Blum Holdings Inc (BLMH)

[sleekscape]

Unfortunately for the sector, it looks like 4/20 was a sector top....

And now we are already in the doldrums of summer trading on the OTC, which means low volumes and downwardly drifting stocks

Now the possibility of DEA rescheduling would certainly be a catalyst with the potential to lift the sector in a meaningful way...

I used to think that the DEA would move MJ to schedule 2 due to public and political pressure -- but I also realized that most of the articles I had been reading since 2014 were those linked by MJ supporters, so they were overwhelmingly biased to the positive, giving me the strong impression that the tide was too strong for the DEA to stand pat.

Over the last few weeks, I have undertaken an objective analysis of the DEA reschedule question.

I started with the all important letter from the DEA/FDA/HHS, signed by Chuck Rosenberg/Michael Botticelli/Sylvia Burwell to the group of pro-MJ Congresspeople.

I researched those 3 departmentheads and their stance on weed because they are the decision-makers on rescheduling -- not citizens, not Congress -- and this is why political pressure won't be the deciding factor in the DEA's decision.

I researched the mechanism of rescheduling -- the FDA does the scientific literature review and makes a determination based on the research evidence or lackthereof for MJ to act as a medicine.

The real role of the HHS is basically to be a spectator to the process -- as a single body their authority is minimal.

The FDA then presents their conclusion to the DEA, who does their own 8-factor analysis before reaching a conclusion.

So starting with the FDA, and understanding how they think about downscheduling MJ -- they are looking for the same type of evidence for efficacy they look for when approving a new prescription medicine.

The FDA is a body of physicians and non-physician researchers -- they want to see at least 1 large-scale double-blinded, clinically controlled clinical trial that demonstrates the efficacy of whole plant MJ.
Not isolated specific cannabinoids like THC or CBD.
Not isolated synthetic analogs like Marinol, Dronabinol (these have already been FDA-approved as medicines).

Rescheduling MJ means rescheduling the whole plant.

So they are looking at studies of smoked or vaped MJ.

There are only 3-4 decent quality studies, as defined by the 2015 JAMA study performed by FDA-sponsored researchers, of whole plant MJ... The pooled sample size of these studies is less than 100 patients.

So now things become a lot more clear...

A drug that has been Schedule I for over 40 years is not going to be rescheduled based on pooled data from 3 studies based on less than 100 patients.

It would likely take positive pooled data on whole plant MJ of at least 250-500 patients for a particular indication or a cluster of related symptoms, at a bare minimum, for the FDA/DEA to recommend rescheduling.

So from a purely scientific perspective, taking into account what the FDA needs to see before declaring MJ a medicine, thus necessitating its removal from Schedule I, the data looks very unfavorable -- it simply does not satisfy their criteria.

That is an objective viewpoint.

Now for some subjective color on the situation.

If the FDA was pro-MJ as a medicine, perhaps they might bend a bit on their criteria, reasoning that this is a unique situation, one that does not share many of the attributes with candidate medications manufactured by pharmaceutical companies looking for FDA approval.

Because this is a unique situation.

Very unique.

So they could choose to be influenced by subjective factors.

To understand the likelihood of the FDA changing their stance on the criteria they possess for rescheduling MJ, it would make sense to look at the individual at the top of the power structure.

Michael Botticelli heads the FDA.

Saying that he despises MJ is probably an understatement.

So subjective factors influencing the FDA to bend its criteria for rescheduling are actually likely, if anything, to cause them to increase the stringency of their criteria, thus making it even less likely MJ would pass their test.

We already know that the DEA laughs at the prospect of MJ as a medicine...

MJ will NOT BE RESCHEDULED by the DEA unless the FDA makes this their recommendation.

And based on the facts I have outlined above, that is highly doubtful.

In addition to this evidence, I have previously posted quotes from Hudak (the most dialed in guy outside the FDA/DEA) and Baer (the chief spokesman of the DEA) that indicate the DEA will not reschedule MJ this year.

Once this potential sector catalyst is removed from the equation, the OTC MJ sector is absent any near-term catalysts.

Furthermore, one can argue that the MJ stocks will be injured by the DEA's rejection of rescheduling MJ, not necessarily because they have increased in anticipation of a rescheduling, but because many who have postponed selling MJ stocks because of the possibility of MJ becoming Scheule II will dump their shares when the DEA rejects pot for the umpteenth time.

The next sector catalyst, the November elections, is too far away to cause meaningful buying of MJ stocks sufficient enough to neutralize the probable selling forces on these equities.

Thusly, I remain sidelined.

Sleek