Blue sky predictions for CBD sales in the U.S. need to be reassessed in light of the U.S. The Food and Drug Administration’s warning about CBD, said Jefferies LLC analyst Owen Bennett.
“We currently model 2022 CBD retail sales of $3.5-billion compared to some blue-sky estimates as high as $22-billion. We believe this update will be a catalyst to re-base the majority of these estimates, with risks now more visible and the FDA striking a very cautious tone on the safety of CBD products,” wrote Mr. Bennett in a research note published Tuesday.
On Monday, the FDA issued a warning about CBD, saying that the drug is not considered “generally recognized as safe” for human and animal consumption, and may cause various harms, including liver injury, drowsiness, and negative interactions with other drugs.
“The FDA is concerned that people may mistakenly believe that trying CBD ‘can’t hurt.’ The agency wants to be clear that we have seen only limited data about CBD’s safety and these data point to real risks that need to be considered,” the agency said.
The FDA is in the process of deciding whether or not CBD can be sold in food products – a review that follows the descheduling of the drug last December.
The agency said it expects to provide an update on this process in the coming weeks. It has sent warning letters to 15 companies that it says are selling CBD in ways that violate the Federal Food, Drug, and Cosmetic Act.
“Longer term there will likely be a route to market for CBD products, with the FDA having already approved drugs with CBD as the active ingredient,” wrote Mr. Bennett.
“In our view though, the safety risks as well as the spike in consumer interest will likely see heavy regulation (especially against the backdrop of the recent vapour deaths, an area where the FDA has arguably dropped the ball on regulation), with companies having to support product launches with detailed reports likely including clinical studies (similar to what we are seeing now with the FDA's planned regulation of e-vapour),” he wrote.
Mr. Bennett suggested that larger and better capitalized companies, including Canadian LPs, could be better positioned to navigate heavier regulations. “Existing FMCG will also be in a good spot as consumers will want the comfort of brands they already trust,” he added.