Nasdaq-traded marijuana stocks are undervalued as investors remain skittish and as the use of drugs produced by major cannabis-focused biopharmaceutical companies have not been widely adopted.
The current options for mainstream investors in this budding sector are limited to a handful of companies listed on the Nasdaq, including GW Pharmaceuticals (GWPH) , a U.K.-based biotech company with a cannabis-based epilepsy drug; Insys Therapeutics (INSY) , a Phoenix company known for its cancer pain management drug but is developing a cannabis-based drug for the treatment of epilepsy; Cara Therapeutics (CARA) , a Shelton, Conn.-based clinical state biopharmaceutical company that develops and commercializes pain relief drugs and Zynerba Pharmaceuticals (ZYNE) , a Devon, Pa.-based company focused on developing and commercializing synthetic cannabinoid therapeutics.
While stocks like GW Pharmaceuticals and Insys Therapeutics have seen spikes in their valuations because of the positive indications from their cannabinoid-based medications for which they are seeking FDA approval, the majority of cannabinoid pharmaceutical companies remain undervalued, said Al Forman, a partner at Tuatara Capital, a private equity fund dedicated to the legal cannabis industry in New York.
"While sales of cannabinoid-based medications are starting to gain momentum, they are very much still in the early innings," he said.
Since the revenue in pharmaceutical sales revenue is directly correlated with how comfortable physicians are in prescribing certain medications as a remedy, once medical cannabis and cannabinoid-based medications become part of mainstream conversations, the valuations of these cannabinoid pharmaceuticals companies will "start moving in line with other top performers in the biopharma industry," Forman said.