At least once a week, Steve McDonald drives from his home in Irvine to an industrial stretch of Santa Ana filled with auto shops and home-improvement wholesalers.

Inside a beige storefront, McDonald consults with young budtenders about the jars of raw cannabis flowers and rows of infused edibles that fill the shelves at From the Earth medical marijuana dispensary.

The 40-year-old said cannabis products help him avoid prescription medications for pain from severe burns he suffered in a fire two years ago, as well as lingering back trouble and anxiety that plague him from his days as a paratrooper in the Army’s 82nd Airborne Division.

“Some days are better than others,” he said. “Cannabis isn’t a cure-all … But it has a lot of benefits – more than negatives.”

Two miles to the west, in a Costa Mesa high-rise with views of the Segerstrom Center for the Arts, a team of doctors and executives also discuss ways in which patients like McDonald can be helped using marijuana. Only, they never say that word.

“We don’t talk about marijuana or cannabis,” said Dr. Brian Murphy, CEO of Nemus Bioscience. “We talk about cannabinoids.”

Those are the chemical compounds in marijuana that have both psychoactive and therapeutic effects. And they are enticing pharmaceutical companies to spend years and millions of dollars pursuing government approval of new drugs inspired by the plant.

The United States’ conflicted history with marijuana regulation has caused it to lag behind countries such as Israel and Canada in developing pharmaceutical-grade drugs based on cannabis. But as public support and legalization of medical marijuana spread, a growing number of cannabis biotech companies are joining Nemus in Southern California, including two in Irvine, two more in San Diego and one each in Los Angeles and Manhattan Beach.

The sector has surged over the past couple of years, said Scott Greiper, president of New York-based Viridian Capital Advisors, which tracks the cannabis industry. More than half of all investments in the marijuana industry are now going to biotech companies seeking the “next billion-dollar drug” based on cannabis, he said, with three such companies trading on the Nasdaq and many more on the penny stock exchange. And he predicts the market for such drugs could reach $20 billion by 2020.

Earlier this year, the federal government promised to expand the number of suppliers permitted to provide researchers and drugmakers with government-approved marijuana.

“It is profound that we have this opportunity to be right in the middle of such powerful changes in the pharmaceutical industry,” said Raymond Dabney, who recently moved his firm, Cannabis Science, from Colorado to Irvine.

The companies are developing products for patients who don’t feel comfortable buying flowers in dispensaries that can smell like weed, but would buy a cannabis-inspired syrup from their local pharmacist.

They’re also hoping to persuade patients relying on California’s 20-year-old medical marijuana community and other entrenched markets across the country to switch from smoking Bubba Kush and Maui Gold to filling prescriptions for drugs named Syndros, Epidiolex and the like.

That may be a tough sell. Many medical marijuana users view cannabis the way McDonald does: as a holistic alternative to pharmaceuticals with far fewer side effects. Moreover, in states such as California, patients can legally grow medicinal pot in their backyards.

But with medical cannabis a $2.7 billion-a-year industry in California alone, drug companies see a major opportunity for new products that are rigorously tested, will likely be covered by insurance and – unlike traditional marijuana plants – can be patented.


There are 173 ailments, from arthritis to epilepsy, that patients say they’ve treated by smoking, vaping or otherwise ingesting marijuana, according to the advocacy organization United Patients Group. Extensive studies back up some of those claims, while others rely only on anecdotal evidence.

Skeptics say pot is no “miracle plant” and question the rigor of existing research on its medical use. But scientists working to develop drugs based on marijuana have faith in its pharmaceutical potential.

“The tricky bit is getting the drug in the body correctly,” said Nemus’ Murphy.

Take glaucoma.

Research dating back to the 1970s shows THC (the cannabinoid in marijuana that makes users feel high) can ease symptoms of the disease by relieving eye pressure. But the benefits of smoking marijuana last only a few hours, meaning consistent relief may require burning through eight joints a day.

Decades ago, researchers sought a solution via an eyedrop. They extracted THC from marijuana and placed a liquid version in the eye, but nothing happened. That’s because THC is fat-soluble, meaning it binds to fat and not liquid – a problem considering the constant wetness of the eye. Plus the cornea is good at keeping foreign substances out.

Nemus is now manipulating THC molecules in hopes of making a version that’s more easily absorbed. And since many people struggle to get drops in their eyes, the company is also developing an implant that would steadily release synthetic THC.

That drug and others Nemus is planning are in the preliminary phase of seeking U.S. Food and Drug Administration approval.

Already, federal regulators have approved three cannabis-based drugs to treat nausea and promote weight gain for cancer and AIDS patients.

Edmond Arlington took one such drug – the “pot pill” Marinol – for several years after he injured his back lifting heavy equipment. The Riverside native first tried smoking marijuana to combat nausea caused by the “arsenal” of painkillers he was taking. But the accompanying high interfered with his ability to function, he said. Marinol, which delivers a dose of pure THC, calmed his stomach without making him stoned, he added.

But Dr. Allan Frankel, a Santa Monica internist focused on medical marijuana treatments, said he’s never had a patient who thought Marinol worked better than cannabis.

“The whole plant is tremendously different than a single molecule,” he said.

That’s why pharmaceutical companies are experimenting with a variety of cannabis compounds as they develop new products.

There’s a mouth spray that aims to ease muscle spasms in people with multiple sclerosis. There’s a patch that’s said to dull chronic pain; another could treat osteoporosis. There’s a gel that promises to treat issues triggered by Fragile X syndrome, a rare condition that can cause serious intellectual disabilities.pharma

If these drugs get FDA approval, patients could save a lot of money, Murphy argues. As it stands, they might spend $500 or more to buy a month’s supply of marijuana at a dispensary. If they could buy a marijuana-based mouth spray at CVS, they might instead face a $10 copay from their insurance company.


Several hurdles have kept pharma giants such as Pfizer or Novartis from developing major cannabis drugs.

The federal government recently reaffirmed its ranking of marijuana alongside heroin as a Schedule I drug, a classification reserved for substances that have no proven medical use and are highly addictive. Doctors can’t write prescriptions for Schedule I drugs – or any controlled substance that isn’t FDA- approved. So in California and the other 24 states where medical marijuana is legal, doctors write “recommendations” for patients to use the plant.

The Schedule I designation makes research more challenging and can make it difficult for drug companies to attract investors. But Murphy notes the Drug Enforcement Administration changes the classification of individual cannabis-related pharmaceuticals if they’re approved for patient use. Marinol, for example, is a Schedule III drug, akin to Tylenol with codeine. And a similar pill, Cesamet, is Schedule II, which includes oxycodone and Ritalin.

Another hurdle for developing pharmaceutical marijuana drugs has been the limited supply of federally approved cannabis, some experts say.

For nearly 50 years, the only sanctioned source for federally regulated research and drug manufacturing has been a pot farm maintained by the University of Mississippi. The DEA this week announced it will allow more growers to supply marijuana for research and commercial production of approved drugs, though it’s expected to be some time before those new pipelines are open.

The three companies with FDA approval for cannabis-based drugs bypassed that supply hurdle by creating synthetic THC in labs. But a British company with U.S. headquarters in Carlsbad is close to developing the first federally sanctioned drugs extracted directly from marijuana plants.

GW Pharmaceuticals is in the final stages of clinical trials on Epidiolex, a syrup that contains pure CBD, the compound in marijuana thought to have the most medical benefits without getting users high. In tests with some 2,000 patients, Epidiolex has helped reduce seizures in children with two of the rarest forms of epilepsy, according to CEO Justin Gover.

A greenhouse in England supplies GW Pharmaceuticals with organic cannabis that the biotech company uses to develop medicines. (TIM PLATT, COURTESY OF GW PHARMACEUTICALS)

A greenhouse in England supplies GW Pharmaceuticals with organic cannabis that the biotech company uses to develop medicines. (TIM PLATT, COURTESY OF GW PHARMACEUTICALS)

The company grows its strain of organic cannabis in a greenhouse in England and imports the CBD syrup to the United States. Gover said it hopes to get FDA approval for Epidiolex in 2017 and start selling it by early 2018.

For its supply, Nemus has inked a deal with Teewinot Life Sciences Corp. The Florida company takes DNA from cannabis plants, implants it in microorganisms and grows colonies that can produce cannabinoids it says are genetically identical to those found in marijuana plants. But rather than wait weeks for harvest, Teewinot says it can grow the compounds in a lab in 48 hours.


Given such advances, experts believe it’s inevitable that more cannabis-inspired drugs will hit pharmacy shelves.

That’s a scary prospect for many medical marijuana patients, who worry about Big Pharma squeezing out their favorite dispensaries and then hiking the cost of replacement drugs.

“The trust of pharma just isn’t there,” said McDonald, the veteran from Irvine.

A spokeswoman for Pharmaceutical Research and Manufacturers of America or PhRMA, a trade group representing drug companies, said the organization doesn’t have a position on how the federal government classifies marijuana. But Aaron Herzberg, who runs the Costa Mesa investment firm CalCann Holdings, is among the many marijuana advocates who blame drug companies for keeping the plant illegal.

The Arizona company Insys Therapeutics, for example, petitioned against a Department of Health and Human Services recommendation to reclassify naturally derived THC as a Schedule III drug. And investigations by Vice and The Nation suggest pharmaceutical companies pay leading anti-marijuana academic researchers and support groups that lobby to keep cannabis in Schedule I.

In states where medical marijuana is legal, a recent University of Georgia study showed prescriptions for painkillers and seizure medicines dropped significantly. In the 17 states studied, Medicare expenses for those drugs fell by $165 million, which critics say points to the motivation for pharmaceutical companies to fight federal reclassification of marijuana.

Even if more FDA-approved cannabis drugs come to market, John Hudak with the Brookings Institution doesn’t believe the current medical marijuana industry will be wiped out. He argues the federal government never will sanction patient use of cannabis plants. Rather, he predicts pills and patches will be sold through pharmacies while flowers and edibles will still be sold at dispensaries.

Frankel, a physician, bets that herbal marijuana will come out on top. But if biotech companies manage to produce affordable drugs that capture the plant’s benefits without introducing new side effects, he sees it as a win-win.

“If it’s better medicine and people get treated … ,” he said. “Hey, I’m a doctor, and that’s what I want.”

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