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Cannabis stocks surge on US legalization push

Top Democrats are pushing for a federal decriminalization law by the end of this year.

Cannabis stocks were on the move last week as favourable developments put the industry in a spotlight.

One saw a British drug company with approved cannabis-based epilepsy drugs the target of a takeover from a larger biopharma firm. The other saw a renewed push in the U.S. Senate for a federal law legalizing cannabis.

The news sent an index of 43 of the largest publicly traded North American cannabis stocks up 16% on the week. Year-to-date the index is up 41%. Among the biggest movers were Tilray Inc., (NDQ: TLRY) up 43% and Aphria Inc. (TSX: APHA) up 27%.

TilrayTLRY-Q US $25.72 211.38%
Aphria APHA-T C$ 21.28 141.82
GW Pharma ADRQWPH-Q US $214.50 85.92
Canopy GrowthWEED-T C$ 54.76 74.84
Cronos GroupCRON-T C$ 13.70 73.19
Source: Globe & Mail

On Wednesday, Jazz Pharmaceuticals Plc (NDQ:JAZZ) a global biopharmaceutical company based in Ireland, made a US $7.2 billion offer for UK-based GW Pharmaceuticals Plc (NDQ: WPH).

Jazz offered US$220 per American depositary share – a 50-per-cent premium to GW’s closing price the day prior. GW ended the week at $US 214.50, up 44% on the week.

Jazz wants to add GW’s epilepsy treatments to its suite of neuroscience drugs. GW received the first approval of its kind from the U.S. Food and Drug Administration in 2018 to market its cannabis-based drugs.

Also last week, three U.S. Senate Democrats, including majority leader Chuck Schumer, said they would pursue “comprehensive cannabis reform legislation” this year.

The House of Representatives passed the Marijuana Opportunity Reinvestment and Expungement (MORE) Act which legalizes cannabis in December. Senate approval is required to make it law.

The U.S. is the largest single potential market for cannabis products. Demand is growing for medicinal marijuana to deal with pain and anxiety, as well as consumer products from vape pens and gummies to cookies and cannabis-infused drinks.

For now, U.S. companies can only operate within the states where recreational pot is legal. They must have separate sets of operations in each state. A federal law changes that.

It would also enable companies to have a primary listing on the New York Stock Exchange or Nasdaq giving them access to capital by large institutions. They cannot do that without a federal law which is why many are listed in Canada.

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