On April 7th, British American Tobacco (BAT) announced a $10 million investment in a partnership with CBD company Charlotte's Web to develop a drug to treat neurological diseases. The investment is part of BAT's diversification plan for their business.
Establishment of a Joint Venture Company.
BAT subsidiary AJNA BioSciences PBC and Charlotte's Web have formed a joint venture and plan to seek approval from the US Food and Drug Administration (FDA) for a therapeutic drug made from cannabis extracts.
In this project, AJNA has invested $10 million. According to the agreement, Charlotte's Web and AJNA each own 40% of the entity, with the remaining shares belonging to BAT.
In the CBD industry, BAT has also invested in Canadian cannabis company OrganiGram and German cannabis company Sanity Group, and has joined Casa Verde Capital under Snoop Dogg's leadership.
Tobacco company's first attempt at entering pharmaceutical development
To date, few companies have taken action to apply for FDA authorization for CBD medications. Only one similar medication has received recognition, which is GW Pharma's Epidiolex, a seizure medication made from CBD. However, the FDA has indicated that it has also approved three synthetic marijuana-related medication products.
Jefferies analyst Owen Bennett stated in a research report that "this is the tobacco company's first attempt to enter the pharmaceutical development field. Given last year's sales of Epidiolex at $740 million, the outlook is quite attractive.
This joint venture is set to commence clinical research this year and describes the candidate drug as a "novel plant-based medication targeting neurological disorders". British American Tobacco has declined to reveal further details about the drug's treatment capabilities.
On Thursday, Charlotte's Web stock soared by as much as 21% while BAT's stock enjoyed a more modest increase of 1.5%.
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British American Tobacco has invested $10 million in a CBD brain drug.
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