SEATTLE. WA — The cannabis industry could reach $35 billion in size by 2020, according to ArcView Research. However, cannabis continues to be a banned substance under U.S. federal law, while being legal only under state law in 23 states – and on an inconsistent basis. These states have licensed a number of cannabis testing laboratories, but some have struggled to remain compliant with applicable state standards.
In this article, we’ll take a look at some of the challenges facing the industry and one publicly -traded cannabis testing company that is rapidly growing in Nevada.
Unreliable Test Results
Most states that have legalized medical or recreational marijuana have implemented some kind of testing standards or are in the process of passing legislation. Even with these standards in place, state regulation may be failing to safeguard consumers.
In June, the Oregonian published a scathing critique of the cannabis industry’s lack of testing standards, showing samples obtained from dispensary shelves containing 14 dangerous chemicals, including a half-dozen that the federal government believes may cause cancer and a banned household roach killer. Johns Hopkins researchers found in the same month that the vast majority of edibles mislabeled the amount of THC contained in medical marijuana samples.
CNN brought national attention to the issue in November after finding a neurotoxin called imidacloprid in at least one of six samples that it tested during an investigation. After making the discovery, officials launched an investigation that led to a voluntary recall of 2,362 marijuana plants, including 23 different types of concentrates. These aren’t isolated cases either, as evidenced by the City of Denver’s 12 ongoing investigations into illegal pesticide usage.
Troubled Testing Firms
Many cannabis testing laboratories have come under fire from regulators for not properly testing product and allowing tainted samples to reach public consumers, while others have struggled to navigate the patchwork of testing frameworks.
Earlier this year, a large publicly-traded cannabis lab testing firm announced that it would close its Denver laboratory amid Marijuana Enforcement Division violations and disagreements among its executive leadership. Many smaller laboratories are also struggling to adjust to tighter regulations in states like Oregon that often require significant investments in machinery needed to test for upwards of 60 different pesticides.
The lack of uniform testing standards and frequent mishaps may also lead to lawsuits that could put smaller labs out of business if they make a mistake. Over time, these lawsuits could reduce the number of labs operating in legal states, while dispensaries and growers will be incentivized to work with larger marijuana testing labs with extensive resources. These dynamics could create opportunities for large well-funded companies operating in the space.
DigiPath, Inc. (OTCQB: DIGP) owns and operates a cannabis-testing laboratory in Nevada, where medical marijuana has already been legalized and recreational marijuana may be legalized as well in 2016. Since opening its lab earlier this year, DigiPath Labs, a subsidiary of DigiPath, Inc., has announced a series of customer agreements and partnerships as it builds market share in the state’s rapidly growing industry. This makes it one of the few high-quality publicly-traded cannabis testing companies.
With a market capitalization of just $2.2 million, the company represents an attractive play in the space with plans to open up additional labs in other states that have legalized the drug. The company also operates an education and media division focused on cultivating an audience of cannabis enthusiasts, with its TNM News Corp. reaching hundreds of thousands of listeners on online, mobile and terrestrial venues throughout the country.
DigiPath, Inc. Chief Science Officer Dr. Cindy Orser, Ph.D., has also been pushing for unified cannabis testing standards throughout the country. After working with Nevada to help draft its testing standards and pesticide regulations, she attended the Conference of Western Attorneys General to push for adoption of those standards in other states that have legalized cannabis. The hope is to create a unified system rather than the voluntary standards that remain commonplace across the country.
The traditional lab testing industry may be well-defined, with companies like Psychemedics Corporation (NASDAQ: PMD) providing drug testing, Enzo Biochem Inc. (NYSE: ENZ) running biotech assays, and NeoGenomics Inc. (NASDAQ: NEO) focused on cancer-related genetic testing, but the cannabis testing industry is a relatively new space where DigiPath is well-positioned to succeed given its investment in top-tier talent and equipment.
For more information, visit the company’s website at www.digipath.com.
Except for the historical information presented herein, matters discussed in this article contain forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from any future results, performance or achievements expressed or implied by such statements. Important factors that could cause these differences include, but are not limited to, the demand for the company’s services, governmental regulation of the cannabis industry, and the company’s ability to execute its business plan. Emerging Growth LLC dba TDM Financial, which owns CannabisFN, is not registered with any financial or securities regulatory authority, and does not provide nor claim to provide investment advice or recommendations to readers of this release. Emerging Growth LLC dba TDM Financial, which owns CannabisFN, may from time to time have a position in the securities mentioned herein and may increase or decrease such positions without notice. For making specific investment decisions, readers should seek their own advice. Emerging Growth LLC dba TDM Financial, which owns CannabisFN, has been compensated for its services in the form of cash and equity securities by DigiPath. For full disclosure please visit:http://www.cannabisfn.com/legal-disclaimer/.
SOURCE: Cannabis Financial Network