No long-term impact of FDA crack down on Curaleaf’s CBD marketing

Morningstar analyst Kristoffer Inton believes that the shares remain undervalued

Kristoffer Inton 24 July, 2019 | 3:00AM

Cannabis plants

On July 22, the Food and Drug Administration sent a warning letter to Curaleaf (CURA) regarding the marketing of its CBD products. The FDA stated that Curaleaf’s CBD products, including lotions, tinctures, pain-relief patches, and animal treatments are unapproved and misbranded drugs. Drugs can only be approved by the FDA, which it has not done for Curaleaf’s products. In addition, the FDA claimed Curaleaf is marketing with unsubstantiated therapeutic claims that the products can treat serious diseases and conditions, such as cancer or pain. In response to the news, shares dropped more than 14% before recovering to about 5% down, as mid-day yesterday.

Curaleaf has announced that it will work to adjust to the FDA letter and reiterated that the focus was on marketing of hemp-derived CBD products, not product quality or consistency. As such, we see little-to-no impact, especially in the long term or to non-hemp cannabis products. Demand will not be stifled by the FDA’s warning. Although the therapeutic claims on Curaleaf’s website were too bold for standard FDA compliance, we do not think the claims themselves drove significant sales. We expect the company will take the necessary action within the 15 mandated working days to address the FDA’s concerns.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Curaleaf Holdings Inc9.29 CAD-2.72

About Author

Kristoffer Inton

Kristoffer Inton  Kristoffer Inton is an equity analyst for Morningstar, covering gold, coal and cement companies. Before joining Morningstar in 2013, he was an investment banking associate for Guggenheim Securities in New York. He holds a bachelor’s degree in finance with high honours from the University of Illinois.

© Copyright 2020 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Cookies