That old investing adage of “sell in May and go away” might have been good advice to follow for investors in the cannabis industry. Most cannabis stocks performed dismally last month. But not all of them were losers.
Three cannabis stocks managed to achieve solid gains in May: Namaste Technologies (NASDAQOTH:NXTTF) (TSXV:N), Cara Therapeutics (NASDAQ:CARA), and GW Pharmaceuticals (NASDAQ:GWPH). Here’s how these stocks bucked the downtrend and whether or not they’re smart picks to buy now.
1. Namaste Technologies
Namaste Technologies has taken investors on a roller coaster ride in 2019. Shares of the cannabis-focused technology company more than doubled in the first nine days of the year. But the stock was down 37% for the year by late April after a scathing report by short-seller Citron Research led to Namaste uncovering issues that led to the ouster of CEO Sean Dollinger.
However, Namaste is definitely rebounding now. The stock vaulted 16% higher in May. Why? There wasn’t a lot of news from the company, but the news it did have was positive.
After the embarrassing revelations that its former CEO had sold company assets to another Namaste Technologies executive, the company has been cleaning house. On May 24, Namaste announced the addition of a new independent board of directors member, named its first member of an advisory board, and appointed a new vice president of marketing and strategy.
In addition, Namaste reported that two companies in which it owns sizable stakes, Choklat and CannMArt Labz, had submitted key license applications to Health Canada. Choklat applied to manufacture cannabis-infused edibles, while CannMart Labz applied for approval of its cannabis oil sales and extraction.
2. Cara Therapeutics
Cara Therapeutics only barely qualifies as a cannabis stock. However, the biotech does have a preclinical program that focuses on cannabinoid receptors — and that’s enough to land Cara a spot on several listings of cannabis stocks. Cara’s stock gain last month of 8% was enough to rank it in second place among the top cannabis stocks in May.
However, Cara’s nice jump had nothing to do with its cannabinoid program. Instead, good news for the company’s lead pipeline candidate, Korsuva, provided a catalyst for the stock.
On May 29, Cara announced positive results from a phase 3 clinical study evaluating Korsuva injection in hemodialysis patients with moderate-to-severe chronic kidney disease-associated pruritus (CKD-aP). The drug passed the primary endpoint of the study with flying colors with a significant reduction in itching experienced by patients.
Cara does have another phase 3 study of Korsuva in treating CKD-aP patients on hemodialysis to complete, though. The company should report the results from this study later in 2019. Assuming all goes well, Cara might not be too far away from winning approval for its first drug.
3. GW Pharmaceuticals
Another biotech took the No. 3 spot among the top cannabis stocks in May. GW Pharmaceuticals’ shares rose more than 4% last month, which was a great performance considering the overall malaise for the stock market.
Unlike Cara, GW actually focuses primarily on developing cannabinoid drugs. In 2018, the company’s cannabidiol (CBD) drug Epidiolex became the first therapy made from cannabis plants to win approval from the U.S. Food and Drug Administration (FDA).
Epidiolex was the main reason why GW Pharmaceuticals stock enjoyed a solid gain in May. The company reported better-than-expected sales for the drug in its first-quarter results announced early in the month. GW launched Epidiolex in November 2018 as a treatment for Dravet syndrome and Lennox-Gastaut syndrome (LGS), both of which are rare forms of epilepsy.
GW also announced positive results from a phase 3 study of Epidiolex in treating another rare type of epilepsy — seizures associated with tuberous sclerosis complex (TSC). The biotech intends to submit for approval of this additional indication in the fourth quarter of 2019
