When someone thinks about the cannabis industry, they typically think of a dispensary or a grow facility.

Although these concepts might seem be some of the sexiest and most lucrative, are they as attractive on paper and are they the best long-term investment?

The answer to questions like these differs from person-to-person and has a lot to do with personal preference and aspirations. Retail dispensaries and grow facilities have proven to be profitable but many fail and the causes can be even more wide ranging.

From corruption to theft, United States legal cannabis businesses face unprecedented risks. Many of these businesses cannot open a bank account and this creates an unnecessary risk. The cash nature of this business and the lack of support from the federal government puts these businesses and innocent people in harm’s way.

Emergence of Billion-Dollar Opportunities

The emergence of the cannabis industry has led to the creation of sub-industries within it and this has created numerous opportunities for investors.

One sub-industry we find to be very attractive is biotech and this is due to the potential development of numerous billion dollar products.

The potential medical benefits of cannabis can no longer be ignored as agencies like the National Cancer Institute (NCI) continue to recognize its potential. In 2015, the NCI updated its website to include various studies that reveal how cannabis may inhibit tumor growth by killing cells.

Betting on Biotech

Although the biotech industry offers a lot of opportunity, it presents even more risk. When we look at biotech investment opportunities, we look for companies that possess a competitive or unique advantage over their peers.  

Some important factors we think are important to look at when considering a biotech investment include the following:

• Management: By far the most important (pedigree, track record, etc.)
• Balance Sheet Strength: Does it need money- clinical trials are not cheap  
• Strategic Partnerships: Does it benefit from strategic relationships
• Product Pipeline: How advanced are they in the testing process.
• Illnesses Focused: Are they working on an illness with no current treatment
• Valuation: Does the current market cap offer limited or significant upside

A Story to Watch

Last week, one of the biotech companies we have been monitoring closely, Nemus Bioscience (NMUS), announced a milestone for its proprietary cannabis product candidate.

Nemus will be advancing the development of a human-dosage suppository formulation of NB1222 with Catalent Pharma Solutions. The product candidate is the proprietary prodrug of tetrahydrocannabinol (THC).

NB1222 has been synthetically manufactured and is being developed to treat and manage chemotherapy-induced nausea and vomiting (CINV). Nemus also plans on advancing this prodrug into formulation activity for the glaucoma indication using its NB1111 candidate molecule.

A Strategic Relationship

Nemus Bioscience is an interesting company to watch due to its valuation, product pipeline, and its strategic partnership with the University of Mississippi. The university has been the sole provider of cannabis for medical research through a partnership with the National Institutes of Health since 1968.

Nemus Bioscience Chief Executive Officer and Chief Medical Officer Brian Murphy said, “Nemus is looking forward to working with Catalent to complete this important milestone as the company prepares to advance the candidate therapy to human clinical trials. In addition to the recognized anti-emetic activity of cannabinoids, we feel a formulation that could provide reliable and predictable bioavailability and pharmacokinetics, could leverage other valuable physiological attributes associated with cannabinoids like appetite stimulation along with anxiolytic and pain mitigation properties in a patient population that could benefit from these activities."

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