Charlotte’s Web (OTC: CWBHF) CEO Deanie Elsner addressed the company’s recent rejection letter by the FDA in the company’s earnings call on Thursday. Since the passage of the 2018 Farm Bill that legalized hemp, the issue of CBD products has remained in a grey area. The FDA has had several public meetings and accepted public comments on the subject, but it still hasn’t made any specific decisions.
Charlotte’s Web was specifically focused on a regulatory pathway for full spectrum hemp extract with naturally occurring CBD. CBD products remain unregulated as the industry has grown to become a $3 billion to $4 billion industry.
FDA Punts To Congress
“After 2.5 years, it has become increasingly more apparent that in the FDA’s own words, potential legislation might be appropriate to enable a framework for under which the FDA can regulate full spectrum hemp extracts as dietary supplements,” said Elsner. “During the second quarter of 2021, we put this thesis to test by formally submitting a new dietary ingredient notification to the FDA for our full spectrum hemp extract as they have been recommending. The FDA responded with an objection letter to our NDI notification. Their response substantially based on their drug preclusion provision reveals that legislation is required to enable the FDA to establish a regulatory oversight for full spectrum hemp extracts as dietary supplements. Both the House and the Senate have introduced bills that would recognize hemp CBD as a dietary supplement and we are encouraged by this progress.”
When asked about the specifics of the letter, Elsner went on to say, “I will start with we were disappointed and strongly disagreed with not just the conclusion that they advanced, but the reasoning for their conclusions, because their letter back to us contained a significant amount of factual inaccuracies. And so the first thing I would tell you to do is on our website in the IR section, we have posted our response to the FDA. And we laid out an excruciating detail why we think they need to create the record in terms of what we submitted and what they concluded.
Now, that said, they drew a conclusion based on two examples. One was, they can’t move forward with an NDI as a dietary supplement because CBD is precluded, because it’s already a drug. And as you know, six months prior to the hemp bill being signed into law in December 2018, a drug was approved that’s CBD isolate. The second reason why they objected to our NDI was that they expressed safety concerns. And I think that’s the part that we are looking for a correction on, because regarding safety, the conclusions drawn just don’t appear to be based on the data we provided in our NDI. So, that’s we are trying to get focused on. In terms of what does it mean, I think what you are getting to is, it is the industry has been caught in a little bit of a catch-22, because the FDA has not been clear about the process by which they want companies to go through to gain regulatory clarity. And Congress has been pointing to the FDA to take responsibility for this.
And so our decision was full transparency, to force the issue to see who has the next decision. And with the FDA objecting to our NDI, it becomes very clear that the regulatory process to get established has to start with Congress, legislative and the FDA to regulate the dietary supplement for CBD, and then FDA can regulate within. And so I am confident there is a way to do this. Over the last 18 months, we have met with the FDA, about eight to ten different times and our meetings were very constructive. I have got a great deal of respect for the FDA. But I think they are in a bit of a catch-22, because they have approved the drug. And they can’t seem to move away from that precedent. And so Congress has to act. And I think once Congress acts, the FDA can be very clear about the process. The process is scientific. It’s intense. There is a ton of data that we have got to do to submit for it. And I feel really good having gone through this knowing what they are looking for. But now we need Congress to act. And when that happens, I think the category will be able to submit NDIs and the whole thing will begin to open up.”
Elsner was asked whether relying on Congress would be any better and she answered, “This is not just a CBD hemp industry challenge. This is a THC sector challenge, because we are going through with hemp extracts with naturally occurring CBD is exactly what the cannabis industry is going to have to do following us. And so this is not Congress, maybe or maybe not engaging on the hemp CBD industry. This is Congress looking at a category today, that is roughly $17 billion to $20 billion in total in the US across 11 states where cannabis is legal and CBD participates. And so some kind of resolution has to be landed for how both of these categories are regulated. And the FDA has to have clarity and perspective about how they want companies to produce safe products for consumers in a way that is holding manufacturers to a very high level of standard. And so we are doing this for ourselves, but doing this for our category. We are doing this in support of our consumers. But it’s the whole sector that is going to put the pressure for Congress to act and push the FDA to move forward. And we will continue to push both fronts.”