• Melodiol Global Health welcomes moves to reschedule marijuana to a lower risk category in US
  • Analyst says potential US policy change “could catalyse a significant re-rating of cannabis stocks”
  • Melodiol monitoring situation closely in event entry points are available

 

Moves to recategorise marijuana in the US to schedule III could “accelerate” entire industry, Melodiol is monitoring the situation closely.  

Melodiol Global Health (ASX:ME1) has welcomed suggestions by the US Department of Health and Human Services (HHS) to relax marijuana restrictions, in response to a review prompted by the Biden Administration in October 2022.

Around 40 US states have approved the use of marijuana to varying degrees, although there are state and federal regulations where its use is still entirely prohibited.

Marijuana is categorised as a schedule I substance according to the Controlled Substances Act and has been since it was enacted in 1970, placing it in the same class as heroin and LSD with no accepted medical use.

Reassessing the categorisation of marijuana as less dangerous is seen as an initial stride towards broader legalisation, which is reportedly supported by most Americans.

The US Department of Health and Human Services (HHS) is proposing a reconsideration of marijuana’s classification to schedule III, suggesting it should be labelled as having a moderate to low propensity for dependency and reduced potential for misuse.

 

‘Transformational shift in US cannabis policy’

In a research note Eight Capital research analyst Ty Collins says the HHS suggestion is a “critical step towards enacting a potentially transformational shift in US cannabis policy with effects that could catalyse a significant re-rating of cannabis stocks”.

Furthermore, he says rescheduling is a major legitimising event for the industry that could open the doors to greater participation from institutional investors.

“Moving cannabis to schedule III would represent a seismic shift in longstanding federal policy and could provide cover for various institutions (eg investors, banks, stock exchanges) long deterred by its Schedule I status to begin engaging (or re-engaging) with the industry,” he says.

“Rescheduling is tantamount to legalizing medical cannabis, and would provide a clear signal about the broader direction of federal cannabis policy moving forward.”

Collins says it would likely begin to draw in more strategic capital from industries including pharma, tobacco, alcohol, and consumer goods.

He says the recommendation must now be reviewed by the DEA, which has the final say on rescheduling but has historically conformed to HHS’s conclusions.

“We note that the DEA Administrator is a Biden appointee, and while the timing and
outcome of DEA’s review are uncertain, we believe that political considerations ahead of 2024 election campaigning will bear heavily on both.”

 

Melodiol monitoring situation closely

ME1 has built a diverse portfolio of cannabis brands in high growth market segments and geographies including North America. Its brands include:

  • Mernova – Licensed producer of cannabis products in Canada for sale under the Ritual brand banner
  • Health House International – Leading distributor of medical cannabis to the Australian and other international markets
  • Sierra Sage Herbs – US based developer of plant based first aid and beauty and personal care brands Green Goo, Southern Butter and Good Goo.
  • impactive – CBD topical products for athletes
  • Halucenex – Clinical stage psychedelics research and development operation.
  • Creso Pharma Switzerland – CBD related research, development, and commercialisation.

 

ME1 managing director and CEO William Lay says since Biden’s announcement of a review last year the industry has been eager for updates.

“Any shift in legislation has the potential to be highly beneficial for ME1 and the industry as a whole,” he says.

“The recent announcement that the HHS has recommended to the DEA that cannabis be reclassified as a schedule III drug is extremely positive news for the global cannabis industry and could serve as a major milestone in the long term regulatory development of this market.”

In 2022, the market size of the US cannabis industry reached a valuation of US$13.2 billion, with projections indicating a CAGR of 14.2% from 2023 to 2030.

The market’s expansion is primarily propelled by the progressing legalization of cannabis and the growing societal embrace of its medicinal applications.

The recategorisation of cannabis to Schedule III of the Controlled Substances Act is forecast to significantly further boost growth of ME1 and industry.

“The United States remains the largest market in the world and Melodiol continues to monitor it carefully as regulations evolve,”  Lay says.

 

This article was developed in collaboration with Melodiol Global Health, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

 

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