Pharmaceutical companies working on marijuana-derived treatments believe recent federal policy changes will open new avenues for investment and public stock market opportunities, potentially revitalizing a struggling industry sector.
Last week, the U.S. Department of Justice moved to reclassify FDA-approved cannabis medications and state-approved medical marijuana, creating easier access to banking services and tax benefits for companies in the space.
Leadership from three pharmaceutical companies developing cannabis treatments indicated that the federal reclassification will help reduce marijuana’s negative perception and may encourage traditional investors and financial institutions to participate after years of staying away.
Following the reclassification announcement, Ananda Pharma plans to seek between $10 million and $20 million in private investment over the next six months. The company is working on a cannabis-derived therapy for pain associated with endometriosis.
“We have calls lined up already with a VC investor interested in endometriosis and with a significant U.S.-based family office,” said Chief Executive Melissa Sturgess, referring to venture capital funding.
The organization plans to direct the investment toward accelerating regulatory discussions in the United States and producing their CBD-based medication, which excludes the psychoactive element THC.
Federal officials also intend to broadly reclassify marijuana soon, which could benefit recreational cannabis businesses that have struggled with reduced consumer spending and competition from illegal market operators.
“We have heard directly from VCs and other investors that rescheduling will get the capital flowing again,” stated Brett Schuman, who co-leads the cannabis legal practice at San Francisco-based Goodwin law firm.
IGC Pharma is currently conducting intermediate-phase trials for a low-concentration THC liquid designed to address agitation symptoms in Alzheimer’s patients, targeting what the company estimates as a $1 billion to $10 billion market opportunity.
According to IGC CEO Ram Mukunda, timing uncertainties and restricted banking access have prevented some institutional investors from participating, despite expressed interest. The company is considering a $50 million fundraising effort later this year.
Schuman explained that certain banks include provisions in lending agreements that prohibit clients from cannabis investments, with some restrictions specifically targeting Schedule I classified substances. This federal category, which encompasses heroin and LSD, designates drugs considered to lack accepted medical applications and carry high abuse potential.
The government’s reclassification moves cannabis to Schedule III status, grouping it with substances like codeine-containing Tylenol, ketamine, anabolic steroids, and testosterone.
Avicanna, developing a cannabis medication for uncommon seizure conditions, now envisions potential initial public offerings on major stock exchanges.
Avicanna CEO Aras Azadian explained that marijuana’s Schedule I classification made conducting U.S.-based clinical studies “quite difficult,” forcing the company to perform much of its initial research in Canada.
Despite reclassification benefits, companies planning significant U.S. investments still face uncertainty from the challenge of coordinating new federal cannabis policies with diverse state-level regulations.
“The major gating factor here has been the fact that there was no federal pathway to enter without a substantial amount of investment or red tape,” Azadian noted. The company can now approach U.S. markets more strategically and form partnerships with domestic companies, he added.
BRC Therapeutics CEO George Hodgin indicated that reclassification has diminished reputation-related obstacles among conventional life sciences investors.
Under the U.S. Controlled Substances Act, marijuana remains illegal except when used in FDA-approved medications. Jazz Pharmaceuticals, with its epilepsy drug Epidiolex, represents the only U.S. pharmaceutical company with an approved cannabis-derived treatment.
BRC reported that reclassification is already generating interest in their research, including development of a treatment for aromatase inhibitor-induced arthralgia, a side effect experienced by some breast cancer patients.
The scheduling change may also reduce development expenses.
Schedule I restrictions created logistical challenges for companies obtaining and transporting research drugs, sometimes requiring hemp cultivation to extract minimal THC amounts or conducting trials internationally. Relaxing these limitations could streamline research processes, trial planning, and reduce costs.
“A room full of marijuana plants could generate enough THC for thousands of patients,” IGC’s Mukunda observed. The company previously needed to cultivate “acres and acres” of more loosely regulated hemp to achieve equivalent results, he said.
