Vape sales are falling on fears about the outbreak of vaping-related lung illness
The vaping-related lung disease that has infected more than 530 Americans and caused eight deaths is hurting sales of vapes, which have been on an upsurge as more states legalize cannabis for medical or recreational use.
Research from Jane Technologies Inc. analyzing dispensary sales data found the market share for vapes was down 15% in the first week of September with medical states, including Oregon, and in states with high levels of cannabis tourism, such as Nevada and Massachusetts, showing the worst declines.
Vapes share of sales fell 65% in New Mexico, was down 62% in Oregon, down 37% in Massachusetts and 32% in Nevada, according to the data, as reported by New Frontier Data, a data company that gathers intelligence for the cannabis sector.
As vape sales have fallen, consumers have bought more flower, pre-rolls and tinctures.
“Given an estimated 273 million vape pens sold through legal U.S. markets from 2017-2019, a suspected strong connection of the outbreak of illness to unregulated products will likely fuel calls for legalization, standardization, and quality controls to minimize risks,” New Frontier wrote Monday.
Last week, the FDA said it has launched a criminal probe of the crisis, looking at black-market THC products, which are suspected to be the key culprits, based on information patients have provided to the Centers for Disease Control and Prevention.
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In particular, investigators are looking at the use of vitamin E acetate, a compound often used as a cutting agent to allow black market operators to use less pure cannabis oil when filling cartridges. While vitamin E is considered to be safe as a dietary or health supplement ingested in capsule or pill form, it can cause respiratory illness including pneumonia when inhaled.
Rob Di Pisa, co-chair of the Cannabis Law Group at law firm Cole Schotz, said the risk now is that “everything just gets lumped in together,” meaning that consumers are conflating the products being sold in the black market for cannabis with the e-cigarettes that dispense strong doses of nicotine and have drawn the ire of regulators because of their popularity with young people.
“Anything related to cannabis and vaping cartridges are usually illegal and contain all kinds of pesticides that can create cyanide when they are inhaled,” he said. “This all relates back to regulation and the need for it. If the black market is allowed to survive and there are no clear rules on what is permitted to go into cartridges that’s safe for human consumption, this is what happens.”
Vaping is a popular way of ingesting cannabis, because it doesn’t smell like a traditional joint, he said. Many have sleek designs, which further appeal to young people.
“The sector is so volatile right now and it’s really a shame to see it take additional hits,” he said.
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Shares of accessories maker Greenlane Holdings Inc. GNLN, -7.49% fell 8% Monday and are down 60% in the last three months. Turning Point TPB, -2.04% was down 1.9%, and has lost about 48% of its value in the last three months.
Elsewhere in the sector, a banking bill that would allow financial institutions do business with cannabis companies without fear of federal enforcement action is expected to be put to a vote in the House this week, according to advocacy site Marijuana Moment.
The bipartisan Secure and Fair Enforcement (SAFE) Banking Act cleared the Financial Services Committee back in March and will be put to a floor vote on Wednesday, according to the site. The continued federal ban on cannabis has made it risky for banks that are federally insured to serve the new legal cannabis sector, preventing companies from tapping capital markets.
DiPisa said he still expects a banking bill to be the first major piece of legislation on the cannabis sector, but that states will likely seek more autonomy over their own markets than push for a lifting of the federal ban.
“If each state creates its own regulations and manufacturing facilities, they won’t want those jobs to relocate to the South or the Midwest where you have traditional farming because they would lose tax revenue,” he said. “I expect either the SAFE Act or the STATES Act will be passed,” he said referring to the Strengthening the Tenth Amendment Through Entrusting States (STATES) Act, a separate bill that would address the banking issue.
GW Pharma stock GWPH, -2.22% rose then surrendered those gains, after the company said the European Commission has granted approval for its cannabis-based drug Epidyolex for the treatment of seizures in patients with Lennox-Gastaut syndrome or Dravet syndrome, two severe types of childhood epilepsy.
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The drug, which is already approved in the U.S. under the brand name Epidiolex, will now be available to children of 2 years of age and older across Europe. The news “marks a significant milestone, offering patients and their families the first in a new class of epilepsy medicines and the first and only EMA-approved CBD medicine to treat two severe and life-threatening forms of childhood-onset epilepsy,” Chief Executive Justin Gover said in a statement.
Canopy Growth Corp. shares CGC, -0.90%WEED, +0.03% reversed early losses, after CFRA initiated coverage of the stock with a hold rating. Analyst Garrett Nelson set a 12-month price target of C$35 ($26), which is just above the stock’s current price of C$33.
“Our opinion reflects a balanced number of pros and cons, as we see cannabis prices remaining depressed due to Canadian market oversaturation, but it possesses a robust balance sheet, has a strong sponsor in 36% owner Constellation Brands STZ, +0.09% and upside potential in the event of U.S. federal legalization from its agreement to acquire leading U.S. cannabis license holder Acreage Holdings ACRGF, +4.67% ,” said Nelson.
Cronos CRON, +0.87% as up 1% and Tilray TLRY, -1.38% was up 1%.
Aurora Cannabis Inc. ACB, +2.29%ACB, +2.55% was up 4% and Hexo HEXO, +2.06% was up 5%. Organigram OGI, -0.14% rose 0.7%, Green Growth Brands GGBXF, +1.21%GGB, +0.00% was up 2.7% and Aleafia Health ALEAF, -2.57%ALEF, -3.26% was down 1.2%.
The ETFMG Alternative Harvest ETF MJ, -0.42% was up 0.7%, and the Horizons Marijuana Life Sciences ETF HMMJ, +0.58% was up 2.3%.
The S&P 500 SPX, +0.12% was down 0.1% and the Dow Jones Industrial Average DJIA, +0.18% was down 0.2%.
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