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ACKRELL
CAPITAL
Cannabis Investment Report | December 2017

ever, that the DEA recognized and responded to the demand for expanded registration is a significant
development on its own, and one that we believe may signal an important redirection of DEA policy.

In October 2017, the FDA accepted GW Pharmaceuticals’ New Drug Application (NDA) for the
cannabis-derived drug Epidiolex. The steps required to file an NDA for any drug involve extensive
coordination and data sharing between the FDA and the applicant; submission of the Epidiolex NDA
is an important milestone toward FDA approval. Many observers expect that Epidiolex will be the first
cannabis-derived drug approved by the FDA.

Additionally, the FDA published industry guidance on botanical drug development in December
2016, several months after the DEA announced its new registration policy. The FDA guidance dis-
cusses challenges inherent to botanical drugs, including challenges related to ensuring therapeutic con-
sistency, and suggests certain steps to address those challenges. The FDA guidance updates and replaces
similar guidance last issued in June 2004, and we believe that the timing of this update may relate to
other cannabis-related developments at the FDA and the DEA.

Federal Legalization: Predicted Developments
We predict six developments on the path to federal legalization: (1) the FDA will begin approving indi-
vidual pharmaceutical-grade drugs derived from cannabis; (2) more states will adopt medical cannabis
laws; (3) more states will adopt recreational laws; (4) the FDA will adopt routine approval procedures
for drugs with extracts of low-THC/high-CBD cannabis varieties; (5) the FDA will adopt routine
approval procedures for drugs with extracts of high-THC cannabis varieties; and (6) cannabis parts
and derivatives will be removed from the CSA schedules (either incrementally, starting with CBD, or
all at once) and will be fully legal for medical and
recreational purposes.

Path to Federal Legalization
1. The U.S. Food and Drug Administration will
begin approving individual pharmaceutical-
grade drugs derived from cannabis.
2. More states will adopt medical cannabis
laws.
3. More states will adopt recreational laws.
4. The FDA will adopt routine approval
procedures for drugs with extracts of
low-THC/high-CBD cannabis varieties.
5. The FDA will adopt routine approval
procedures for drugs with extracts of
high-THC cannabis varieties.
6. Cannabis parts and derivatives will be
removed from the CSA schedules and will
be fully legal for medical and recreational
purposes.

We do not predict that these developments
necessarily will occur in the order presented. We
do expect some of them to develop in parallel, and
none of them depends fundamentally on any other.
The manner in which federal cannabis legalization
actually proceeds, and the timing of any related
developments, are not known to us or anyone else.
Almost certainly, our predictions will prove inaccu-
rate in some respects. States may reverse their legal-
ization efforts. The medical efficacy of cannabis
may not be proved to be significant. Cannabis may
never be legalized federally. However, we believe
these developments will likely be among others
that lead to the federal legalization of cannabis. We
expand on each of these developments in the fol-
lowing discussion.

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© 2017 Ackrell Capital, LLC | Member FINRA / SIPC

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