NEW YORK (MainStreet) — Biotech was one of the top performing sectors of marijuana penny stocks in 2014, according to Viridian Capital & Research. That’s because of the anticipated advent of pharmaceutical like pot products.

“Pharmaceutical like products in a pill that are infused with THC or CBD, tested and geared towards specific maladies is one of the holy grails of the marijuana biotech sector,” said Scott Greiper, founder of Viridian Capital & Research.

Viridian Capital & Research found that the cannabis biotech sector returned 339% in 2014.

“The biggest hot button issue in pot biotech is when and if these pharmaceutical like pot products will emerge and what standards and guidelines we might see the FDA require,” Greiper told MainStreet. The top performing marijuana biotech stock in 2014 was Abattis Bioceuticals (ATTBF) with gains of 850%.

“Abattis works to create medicine for targeted, specific diseases and medical conditions,” said Greiper. “If one of their marijuana drugs gets FDA approval, it will be a huge development and more people will invest.”

Among concerns in the medical marijuana industry is that biotech companies are creating medicinal formations of different strains that will not be a pharmaceutical grade. Abattis responded by involving the company in testing.

"Abattis is a majority owner in Phytalytics, which got a provisional license to act as a marijuana laboratory in Washington to improve controls around testing of strains for specific diseases and medical conditions,” said Michael Swartz, analyst with Viridian Capital & Research.
Biotech stocks to watch in 2015 include GW Pharmaceuticals (GWPH), which manufactures Sativex, a drug containing THC and CBD that treats spasticity associated with multiple sclerosis.

"It is approved for use in other countries including Canada and is effective for relieving pain in cancer patients non responsive to non-opiod treatment,” said Matt Karnes, managing partner with GreenWave Advisors in New York. “Successful completion of phase 3 trials will likely lead the way to FDA approval.”

Another stock to watch is Nemus Bioscience (NMUS), which has an exclusive partnership with the University of Mississippi to grow for the development of various medical marijuana products.

“Because of this distinction, many investors may find the risk reward profile more favorable particularly because Nemus will have access to the patents developed under this program,” Karnes told MainStreet.

Finally, Insys Therapeutics (INSY) obtained five Orphan Drug Designations (ODD) for cannabinoid products, including an ODD to develop treatment for pediatric schizophrenia.

“Once these firms are able to market these products, the argument to reschedule or delist marijuana under The Controlled Substances Act will become more substantial and therefore we believe investor sentiment will intensify," Karnes said.

Under the Orphan Drug Act (ODA) of January 1983, an orphan drug is one that is developed to specifically treat rare medical conditions referred to as orphan diseases.

“The winners going into 2015 will include those biotech firms that have already made great strides in new product development and are likely to gain further traction due to new legislation easing fears of federal government interference,” said Karnes.

--Written for MainStreet by Juliette Fairley