sativex has. Shares of GW Pharmaceuticals have gone through the roof this year, with a current valuation of $923 million despite sluggish 2013 sales. Additional buzz surrounding GW’s anticipated release of Epidiolex, a cannabidiol-based oil used to treat a type of childhood epilepsy, into the U.S. market later this year helped the company raise $90 million for research and development on the NASDAQ back in January.

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