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Although the Nasdaq has been under pressure, biotech stocks focused on the marijuana industry have been on fire.
From Israel to the United Kingdom, we have seen a rally across the board and continue to view the biotech sector as one of the greatest beneficiaries of the legal cannabis movement.
A legal cannabis movement is sweeping the globe and we are seeing reform take place all around the world. During the last few years, Brazil, Mexico, Paraguay, Puerto Rico, Canada, Uruguay, Jamaica, Portugal, and the Netherlands have taken steps to legalize or decriminalize cannabis.
The biotech sector will be one of the greatest beneficiaries of the legal cannabis movement and we have already identified several leaders focused on this opportunity. These companies are led by a management team with a proven track record of success, own an advanced proprietary pipeline of products, are well capitalized and positioned to execute, is an acquisition target, and trades on a national exchange (i.e. Nasdaq, NYSE).
Although cannabis is still illegal in the United States, the market has seen some of the most prestigious Wall Street-based firms buy into the sector’s incredible profit potential. Below, we highlighted three cannabis biotech firms that have outperformed the market over the last few weeks.
Cara Therapeutics Surges Higher
Last month, we highlighted Cara Therapeutics as a top pick due to the attractive valuation and potential catalysts. The company is focused on developing and commercializing new chemical entities designed to alleviate pain.
Since then, Cara has announced positive data and the shares have rallied more than 70%. We are favorable on this announcement and it caused several banks to raise their price targets on the company.
IGC Breaks Out on Strong Volume
Yesterday, India Globalization Capital (IGC) broke out of its previous trading range and the shares rallied more than 37% on very strong trading volume. We highlighted IGC earlier this month after the company signed an agreement with the University of South Florida.
A lot of IGC’s value is in the intellectual property and its previously filed patents. In September 2014, the company filed a patent for IGC-501 and IGC is currently finalizing the product development by conducting anecdotal testing. In August 2014, the company filed a patent for IGC-504 and in February 2017, IGC filed a patent for IGC-506. The company expects to file an additional patent to finalize these products later this year while advancing its refractory epilepsy treatment for dogs and cats (IGC-505 and IGC-503).
We are favorable on yesterday’s move higher as we think the shares are very undervalued when compared to its peers. We believe the market has not fully grasped the company’s long-term potential and will continue to keep IGC on our radar.
Zynerba Initiates Phase I Clinical Program
Zynerba Pharmaceuticals (ZYNE) has come off its lows and is trading near overbought territory after rallying more than 15% from its June lows and we see significant upside to current levels. The average Wall Street price target on ZYNE is north of $30 and we view the company as an acquisition candidate for any biotech company interested in the cannabis industry.
Yesterday, Zynerba initiated its ZYN001 Phase 1 clinical program to study the company’s patent-protected, pro-drug of tetrahydrocannabinol (THC) delivered via a transdermal patch. With the successful completion of this single and multiple dose study, a Phase 2 program for ZYN001 in fibromyalgia and neuropathic pain is planned to start in the second half of 2017.
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