How these Biotech Companies have been Exploring the Potential of Cannabinoids — Before and after the MMCREA

Biotechnology companies and the medical-marijuana industry are awaiting some critical updates in the wake of the Medical Marijuana and Cannabidiol Research Expansion Act (MMCREA). President Joe Biden signed the bill into law in December 2022, paving the way for biotech and pharmaceutical companies to kick research into medical uses for cannabis and its derived compounds into high gear. 

It was welcome news for an industry that’s projected to reach $43 billion in revenue in 2024. Next up could be a key decision from the Drug Enforcement Administration (DEA) on scheduling for cannabis and cannabinoid products. While no firm date for a decision has been set, a recently released report suggests other government agencies would like to see the scheduling status for such drugs to be reviewed.

In August 2023, the U.S. Department of Health and Human Services (HHS) issued a groundbreaking report calling for cannabis to be shifted from Schedule I to Schedule III of the Controlled Substances Act (CSA). That report, which remained redacted until earlier this year, followed an almost a yearlong federal review of all available research on marijuana.

The DEA categorizes Schedule I drugs as having a high potential for abuse and no medical uses. Reclassifying cannabis as a Schedule III drug would be a groundbreaking change, listing it as having "moderate to low potential for physical and psychological dependence."

The early stages of cannabinoid development

Despite the newness of the MMCREA, use of cannabis and cannabinoid-inspired compounds dates back decades. More than 30 years ago, AbbVie (ABBVdeveloped the anti-nausea drug Marinol, a synthetic form of the cannabinoid tetrahydrocannabinol better known as THC. Marinol has been around for so long that it's now available in its generic form, dronabinol, which is currently in clinical trials to treat other conditions, including obstructive sleep apnea. 

More recently, Jazz Pharmaceuticals (JAZZ) owns and markets Epidiolex, the first FDA-approved, plant-derived form of cannabidiol (CBD) approved to treat certain types of seizures in children. Epidiolex received FDA approval in 2018.

It will be interesting to see if the DEA's reclassification of Epidiolex as a Schedule V drug — indicating a low potential for abuse and a currently accepted medical use — has any impact on its decision regarding scheduling for cannabis.

The new era in cannabinoids

Although the MMCREA and possible reclassification of cannabis or cannabinoid-inspired products represent groundbreaking developments, they are just the tip of the iceberg. Companies like Corbus Pharmaceuticals (CRBP) remind us of the science behind cannabinoids, rooted in the endocannabinoid system

This system regulates multiple processes throughout the body. The company is targeting the two main cannabinoid G-protein-coupled receptors to target cancer and inflammatory, fibrotic, and metabolic disorders.

However, researchers have only thus far scratched the surface of the potential opportunities posed by the endocannabinoid system as a whole. In addition to Corbus, several other up-and-coming biotech companies have already been blazing a trail in cannabinoid research.

For example, Incannex (IHXL) is developing a treatment for obstructive sleep apnea (OSA) that utilizes dronabinol, a synthetic form of THC that's FDA-approved to treat chemotherapy-associated nausea and vomiting and anorexia associated with HIV/AIDS.

Incannex's IHL-42X program combines dronabinol with the carbonic anhydrase inhibitor acetazolamide, which was already approved for a long list of indications, including glaucoma, congestive heart failure, epilepsy, altitude sickness and others. The company's drug-combination strategy benefits from the large body of pre-existing safety and efficacy data on both dronabinol and acetazolamide.

Tapping into that data should reduce the development time and expense for IHL-42X, which could put the much-needed treatment into patients' hands sooner rather than later. Incannex has also benefited greatly from receiving one-on-one guidance directly from the FDA, enabling it to design its clinical trials exactly the way the FDA requires them in order to hopefully speed up the approval process.

The company's pre-IND (investigational new drug) meeting with the FDA has served two purposes. In addition to dealing with a sizable knowledge gap due to the lack of any other FDA-approved treatments for OSA, the FDA guidance is helping Incannex navigate the tricky regulatory environment for cannabinoids.

Treating orphan diseases with cannabinoids

While obstructive sleep apnea represents a large market with significant unmet need that could be addressed by cannabinoids, other companies aim to unlock promising cannabinoid-based treatments for rare diseases. Also known as orphan diseases, these conditions affect fewer than 200,000 people in the U.S. As a result, drugmakers haven't given them much attention due to the small markets they represent.

For example, Zynerba Pharmaceuticals, now part of Harmony Biosciences (HRMY), is developing a cannabidiol gel for fragile X syndrome and 22q11.2 deletion syndrome. Zygel is a proprietary permeation-enhanced cannabidiol gel for transdermal delivery into the circulatory system. Instead of being extracted from the cannabis plant, the product is actually a synthetic form of cannabidiol.

Applying the gel to the skin helps reduce gastrointestinal side effects and avoids first-pass liver metabolism, which could enable lower dosage of active pharmaceutical ingredients. Additionally, Zynerba's research found in 2016 that cannabidiol is degraded to THC in acidic environments like the stock, potentially resulting in negative psychoactive effects.

Investing in cannabinoid-linked stocks

Even though research into cannabinoids and cannabinoid-inspired compounds stretches back decades, it is still in the early stages. However, the passage of the MMCREA should pave the way for more promising treatments using such compounds.

Companies of all sizes are investigating cannabinoids and related compounds, ranging from large pharmaceutical companies like Jazz Pharmaceuticals, which had $3.8 billion in revenue in 2023, down to smaller names like Incannex. Thus, it's easy to understand why a growing number of biotech and pharmaceutical companies of all sizes are looking to cash in on cannabis.

Disclosure: Ari Zoldan is CEO of Quantum Media Group LLC, and Incannex is a client of Quantum Media Group, LLC

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Ari Zoldan

Ari Zoldan is the CEO of New York-based Quantum Media Group, LLC. The company provides investor relations, public relations and equity research services to publicly traded companies. As an on-air media personality, Ari can be seen regularly on major media outlets and is frequently quoted in mainstream news outlets covering business, innovation and emerging trends.

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