Could the DEA’s New Proposal Boost Cannabis Research?



Yesterday, the US DEA (Drug Enforcement Administration) announced it is planning to increase cannabis production for research in 2020. However, the agency plans to cut the production of five other Schedule II opioid controlled substances.

The DEA stated that the number of individuals registering for cannabis research rose by 40% from 384 in January 2017 to 542 in January 2019, increasing the need for cannabis supplies. Therefore, it plans to increase cannabis production from 2,450 kilograms in 2019 to 3,200 kilograms next year.

In the press release, DEA acting administrator Uttam Dhillon said, “The aggregate production quota set by DEA each calendar year ensures that patients have the medicines they need while also reducing excess production of controlled prescription drugs that can be diverted and misused.”

He added, “DEA takes seriously its obligations to both protect the public from illicit drug trafficking and ensure adequate supplies to meet the legitimate needs of patients and researchers for these substances.”

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Good news for cannabis players

Currently, federal laws prohibit cannabis. However, 11 states have legalized marijuana, and 33 states have legalized the use of cannabis for medical purposes. Many cannabis players are focusing on research to make a case for legalizing cannabis at the federal level. The DEA’s new proposal could provide companies with enough marijuana to conduct their research.

Stock performance

This year, the cannabis sector has underperformed the broader equity market. The ETFMG Alternative Harvest ETF (MJ) and the Horizons Marijuana Life Sciences Index ETF (HMMJ) have returned 3.1% and 5.2%, respectively. Meanwhile, the S&P 500 has risen 19.7%.

This year, Aurora Cannabis (ACB) had risen 25.5% as of yesterday. The company reported its fourth-quarter results yesterday after markets closed. Its revenue of 98.9 million Canadian dollars was significantly lower than analysts’ estimate of 108.3 million, prompting ACB stock to fall yesterday after the release.

Canopy Growth (WEED) (CGC) stock has fallen 1.3% year-to-date. The company reported dismal fiscal 2020 first-quarter results on August 14, prompting its stock to fall. However, at the Barclays 2019 Global Consumer Staples Conference on September 4, Canopy CFO Mike Lee expressed optimism on the company’s future. To learn more, read Canopy Growth: Key Takeaways from Its Investor Call.

This year, Aphria (APHA) stock has risen 21.3%. The company reported strong fourth-quarter performance on August 1, beating analysts’ top- and bottom-line estimates.


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