Cannabis stocks mostly higher as sector braces for FDA hearing on rules for CBD

Cannabis stocks were mostly higher Tuesday, as investors braced for a Friday hearing by the U.S. Food and Drug Administration on how to regulate cannabis and its popular ingredient, CBD.

The substance can be extracted from the cannabis plant or from hemp, which has caused confusion ever since hemp was legalized as part of December’s 2018 Farm Bill. CBD was not legalized in that bill, but rather it was moved under the purview of the FDA, which immediately said companies cannot add it to food or beverages, as many are hoping to do. That’s because it’s the main ingredient in the only cannabis-based drug to win FDA approval.

The FDA is under pressure to create a regulatory framework to allow the use of CBD to treat such ailments as inflammation and anxiety, but it has said it may look to Congress to act instead, if it’s unable to move in a timely manner.

The regulator has been cracking down on companies making claims for CBD products in treating serious illnesses such as Alzheimer’s disease.

The FDA is not expecting the hearing to produce concrete decisions, but rather to serve as a platform for all parties to put forth their views. “Nonetheless, the hearing is a big deal for at least two reasons,” said Ricardo Carvajal at FDA Law Blog. First, although CBD has been in the news, the hearing is not just about CBD or even hemp. It’s about cannabis, he wrote.

“Second, the hearing will give different stakeholders a very public forum in which to plant their respective flags, and to draw attention to the issues they view as critically important,” Carvajal wrote. “Potential benefits of cannabis and its derivatives? Check. Potential safety concerns? Check. Protection of investments in pharmaceutical development? Check. Consumer access to safe and beneficial dietary supplements? Check. That alone would be worth the price of admission (if admission weren’t free).”

Meanwhile, the Transportation Security Administration changed its stance on hemp-derived CBD in carryon or checked luggage over the holiday weekend. The TSA is now allowing products or medications that contain hemp-derived CBD “as long as it is produced within the regulations defined by the law under the Agriculture Improvement Act 2018.” Previously, the TSA’s policy on medical marijuana was that it was not allowed to be carried on planes. “We’ve been sharing our vision and plans to operate in legal markets in the U.S. to provide legal cannabis experiences powered by HEXO,” said Hexo Chief Executive and co-Founder Sebastien St-Louis in a statement.

Acreage said five of its senior executives have agreed to extended lockup agreements for their own shareholdings, consistent with the terms described in the company’s May 17 information circular. Canopy has acquired the right to buy Acreage in a deal valued at $3.4 billion, as soon as it can legally participate in the U.S. cannabis sector, either through a bill like the current STATES Act that some lawmakers are backing, or through a full removal of the federal ban.

Last week, Canopy said the deal has the backing of private-equity firm Cresco Capital Partners LLC, with managing partner Matt Hawkins arguing that it brings a much needed infusion of capital to an industry that is starved of cash.

“Our executives remain 110% committed to the long-term Acreage story,” said Acreage CEO Kevin Murphy in a statement on Tuesday. Canopy shares were up 1.9%.