It may not be the earthshaking news but it is definitely
important one to notice for investors. If you are not aware yet, the Trump
administration has declared a national crisis for the opioid epidemic in the
US. This is how serious the matter is. As part of tackling the crisis, the
government is investigating those companies that have been deeply involved in
creating this crisis. So here comes with the news: The opioid manufacturer Insys Therapeutics filed for bankruptcy
protection Monday, days after agreeing to pay $225 million to settle a federal
investigation into the marketing practices for its powerful but highly additive
fentanyl (opioid) painkiller. As part of the deal last week, Insys agreed to
plead guilty to five counts of mail fraud and pay a $2 million fine and $28
million in forfeiture. The company also said it would pay $195 million to
settle allegations that it violated the federal False Claims Act, which
involves defrauding the federal government through drug sales to health care
programs like Medicare. Apart from the company’s criminal activities that
are wiping out all the investors’ money, the CEO will likely go to jail for 20
years. That’s why it is extremely important to be sure your money is not tied
to the companies that may follow the path.
So who will be the next in the line to fall? Actually there
are a few which are facing mounting lawsuits from the governments over their
involvement in the opioid crisis. They are actually not small ones including
McKesson (MCK), Teva Pharma (TEVA), Cardinal Health (CAH), and privately held
Perdu Pharma, which is also filing for bankruptcy protection. It will be
prudent to steer clear from these stocks at the moment as you will never know
what may be coming for them! Hope I’ve given you enough warning on this crisis!
One thing I found especially funny is the comment from the
TEVA CEO on the potential lawsuits they are facing. I cannot believe it until I
saw this from WSJ. On TEVA's most recent earnings call, CEO Kåre Schultz
basically told plaintiffs took look elsewhere for large settlements. Here's the
quote: “As you know, we have a lot of
debt, so we don't have that much money. So I think [opioid plaintiffs will]
have to find somebody else if they want big settlements. It won't be with us.”
Pretty interesting right that the CEO is thinking they are safe on this just
because they don’t have much money due to too much debt already! It reminds me
of a quote to the effect that when the debt is insurmountable, then it becomes
your (creditor’s) problem, not the debtor! One thing that may be clear from his
words is that they do think the probability to lose in such lawsuits is quite
high. Actually not only for such skunk companies helping spread-out of the
fatal crisis, there are many individuals who have made big money by illegally
providing such additives to addicted patients. I personally know a physician
who has been sentenced for 20 years in jail due to his excessive prescriptions
of such controlled drugs to his patients. He used to be very showy in the
social media for his wealth including a dozen of fancy and expensive
collectible cars. We are seeing more such
lawsuits targeting such individuals now.
Drug overdoses are now the No. 1 cause of death for
Americans under 50 and analysts estimate that opioids could contribute to
nearly half a million deaths over the next decade. That’s why it is indeed a
crisis we are facing. I don’t know there is any magic to get it resolved
quickly as addiction is one of the toughest issues to tackle. Addicted people
will risk their life to just get highs. But I have seen some very interesting
development related to the marijuana legalization vs the opioid crisis. A 2014
paper published in JAMA Internal Medicine reported lower opioid overdose death
rates in states with medical marijuana laws. The study found that between 1999
and 2010, states with medical cannabis laws had a nearly 25% lower average rate
of opioid overdose deaths than states without such laws. If this indeed proves
real, it can be great news for highly addicted patients as per my reading from
experts in this field, it is highly unlikely to get overdosed with marijuana
but it has a great deal of potent effect for many illnesses, including
pain-killing. I know this is a very controversial topic and many people can
have drastically different views on it. I’m not here to argue with anyone but
just to share my view that I’m pro medical use of marijuana, especially its CBD
component that is not tied to the neurostimulating effect (THC dose that). From
the investing perspective, regardless you like it or not, the trend is very
clear that it is just a matter of time when but not if that at least medical
use of marijuana may be legalized at the federal level. Right now most of the
States have already legalized that but it is still a crime per the federal law.
However I won’t be surprised to see a change on this within a couple of years.
As
I said, this is a highly controversial area for investment and it is extremely
volatile. But if you share my view and want to at leave get your feet wet, Canopy
(CGC) will be the biggest player in the cannabis (CBD) sector. It is considered
the next Microsoft in the CBD sector by some experts. One thing extremely
interesting is that CGC is also investing in the CBD products for pet med use.
You may be aware that pet medicines is a huge market. One of the common
problems for pets like dogs is also pain-related like arthritis or joint
inflammation. Medically I don’t think why CBD cannot be also effectively used
for dogs as pain-killer. It’s effective with much less side effects compared
with commonly available pain-killers. CGC is teaming up with Martha Stewart to
dominate the niche, who will join as an advisor to help develop CBD products
for animals. I think this will be a big win for CGC in addition to its many
other active developments in this field. But again, this is a highly
speculative field that requires good risk management for trading or investing
in it. So don’t just blindly follow the herd, especially not to fall into FOMO.
There will be a lot of ups and downs with big swings in the course of firmly establishing
a trend for CBD.
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