Tobacco Titan Teams Up with Charlotte’s Web on New Drug Venture

Hemp extract wellness giant Charlotte’s Web Holdings Inc.  (TSX: CWEB) (OTCQX: CWBHF) entered into a joint venture with botanical drug developer AJNA BioSciences and London-based British American Tobacco (NYSE: BTI) to develop a new drug for an an undisclosed neurological condition.

BAT has invested $10 million in the project, which will use Charlotte’s Web’s proprietary hemp genetics, acquiring a 20% stake. Charlotte’s Web and AJNA each hold a 40% stake.

The leadership team, comprising representatives from all three companies, plans to work with the FDA to file an investigational new drug application and initiate phase 1 clinical trials in 2023.

Charlotte’s Web CEO Jacques Tortoroli said the joint venture is a “capital efficient way for Charlotte’s Web to unlock the value of its intellectual property to advance development of effective botanical alternatives to current neurological pharmaceuticals.”

Neurologist Orrin Devinsky, AJNA’s chief medical advisor, will spearhead the clinical and regulatory strategy for the joint venture.

Devinsky, who is also the director of New York University Langone’s Comprehensive Epilepsy Center and a professor of neurology, neurosurgery, and psychiatry at NYU Grossman School of Medicine, played a crucial role in the development of Epidiolex, which is used to treat rare and severe forms of pediatric epilepsy and remains the only cannabis-based drug approved by the U.S. Food and Drug Administration.

“As one of the first clinicians to research novel cannabinoids, I am very excited to work on this project. I believe the properties of cannabis and hemp are well suited for the FDA’s new botanical drug development pathway,” Devinsky said in a statement.

James Barrett, commercial director of wellbeing and stimulation at BAT, emphasized that investment in the joint venture is another step in BAT’s investments beyond tobacco and nicotine, as the company continues to transform its business for “a better tomorrow.”

Many people expect more tobacco, alcohol, and pharmaceutical companies to enter the marijuana sector once it becomes legal at the federal level in the U.S.

The tobacco giant already owns nearly 20% of Charlotte’s Web, making it a “related party” under securities laws. That means that the joint venture between the two companies is considered a “related party transaction” and would typically require a formal valuation and minority shareholder approval.

But because the transaction’s value doesn’t exceed 25% of the company’s market capitalization, the company can bypass those requirements.

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