With doctors now having the sole responsibility of deciding who has legal access to medical marijuana in Canada, many physicians seem reluctant to recommend the drug given the numerous questions about its safety and efficacy. All of this is creating more uncertainty for this ‘budding’ industry and some of the stocks associated with this sector are starting to show signs of investor fatigue.
In the first part of our medical marijuana series (read it here), we looked at the supply side of the ‘budding’ Medical Marijuana industry in Canada and how a flood of potential growers could drive down the price of this product, possibly pushing small producers out of the business.
As for demand, Canadian doctors have now become a key driver of this sector. Health Canada officials originally decided who had legal access to medical marijuana but has since shifted that responsibility to doctors with the Marijuana for Medical Purposes Regulations that came into effect on April 1, 2014.
The Canadian Medical Association (CMA), meanwhile, seems none too thrilled about their members having these new powers, stating in a recent news release that it “remains adamant that it will not throw its support behind medical use of the drug until numerous questions about safety, efficacy, dosage and delivery have been answered.”
A recent Huffington Post article stated that about 60% of doctors surveyed by the CMA in 2012 said they seldom or never support patient requests for access to marijuana. Physicians instead would prefer to wait until third-party clinical trials are published in peer-reviewed journals and most would not prescribe anything that’s not listed in the Compendium of Pharmaceuticals and Specialties, which is published by the pharmaceutical industry.
For its part, licensed producers such as MedReleaf Corp. have made doctor education about cannabis one of its priorities, this according to the Huffington Post. Unfortunately for the growers, though, marijuana still has stigma attached to it, so much so that most doctors and hospitals don’t want their names associated with any clinical studies that involves its use. Clinical trials are also funded largely by pharmaceutical firms, due to the costs involved, and since cannabis can’t be patented there’s little financial incentive for these companies to do so.
Also complicating a doctor’s decision is the fact that there is hundreds of varieties of marijuana plants, all of which have different chemical compositions.Documented side effects of prolonged marijuana use include impair memory, judgment, attention and motor control, as well as diminished productivity and potential lung irritation. Regular cannabis users have also been known to suffer from withdrawal symptoms.
Drivers under the influence of marijuana are more likely to suffer injuries in car crashes, and recent studies have linked marijuana’s chemical component THC, or Tetrahydrocannabinol, to unknown psychosis in teenagers.
All of these factors related to doctor-driven demand have contributed to the uncertainty surrounding this sector and has made it more difficult for investors and speculators to make money in these marijuana-related stocks, especially some junior mineral exploration companies that have recently expressed a desire to enter the medical marijuana industry due to the challenging environment for drilling-related financings.
In fact, some of the more popular plays in Canada have pulled back substantially from its 52-week highs. Satori Resources Inc. ( TSXV: BUD) is off about 77% to its current price of $0.04, while Next Gen Metals Inc. ( CSE: N) has also retreated by 77% to its recent price of $0.17. Even licensed producer Tweed Marijuana Inc. ( TSXV: TWD) has seen a 40% haircut from its all-time high reached just about two months ago.
While it’s too soon to tell whether the shine has permanently come off of this sector, investors and speculators are likely becoming more discriminant as to where they place their bets.
Please continue to follow SmallCapPower.com for more insights into the investment environment for Canadian medical marijuana stocks.
