Cannabis Cultivation Laws Finally Loosen – Market Realist

Yesterday, the DEA (Drug Enforcement Administration) announced it had loosened the laws on cannabis cultivation to support the expansion of cannabis research in the country. The federal law enforcement agency hopes the availability of cannabis for research will rise with the registration of more qualified growers.

In its announcement, the DEA reported that in the last two years, the number of individuals registering for cannabis-related research has risen 40%. It added that the production quota has more than doubled due to an increase in federally approved research projects.

In the press release, DEA administrator Uttam Dhillon stated, “DEA is making progress in the program to register additional marijuana growers for federally authorized research, and will work with other relevant federal agencies to expedite the necessary next steps.” He added, “We support additional research into marijuana and its components, and we believe registering more growers will result in researchers having access to a wider variety for study.”

Why the cannabis cultivation news is important

Federal law still prohibits cannabis. Only 11 states have legalized adult-use cannabis, and 33 states have legalized cannabis for medical purposes. Therefore, marijuana still has a long way to go to get legalized at the federal level. The DEA’s decision to loosen its grip on cannabis cultivation could boost cannabis companies’ research.

This year, Tilray (TLRY) announced its support of Melbourne’s Murdoch Children’s Research Institute in evaluating the use of cannabis extracts for treating severe behavioral problems in pediatric patients with intellectual disabilities. The company has also announced its support of Montreal’s McGill University Health Centre in evaluating the immunological effects of medical cannabis in people infected by HIV.

Last year, Aurora Cannabis (ACB) partnered with McGill University to study the effectiveness of cannabidiol in treating chronic pain, anxiety, and depression. Also, Cronos Group (CRON) announced its sponsorship of Israel’s Technion Research and Development Foundation in evaluating cannabinoids’ effectiveness in regulating skin health.

Cannabis stocks’ performance

Cannabis companies’ recent regulatory scandals have dampened investor sentiment, dragging stock prices down. This year, Aurora and Cronos have returned 13.3%, and 6.7%, respectively. However, Tilray has fallen 60%.

Recently, Aurora completed its acquisition of Hempco Food and Fiber. Aurora also raised its secured credit facility to 360 million Canadian dollars, and has provided better-than-expected fourth-quarter guidance. Combined, these factors appear to have boosted Aurora stock.

On August 8, Cronos reported its second-quarter results, beating analysts’ revenue estimate. However, its operating expenses were higher than analysts’ expectation, and the company guided for operating losses rising in this year’s second half. These factors offset some gains in the company’s stock price.

On August 12, Tilray reported a weaker-than-expected second quarter. The company had also reported higher-than-expected net losses in the first quarter, dragging its stock down.

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