The stocks of major cannabis companies appear to be picking
up after seeing a drop following FDA warnings over the safety of cannabidiol
(CBD) products. The FDA issued warnings to 15 companies on Monday regarding the
illegal sale of CBD products as food additives or dietary supplements.
The FDA said there was insufficient evidence to back up the safety and efficacy of CBD products and therefore they could not be approved. The agency also raised concerns over the presence of pesticides in CBD and also over products being marketed to children. Some of the negative side-effects of CBD usage include sleep disruption and abdominal pain.
Stocks of leading players – Cronos (NASDAQ: CRON), Tilray (NASDAQ: TLRY) and Aurora Cannabis (NYSE: ACB) fell on Tuesday following the news but now seem to be slowly picking up. Shares of Cronos were up 1.4% during morning trade on Wednesday while Aurora Cannabis’ stock gained 4%. Tilray’s shares were also up 1.3%.
The FDA said it will release more updates over the weeks to come and there is optimism that this will help weed out the unauthorized players bringing in more transparency.
Also read: Cronos Group Q3 2019 Earnings Call Transcript
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In its most
recent quarter, Cronos posted a sharp increase in revenues helped by the
launch of the adult-use market in Canada and the inclusion of the Redwood
business. The company also delivered a profit compared to a loss in the prior-year
period. Revenue totaled CAD12.7 million and earnings amounted to CAD0.53 per
share.
In the third
quarter of 2019, Tilray reported a 409% growth in revenue to $51.1 million,
fueled by the Canadian adult-use market, the Manitoba Harvest acquisition and
growth in international medical markets. Loss widened to $0.36 per share.
In the first
quarter of 2020, Aurora posted a 154% jump in revenues, driven by higher
cannabis production and sales. Earnings fell by 90% to $0.01 per share due to higher
costs.
An industry report states that total legal sales of cannabis in the US are projected to grow at a CAGR of 14% over the next six years, reaching around $30 billion by 2025.