In a new report, analysts at the investment bank Cowen highlighted a marijuana and hemp compound called CBD as a massive opportunity for growth.

The analysts estimated that the US market for CBD would skyrocket from roughly $1 billion to $2 billion now to $16 billion by 2025.

The science on CBD's therapeutic benefits remains somewhat unclear, however. The Food and Drug Administration has approved only one CBD-based drug, Epidiolex, used to treat rare forms of epilepsy.

Wall Street is seeing green.

In a new report shared with Business Insider, analysts at the investment bank Cowen highlighted CBD, a non-psychoactive component of marijuana, as a massive opportunity for growth. They suggested potentially lucrative opportunities for investment in areas like healthcare, food, and tech.

The analysts — a team of 10 people that includes Phil Nadeau, a senior biotech analyst, and Vivien Azer, a senior consumer-product analyst — estimated that the American market for CBD would skyrocket from roughly $1 billion to $2 billion now to $16 billion by 2025.

Widely touted as a wonder substance capable of curing everything from pain to anxiety and insomnia, CBD has in recent months shown up in products like lotion, face masks, cupcakes, and beverages.

The science on CBD's therapeutic benefits is less clear, however. The US Food and Drug Administration has approved only one CBD-based drug, Epidiolex, used to treat seizures in children with specific forms of epilepsy.

Read more: A drug derived from marijuana has triggered the first federal shift on cannabis in half a century, and experts predict an avalanche effect

That hasn't stopped the veritable gold rush into CBD products.

Survey results included in Cowen's report found that 7% of respondents said they were using a CBD supplement. The report also estimated that Americans spent up to $2 billion on CBD products last year.

"This initial response piqued our interest considerably, as it was much higher than we would have expected," the analysts wrote.

Bottles of maple syrup and olive oil infused with CBD marijuana extract at the Village Bloomery medical cannabis dispensary in Vancouver, British Columbia. AP Photo/Ted S. Warren

Farm-bill impact

Part of the boom in interest surrounding CBD could be related to action from President Donald Trump. By signing the farm bill last year, Trump effectively legalized CBD derived from hemp, a plant that's roughly identical to marijuana but without the psychoactive substance THC.

The bill's effects are beginning to reverberate beyond the cannabis industry, the report suggested.

Canopy Growth announced in January its intention to invest up to $150 million in hemp production in New York state. And other US cannabis companies, including Vertical Brands, have spun off their hemp and CBD businesses into standalone entities to better access institutional capital and prepare for initial public offerings on major US exchanges.

Read more: Trump just signed a law that could spark a boom for the $1 billion marijuana-linked CBD industry

On top of that, some mainstream private-equity and venture-capital firms, including Greycroft, have recently greenlighted investments in CBD startups.

In the healthcare realm, the analysts said that on the heels of the recent FDA approval of Epidiolex, more companies could be working on similar products. Tilray, a Canadian marijuana producer that recently signed deals with the drug giant Novartis, and Insys, an opioid maker, are both running clinical trials in seizure disorders, they wrote.

CBD products are also gaining a presence in independent pharmacies — the non-Walgreens and non-CVSes of the world — many of which are already selling or have plans to sell CBD oil.

"Independent pharmacies likely find the high-margin profile of CBD oils attractive, which we suspect is similar to those of more traditional over-the-counter drugs," the analysts said.

And though large pharmacy chains like CVS are not selling CBD now, they might in the future. The analysts said that, for example, the US holding company behind Walgreens, the Walgreens Boots Alliance, has indicated it's monitoring the CBD market.

Read more: A drug derived from marijuana has become the first to win federal approval, and experts predict an avalanche effect

The analysts were also interested in emerging means of making marijuana compounds that don't require growing and harvesting the plants.

Lab-grown CBD and THC have gained a lot of interest from startups in recent years. The process would use a technique known as synthetic biology or biosynthesis to coax genetically altered organisms like yeast into churning out the marijuana compounds. Doing so, the analysts said, could save manufacturers money and time.

Last fall, the synthetic-biology startup Ginkgo Bioworks signed a $122 million deal with the Canadian cannabis company Cronos to make compounds like THC and CBD in a lab.

The startup is also interested in making lesser-known marijuana compounds that are present in very low concentrations in the plant but could have therapeutic properties; some research suggests that THCV, for example, may help staunch appetite. But scientists haven't been able to explore these compounds in depth because of that low presence.

"Compared to chemical methods, biosynthesis methods are more cost-effective, scalable, and environmentally friendly," the analysts wrote, adding that "compared to traditional methods, biosynthesis of cannabinoids is potentially more sustainable, more reliable, faster, and less expensive."

Cowen outlined a few challenges to CBD's growth. For one, the analysts said, the economics of CBD as a commodity could diminish because of simple supply-and-demand issues: As supply rises, CBD as an ingredient will become cheaper, but hemp seeds will become more expensive amid increased demand.