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Cannabis Stocks Regaining Strength

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Shares of major cannabis companies are recovering from the extended losses they suffered on Monday following the U.S. Food and Drug Administration held its first-ever public hearing on cannabis and cannabidiol or CBD.

Shares of Tilray Inc. (TLRY) and Aurora Cannabis Inc. (ACB) are gaining more than 4 percent each, while those of Cronos Group Inc. (CRON) and Canopy Growth Corp. (CGC) are rising more than 3 percent each.

The FDA hearing did not result in any final decision, but it showed the conflicting views people had on the subject. While some people called for strict oversight of the booming CBD industry, companies involved in the industry lobbied for looser regulation.

According to acting FDA Commissioner Ned Sharpless, the regulator still does not know how safe the cannabis compound is for humans, despite its "widespread use in foods and dietary supplements."

More than 100 speakers, including manufacturers, researchers, advocates and opponents, offered divergent views on the subject on Friday. The divergent views underscored the need for an FDA decision as soon as possible so as to eliminate the confusion created due to uncertain regulatory atmosphere.

Friday's hearing is seen as just the first step in a process that could take years for the FDA to establish a legal path for marketing CBD products.

Major cannabis companies like Aurora Cannabis Inc., Canopy Growth Corp., Cronos Group Inc. and Tilray Inc. all saw their stocks fall sharply on Friday and also witnessed the extension of loss on Monday.

The FDA hearing to assess the safety and efficacy of CBD products in food and drinks came after hemp was legalized in the 2018 Farm Bill, which has resulted in CBD derived from hemp being legal in the U.S.

CBD is a naturally-occurring cannabinoid constituent of cannabis. It is a chemical in the marijuana plant often used for medicinal purposes, and does not have the intoxicating effects like those caused by tetrahydrocannabinol or THC.

As CBD is believed to relieve or ease symptoms related to health problems, CBD-infused products such as beer, iced tea, jelly beans and ice cream are flooding the market. The CBD industry is expected to be a $20 billion industry by 2022.

However, the FDA prohibits adding CBD to food and beverages as it views CBD as a drug.

Last June, the FDA for the first time approved a cannabis plant-derived, CBD-based drug, Epidiolex. The drug was approved to treat Dravet Syndrome and Lennox-Gastaut syndrome, two severe and rare forms of epilepsy.

But due to the strong public interest in CBD as a wellness aid, the FDA is seeking to establish a legal path to market for CBD products.

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