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While cannabis isn’t yet legal across the U.S., new technologies are already opening doors to promising new applications of marijuana—and pharmaceutical companies are gearing up for a future where these options could hit the market, says Piper Jaffray.

The back story. In 2017 Canada legalized cannabis, but the road toward acceptance in the U.S. looks longer. The U.S. has taken a more patchwork approach to marijuana legalization, with individual states making their own regulations for now (and not always favoring legalization).

Yet plenty of investors, from institutions to consumer-staples giants and retailers are betting on a future in which the U.S. prohibition is lifted nationwide. And that means more than just pot. Other products like CBD oil are already making in-roads, and of course, given that medical marijuana is already an accepted treatment in many places, cannabinoid-based drugs are another potential growth area.

What’s new. Piper Jaffray’s Michael Lavery recently met with executives of Cellibre, a private cellular agriculture firm that employs techniques borrowed from medicine to allow labs to grow molecules from cell cultures. This is a promising technology for marijuana because the cells “naturally replicate themselves and can create specific molecules without unnatural byproducts.”

The process can be used to potentially produce specific cannabinoids, including ones that are rare and prohibitively expensive today. That’s not only good news for medical applications, but commercial and recreational ones as well, given that consumers are branching out into areas like beverages, vapes, and edibles.

Looking ahead. The glacial pace of U.S. federal law aside, this is still a scenario for the future. Lavery writes that bio-industrial companies may be able to come to market with their own products first, and cellular agriculture production of cannabinoids (if they can be made viable at scale) probably isn’t in the cards until at least late 2020 at the earliest.

That said, Lavery writes that big, traditional drug makers are already preparing for a U.S. market where cannabis is legal, and these new technologies could be harnessed for their benefit. “Pharma companies understand the potential for medical applications of cannabinoids and have products that could be ready to launch if/when U.S. federal law allowed it and if/when quality, consistent production was available at scale.” They may not be able to patent natural molecules like CBD, but derivative molecules and unique production formulas are potential areas of proprietary technology.

It’s not just big pharma however, as consumer companies, especially beer makers are looking into the market. That’s not surprising, given that legal weed often means a decrease in alcohol sales. Lavery writes that “big beer companies already know what minor cannabinoids (i.e. not CBD or THC) would be most interesting to them for potential beverage products, and would be ready to ramp up quickly, should laws change to allow it.”

While there are a few CBD beverages available today, with companies like Canopy Growth Corp. (CGC) and Tilray (TLRY) researching THC beverages, he notes that these could be just the tip of the iceberg when it comes to possible cannabinoid drinks.

Write to Teresa Rivas at teresa.rivas@barrons.com