Cannabis Capital Podcast

Transcript

Ross O'Brien    0:17

Welcome to a special episode of Cannabis Capital, the podcast. I'm your host, Ross O'Brien, founder of venture capital firm Bonaventure Equity, author and lifelong entrepreneur, and I see entrepreneurship everywhere. And as an early investor in these new frontiers of life sciences, it's my goal to bring these conversations and to bring you direct access to the thought leaders and pioneers of this defining moment. And I'm just thrilled to have on today one of our partners and a believable entrepreneur and colleague and friend, Alleh Linquist, CEO and founder of FloraWorks Company. We're super excited to be involved with. So we're going to have Alleh walk us through his fantastic story. We're going to have a great conversation on entrepreneurship. And so welcome, Alleh Linquist, to the podcast today.

Alleh Lindquist 1:10

Hey, thanks for having me. Always a pleasure. Like you said, my name is Alleh Linquist, the CEO and co founder of FloraWorks. We are a rare and novel cannabinoid discovery company looking for new therapeutic opportunities.

Ross O'Brien    1:25

Fantastic. Well, as Alleh, which we talked about, these are unscripted conversations. And so to kick us off, I always like using the oblique strategies. And for those of you who don't know, the oblique strategies are a set of cards developed by the music producers brian Eno and Peter Schmidt. And this is a random drawing of an oblique strategy. So, Alleh, are you ready? The oblique strategy for today's conversation is breathe more deeply.

Ross O'Brien    1:57

Breathe more deeply. So the guys use these in the studio for the context of creating music and creativity. And I always find there's a direct correlation to entrepreneurship and everything. Right. So when you think of entrepreneurship in your journey and we say breathe more deeply, what does that mean?

Alleh Lindquist 2:15

Yeah, I mean, often with the chaos and craziness of entrepreneurship, all the different things you're juggling, it can be a little chaotic. That obviously just triggers for me. You just need to breathe deeply and take a pause, allow your body and mind to calm down so that you can focus that energy on each task as it comes up, rather than feeling like a chicken with your head cut off.

Ross O'Brien    2:41

And I love that. That was the oblique strategy for today, because something you and I talk about a lot is ownership beyond just the technical, the tactical, or the business piece, but also as the individual. Right. And living as an entrepreneur. And something that I learned from from you and really admire about you is the way that you manage all of those aspects of your life while building a company. So what's some advice for the entrepreneurs out there that are listening to this? And what are some of the things that you learned to be able to get to this place?

Alleh Lindquist 3:12

I think. Yeah. A couple of things that really stood out for me on this path is the ability to learn, which really comes from removing the things you think you already know or just not filling the space with things that you already know. Because in entrepreneurship, there's something new to learn every ten minutes, almost. And it's a must do to really succeed and push forward. The other big piece, I think, is just grit, for lack of a better word. Relentless. Pursuit is fundamental to success. When things can feel very difficult, overwhelming and challenging, it's just time to double down and keep going. No one ever got anywhere from quitting.

Ross O'Brien    4:00

So I love this Alleh. Grit, resilience, continual learning. I mean, we're starting to paint the picture of the entrepreneurial archetype that we get very excited about. And look, the challenges I always see it in entrepreneurship is the role of the founder is to pull together resources and then allocate those resources to get the best possible outcome for, in our case, developing new products, developing new science, and ultimately making people healthier. Right? And so when you think about that resource allocation, the dynamic is that you need to make fast decisions with imperfect information. You'll never have enough information as entrepreneur. You'll never have enough capital or enough resources and you have to take risk and you have to pioneer into places where people have not gone before. So how do you look at that resource allocation? And maybe let's start with one of the reasons we have. We have time, people and money. So how do you think about time? How do you choose where to spend your time in driving your venture forward? And more importantly, maybe, how do you choose what not to do?

Alleh Lindquist 5:05

Yeah, no, definitely. I mean, I think it can be easy as an entrepreneur to be distracted by all the great ideas out there that are available.

Alleh Lindquist 5:17

Coming up with your core initiatives as a business is fundamental. It doesn't mean that they can't change throughout the life of the business. That's always the case as you move forward and learn. But without that kind of main north star, it's very easy to get distracted and start running in different directions, which then again pulls all of those different resources around. When you're moving towards a more cohesive goal, the team knows what to do. You know how to allocate time, you know how to make decisions around capital. And even when you do make mistakes or wrong decisions, they are still in the effort towards your main goal. So you still learn something that progresses you towards that main goal versus when you get distracted and apply time and money towards something that's not in that main trajectory. And even when you fail at that, you might learn something important or learn something there, but it doesn't necessarily result in that forward momentum towards your goal.

Alleh Lindquist 6:20

It's just important to put that together with your team and kind of everyone should know generally what you're doing and where you're going.

Ross O'Brien    6:28

So how do you strike the balance between experience and maybe for lack of better term, education? Right? Or there are degrees in entrepreneurship. I don't have one, you don't have one. And I don't know that they're a substitute for actually being in the trenches and learning. So there's an element of I love just recently the quote from Jalen Hertz, who just lost the Super Bowl, and somebody asked him post Super Bowl, said, well, Debrief on the game or whatever. And he said, well, sometimes you win and sometimes you learn. And I thought that just summed everything up. I mean, here's somebody there's not going away. You mentioned grit earlier. I think as an individual, through his play shows us gritty. So bring that back to the experience of entrepreneurship and what it takes to stay in that game.

Alleh Lindquist 7:20

Yeah, for myself, I've been uniquely lucky to have gone into completely unknown industries or businesses. Obviously getting into cannabis early and doing cannabis extraction kind of in the beginning of that technology development. And so CO2 and hydrocarbon were new. We were pioneering technologies, how to make high quality extracts, and you're learning along the way. So that really exposed me to just diving into something that was relatively technical outside of my normal context, but just had to dive in and learn fast. What that ended up leading to was FloraWorks through scientists that I had met and kind of exploring what things I had no idea of, really. And just being able to put those pieces together from how other people were thinking about it and kind of moving that into what became FloraWorks and kind of this idea of unlocking these cannabinoids. And again, no training for this necessarily just a peer kind of drive and ambition to learn fast. And as you said, a lot of that comes down to really being able to bring a team together. I mean, nobody is an entrepreneur on their own, especially in the startup realm. It's teams of entrepreneurs. And so my job isn't necessarily to have all the answers. It's to ask the right questions and drive towards the right answers for the entire team and try to take that information and then project it into a business strategy going forward. The expertise for these things are outside of me. They're with my team.

Ross O'Brien    9:08

So really interesting. We've talked about this. One of my favorite bits of feedback I got on my book did I mention I wrote a book? Yeah, a couple of times. Okay. Cannabis capital of the book. But somebody on social media responded, said, hey, I read your book. It was great. However, it didn't seem to be that focused on cannabis. And I was like, exactly, this was the best. I think they thought it was some constructive feedback and it was delivered in a nice way. But I was like, no, that's exactly the point that there's a base set of fundamentals. Right? So leading a team is about leadership, full stop. It's not about cannabis. It's not about psychedelics. It's not about new drug development. It's not about brands. It's not about like, team dynamics. And being a team leader is in its own right, a discipline. So when you go into you said a moment ago, going into these unknowns in this new sort of frontier, how did you bring forward with you or get access to some of the core sort of just fundamentals right? So when you're going into this, you're not trying to redesign how to manage teams. You're now designing how to manage a team with certain expertise and talents that need to be pulled together in order to drive a mission forward in this frontier market. Like, how did you bring those fundamentals along with you or learn them along the way?

Alleh Lindquist 10:31

I mean, a lot of core business fundamentals not being classically trained, I learned along the way, certainly through trial and error and failure over many, many years with other businesses

Alleh Lindquist 10:47

that really, I think, is foundational to building a strong baseline to grow from. If you don't have basic fundamentals, it can be, again, very difficult because you're going to be dropping the ball on financial strategy or bookkeeping record keeping regulatory landscape. There's a lot of components, especially in cannabis, it's a moving target sometimes in terms of how you're dealing with this. So I learned a lot along the way that I built a strong foundation for approaching FloraWorks, which I would consider to be a relatively technical business in the idea of

Alleh Lindquist 11:30

chemical synthesis work to develop new compounds within cannabinoids and then being able to take those cannabinoids through early discovery work and eventually finding these new potential drugs. It's been a really phenomenal experience thus far to learn and kind of engage. And it's given me the ability to work with a lot of new people that have these types of experiences and kind of pull them up together and take this foundational strength and kind of knowledge that I've had from past experiences and build a foundationally, strong business going forward.

Ross O'Brien    12:11

So what's interesting to me and our team is looking at, and you just said it early discoveries of identifying chemical synthesis and early discoveries of new compounds. So there are only a handful of folks that I've met that saw that this wasn't happening in cannabis, right in the early days of cannabis. What led you down that path? It's so entirely contrarian. And now let's talk about what FloraWorks does because it's unbelievably profound. It seems to me to be the singular opportunity. We looked at the space, we're like, this is all about impacting health care. And it seemed like nobody was thinking about that or talking like that.

Alleh Lindquist 12:51

Yeah. So I would say that kind of this vision for the company that is now was maybe even only partially developed kind of in the beginning through relationships in the extraction space. I met both a chemical engineer who was very talented in putting together manufacturing capabilities based on any of these ideas, depending on what synthesis it was as well as a PhD biochemist here locally in Oregon. And the idea of pursuing CBN as a molecule was kind of what spurred the original business off when that kind of idea came from kind of an old story that cannabis that has been around old weed basically had oxidized, THC it oxidizes into CBN. And we wanted to build a scalable manufacturing process to allow CBN to come to market as a viable new ingredient, which is what we did a couple of years ago. And that kind of further opened up the broader picture of, hey, we've got lots of new compounds that we can discover and lots of different chemical synthesis approaches that we can bring that can lead to different molecules. And again, this is really discovery work, is that we see a lot of potential there, but the question is, how do you get to that potential and what work needs to be done first? And so we felt that

Alleh Lindquist 14:29

creating scalable pathways for manufacturing was a core element of which molecules are going to be viable. If you can't manufacture the molecule at any type of scale, it's not really going to work as a drug for the future. So that was a foundational piece. Definitely was just relationships that had built over time. The further I go in this, the more relationships I have and the more opportunity there has been through those relationships. So I definitely lean and draw on the people around me at all times.

Ross O'Brien    15:04

So, super interesting. I think it would be helpful to just walk through cannabinoids in general. So where are we with cannabinoid science and cannabinoid discovery? Just some basic for some folks may not actually know the difference between CBD and CBN and Cbg, et cetera. So maybe a little of that landscape would be helpful.

Alleh Lindquist 15:23

Yeah, try to summarize that up. So there's roughly 120 known cannabinoids that have been identified in the plant. CBN, for example, is one of those CBD, Cbg, THC, all as well. There's two different types of cannabinoids. There's ones that the plant forms through an enzymatic process like THC or CBD or Cbg, and then there are oxidative compounds like CBN. So cannabinoids that result from oxidative breakdown of enzymatic cannabinoids. And so that's where we really focused our kind of attention and saying, well, let's look at the chemistries that we can use to employ for oxidation and find pathways for these, in some cases known, but in some cases unknown new compounds. So there's quite a bit of new chemical entities, as they're called NECs or Nce. Those are cannabinoid structures that we're identifying. And again, we don't really know what potential they have or use case they have, but the first stage is just unlocking them. So you've got enzymatic and oxidative compounds, you have well into the realm of two or 300 probably at this point, of known and new chemical entities. From there you have these enzymatic and oxidative compounds, and then in the human body. You have an endocannabinoid receptor system, CB one and CB two receptors. There are functionally two different ways that cannabinoids could be used as a treatment for a disease. The first one is a cannabinoid receptor response which is what you experience when you consume THC and feel high. And so each cannabinoid is going to have a different bonding effect and kind of think of as the way those cannabinoids stimulate your receptor system and how your receptor system modulates physiological response in the body. And so one of the effects of cannabinoid stimulation of the receptor system can be homeostasis, for example. Beyond that, you also have these cellular actions where the interaction of a cannabinoid with a particular type of cell can result in a certain action. This is kind of a newer area of exploration but there's been a handful of discoveries around it that have been discovered in mostly petri dishes, which is the first phase, these cellular assay studies where you take a type of cell and you put cannabinoids in and you see if it does something. These are used in drug discovery all over the place.

Alleh Lindquist 18:15

These two different areas are very in depth. There's a lot of work to do on both of them. I mean, the cannabinoid receptor response system or cannabinoid receptor system is relatively unknown and maybe more complex to study than the cellular actions because you're trying to figure out how the endocannabinoid system works in each individual and what kind of physiological responses are happening there. But fundamentally you've got a lot of compounds. You have effectively no or very little potential for toxicity with cannabinoids which make them phenomenal candidate for drug development.

Ross O'Brien    19:00

So let's go back to the business plan. Right. So you take a look at this landscape and it's certainly how we got aligned when we first met. Right? I mean, we're looking at this from an investment standpoint saying this is just the first inning, not even the first inning. I mean, this is day one of just starting to understand what's encapsulated in this plant and distilling this in some fashion and putting it in gummies is not the endpoint that we're particularly interested in. So when you started doing this discovery work in the business plan A, how did you remain disciplined on that? Because I'm sure there was a lot of pull to just go start putting labels on things and selling them online or whatever it might be. Right. But you remain disciplined to building a legitimate lab based processing to bring products into the market. What was that business plan inception like?

Alleh Lindquist 20:02

Yeah, I mean, the core thing here for us was making CBN a viable ingredient for the hemp and canvas markets and kind of testing this thesis that it potentially was good for sleep. And that allowed us to scale up a revenue generating business which allowed kind of the propping up of this further discovery component. But the big kind of goal there after proof of concept. And CBN has been the fastest growing within the recreational cannabis market. So CBN infused goods have been outpacing sales of all other SKUs, and those SKUs are being sold for sleep. So people are buying it and returning for it. So that thesis ended up being true. But we see the future of this as a much broader, bigger market where these things are available in drugstores, they are potentially prescribed by doctors or recommended by doctors. And so there was foundational work that in the industry just hadn't been done, mostly because prior to 2018, you couldn't really do this work. And so the 2018 Farm Bill really opened up this possibility to just take the existing FDA regulation structure and apply it to Cannabinoids and basically go through all of the standard toxicology studies and efficacy proof of efficacy studies. That you would need for something like melatonin or another example is even Epidiolex, which was the first and currently the only approved cannabinoid drug which is CBD for the treatment of Epilepsy. And so we kind of saw that and said that's the way we want to go. It's regulatory intensive and research intensive. But on the other side of it, you have what you need to really drive the consumer trust and confidence that we think is lacking in the cannabinoid and hemp markets today that seem like a perfect opportunity to apply kind of what we do as the chemical synthesis house.

Ross O'Brien    22:13

So you mentioned there's a lot of work to be done, clearly. And that's one of the things that's attractive is the businesses that usually create the most value are very difficult to replicate. Right. And it's doing that hard work. So it's not always just the quickest path, but it's the most defensible and long term value creating path. And ultimately this is about getting products and approved drugs into the hands of the patients that need it the most. Right. The reason I do think that there's so much in this space is it works. I mean, people using raw materials recreationally for all different inflammation to sleep, like you said, folks on CBN. So in some respect, as it occurs in nature, this is working. Right. People all over the place are using things and having good outcomes. The other side of that is there is very little control, very little regulatory oversight, and there's a lack of quality and efficacy in the products. Talk to us about what the regulatory landscape looks like today and where does that need to evolve from your vantage point?

Alleh Lindquist 23:25

Yeah, so obviously we have recreational cannabis at state levels and more and more states are coming all the time. And then we have this hemp regulatory framework, which is national, and the difference here is whether it's less than 0.3% THC. That's the qualifier for hemp. And so you kind of have these two different markets, at least in our business, they cross where we're making hemp ingredients or what are qualified as hemp ingredients from a regulatory perspective. And then we often have to deal with the state regulating level, but we sell those ingredients into the recreational states to be made into currently those products. So that's great for consumers that are already comfortable with cannabis or are comfortable self treating kind of themselves. And you've got somebody maybe taking it for headaches or somebody for anxiety and sleep. But

Alleh Lindquist 24:27

it's certainly not a normal market for something like this where you see kind of the evidence, proof of efficacy that would be normally required, right? And so we saw that as a huge opportunity to kind of do that foundational work to really understand which cannabinoids do what, how do they interact together. Again, we are really excited about cellular action work where we can look in these petri dishes and see what kind of function there might be when these cannabinoids interact with different types of cells. An example of this actually out of Oregon State University last year, there was a researcher there that put some acetate, so CBGa and Cbda into petri dishes and discovered that the acetate version of the compounds inhibited the penetration of COVID into a cell. And so, interesting, that's still an early discovery, but it's an example of these cellular actions. So we think there's a lot to be discovered there and kind of see, especially as we separate each one of these compounds, these molecules, and then run them through the same tests, these different assays to kind of build. A database from that that allows us to kind of look through and say, okay, well, this molecule over here might be better for cancer fighting than just this general idea of cannabinoids. Right? Is there a specific one that functions in a certain way better? That's where we really are excited about the discovery side.

Ross O'Brien    26:12

And what I'm hearing from you is something you mentioned earlier. You do your job to ask a lot of questions, right? And it's clear that having that curiosity and being able to dig deeper and try to understand what the opportunity is also comes from a baseline of a, not needing to know everything, and b, not expecting to know everything or coming at conversations like, hey, I see an opportunity. I've got this all figured out. I see an opportunity. We need to go learn more, which is a very different approach.

Alleh Lindquist 26:43

And it's not that we're completely in the dark here. Obviously there's been some research, there's anecdotal response with CBN for sleep, for example. There was already kind of an anecdotal story out there that led to wanting to get CBN made viable manufacturing process. But even from that, it's led to quite a bit of user experience that now has led to 1500 person placebo blinded study to be able to look at structure function claims for us. So we're taking incremental steps. But that wasn't a blind shot in the dark. Obviously right. We used the story and the history and the end of the response that we knew to kind of guide our exploration deeper. And that's kind of where we're at with other compounds, too, is look for what's there, look for kind of the connections and the stories that might be there and then pick your target disease.

Ross O'Brien    27:38

Well, and the regulatory landscape just a few years ago was not conducive to going and doing a 1500 person double blind.

Alleh Lindquist 27:47

Yeah, we're five years into this now from the Farm bill, but that's not the types of studies we're just getting started, really. The industry is pretty fresh when you think of the therapeutic discovery component of cannabis and the cannabis markets. This has not been possible before. And we're right at the threshold of, I think, a lot of really interesting and meaningful breakthroughs in the space. Like I mentioned, epidiolex, that was really a pretty interesting discovery that kind of spurred this forward. But since then there really hasn't been a major breakthrough yet. And I know of some that we've got in the hopper that we're excited for the future coming up here.

Ross O'Brien    28:35

But do I need to bring the lawyers in to this conversation up the break?

Alleh Lindquist 28:41

We'll maybe hold off on sharing some of those discoveries,

Alleh Lindquist 28:48

being on the inside of it. It's extremely exciting to be doing this work. The therapeutic potential of cannabinoids is substantial and again, we're right on the threshold of discoveries.

Ross O'Brien    29:07

Let's go back to the regulatory piece. Right. I mean, this is when you're, when you're talking about developing true therapeutic discoveries, this is next to nothing to do with getting a license and opening a dispensary. Right.

Alleh Lindquist 29:22

Although completely separate.

Ross O'Brien    29:25

Right. Although that is sort of the baseline of where the regulatory landscape has started. Right.

Ross O'Brien    29:36

I'm grateful for that because it's allowed us to take these incremental steps. Right. But it certainly occurs to me, or seems to me, that just like where we are with the science, that's where we are from regulatory standpoint, there are so many unintended consequences we haven't even started to unpackage just from this regulatory light that's happening in the States. Right. I mean, we're not even talking about people driving on cannabis. Like, what do we do there? How do dispensaries get insurance? From a real estate standpoint, it's just this whole labyrinth now that's opening up. How do you think about and where do you think we need to be focusing from a regulatory standpoint in order to leverage the existing pathways to getting true therapeutic benefit to the people that need the most?

Alleh Lindquist 30:24

Well, yeah, the first thing here, I think, is that at some point this self treatment with cannabinoids will shift from people buying recreational gummy products or vape pens and you'll start to see an explosion of therapeutic nutraceutical supplements, drugs within cannabinoids that will be next to advil, say, or kind of under your categories. In the grocery store you've got sleep products you might have bone health, but eventually we'll see people buying in that space because of the confidence that this foundational research would do. But the regulatory framework for us is really already there. We're not waiting for federal legalization. That really doesn't apply to us. That's a recreational thing. And there is certainly the potential that THC or the intoxicating cannabinoids would qualify or could be a particular treatment for a therapeutic. But that's really not where we focus. We think that there's definitely challenges with saying, here's a disease that we want to treat. Potentially you don't want to be high in the treatment of that, especially when we talk about cellular actions. Those actions are not based on being high. And so we operate outside of that federal nexus and have very clear guidance from the FDA based on any compound that's looking to go after a treatment for a particular indication.

Ross O'Brien    32:06

This is interesting when you talk about people using it as recreationally versus using something that is you used Advil, I think, as the example. So we know aspirin originated from willow bark, right? But aspirin now comes from a factory and is put in a bottle and is on the shelves of CVS and Walgreens everywhere, right? So there's a chasm between chopping down a willow tree and consuming willow bark to actually delivering medicine, right? How does that look from your standpoint as it relates to nutraceuticals, as it relates to FDA pathways, as it relates to just recreational access?

Alleh Lindquist 32:54

Can you say that again?

Ross O'Brien    32:59

Of course.

Ross O'Brien    33:04

How does cannabis sitting today as accessible in gummies and vape pens, how does that need to coexist develop into going from the willow bark to being aspirate? Like, are these nutraceuticals? Does it fall in a nutraceutical category? Is this leveraging the FDA to actually get real drugs approved?

Alleh Lindquist 33:27

I think some of that is a little bit undetermined right now in terms of how the FDA we end up approaching this. Personally, I think there's categories for both pharmaceutical drugs, traditional drugs as the FDA defines them, as well as things that are more approachable at a supplement or nutraceutical level for something like say, a dementia or Alzheimer's treatment. That's very close relationship with a doctor when you're looking at treatment. And that's an area where you would look and say this is a drug category. Whereas sleep, for example, that's something that could be self treated. You don't need to go to the doctor and say, hey, I'm having trouble sleeping, and be prescribed CBN in this case because there's no toxicity or kind of the elements here. You don't have the safety issues that you may have with other drugs or even could be OTC like Advil, which is kind of a road in between the two, which we think is also probably a prime category. But really this is going to come down to how the FDA sees these molecules and what they think is appropriate. They clearly like the. Drug route and seem to be saying that that's where they think cannabinoids should be. And so Epidiolexis has already carved that path, and it's a natural compound. In that case, CBD from the plant you kind of mentioned Advil, and the compound comes from bark, kind of like cannabinoids. You've got your compounds in there, you can extract them like you could extract from the bark. In some cases, though, there's not enough of the molecule that you want like there is in the bark. And so that's where the synthesis work comes in, in trying to create an identical molecule at a much higher scale than you could extract it. And in the case of cannabis, you've got compounds that the plant is very good at making, like THC or CBD. And so those are abundant. All the others, though, however, are not abundant in the plant. And it's very difficult to extract a 1% kind of compound and scale that up, especially when you're dealing with a collection of compounds in a mixture and trying to separate those compounds from the other ones. Because one of the things that we really need to do when looking at this discovery work is know how each compound works independently. It's fundamental to kind of discovering what's really happening here. If you're say you're testing, is this raw cannabis oil, good for sleep, and it's got 120 compounds in it that you're consuming at different levels, really, what's happening there, we don't know. Right. It's anecdotal. Right? So we're trying to break it down and say which cannabinoids could be best for which things? And again, the molecules that you could not get in abundance from the plant is where we focus on the synthesis work. It's kind of unlocking all of those compounds.

Ross O'Brien    36:49

So one of the things that I always like to say is, we have everything we need to bring legal drugs to the market. It's called the FDA. Right. These pathways exist. So FDA has come out recently with sharing some or issued some letters and things. Talk to us about sort of what that means to the broader industry. What does the stance mean from where you come from to where we are today? And then let's lean into a little bit about where FloraWorks is today and what you're pioneering there.

Alleh Lindquist 37:20

Yeah, so there are some recent announcements from the FDA relating specifically to CBD. And so there's kind of a complicated framework here, regulatory landscape, where CBD was approved by Epidiolex before 2018. And so there's a rule in the FDA with the FDA that a drug cannot be a supplement. You can have a supplement that could be tested and become a drug. Can go that direction, but you can't go back the other way. Yeah. And so because CBD, even though it was consumed prior to 2018, it was not consumed legally, this kind of regulatory issue has arisen where CBD is all considered a drug and not considered a supplement. Even though it's obviously being sold as a supplement, in many cases, it's a hindrance to kind of where it can be sold and which companies be willing to work with it. That doesn't necessarily apply to any other cannabinoids. Obviously, THC has its own scenario with federal being a Schedule One right now, but all of the other cannabinoids don't have that issue. The FDA, however, did come out and say that they are not going to be changing that rule at this date. And so CBD will remain a drug in the eyes of the FDA for the foreseeable future. This can be confusing and challenging for consumers because they don't know this. And when you're going into the grocery store and you're looking at CBD products on the shelf, there's really no FDA regulation on that. And this kind of breaks down all the way to the manufacturing. Is it GMP? Is it being done correctly? Is it being tested appropriately? So this kind of lack of oversight by the FDA and the position there creates some interesting conversations around CBD, but it only gives us kind of guidance in how we think about other cannabinoids. The first step in this is going to be applying for grass or new dietary ingredient filings for some of these other compounds like CBN.

Ross O'Brien    39:38

Before we go into that, this is a really important point because there's been a lot of negative reaction within the sort of incumbent CBD world to this FDA position right now. And then when you go into

Ross O'Brien    39:54

obviously we're on the same page here, like this goes down the path you're about to describe, but what does this mean? You talked about what it meant for consumers, but what does it mean for entrepreneurs business out there, like the CBD industry as its own distinct vertical?

Alleh Lindquist 40:10

Yeah, I mean, obviously there's some pretty heavily committed CBD supplement companies out there that have been around for some years now and kind of built this.

Alleh Lindquist 40:22

I don't expect there to be any major shifts. I kind of assume people are going to continue to do what they do and operating kind of in a what I'll call gray zone, even though I guess it's not very gray. The FDA stance is clear. The challenge with it is that the FDA is not actually enforcing this and so these businesses are continuing to operate. Now, you have a wide range out there of actors in this that from very professional outfits that are doing really high quality products to pretty shoddy garage businesses making products again, dosages aren't correct on the packaging to what's actually in the product, or they're making pretty outrageous health claims within this. And arguably, CBD is the most claimed molecule for carrying any type of disease or ailment that we've ever had right.

Ross O'Brien    41:15

And potentially the least efficacious.

Alleh Lindquist 41:18

Yeah. No. To be determined. Right. A lot of these claims are being driven by anecdotal response which is difficult to measure and or just by the businesses themselves wanting to sell more product and trying to push that forward. So you do see some enforcement from the FDA where they send cease and desist letters, particularly to companies making claims. Arguably, there's a difference between claiming the curing of cancer, for example, which we've certainly seen out there, versus may help you sleep better kind of claim. Right. Big differences. Although consider both of them, the FDA would consider a violation without being referenceable to an efficacy study when those studies have to be conducted and published in a scientific journal to be referenced to be able to make claims.

Ross O'Brien    42:11

So we've identified this is where we are today. You're about to talk about certain pathways going forward. And what I love about this is none of them are easy. Right. We're talking about large institutions here paying attention to this now, which on one side is great, and the FDA serves a really important purpose, but there are some pretty clear pathways that are developing and this is going to be a relatively long road, right?

Alleh Lindquist 42:39

Yeah. So we've got definitely some drug indications that we're looking for. So the path for us is something called an ind or an investigative new drug filing with the FDA. There's a handful of requirements for that, both proof of concept scientific data to support the disease, or indication that you're looking to go after with your molecule, as well as the toxicology work that needs to be done to prove safety before you move into a human trials. So that's where we really are focused along the way there. However, we are looking at some of these molecules being able to file what's called a grass, generally regarded as safe statement, which again, requires toxicology work. That statement has nothing to do with efficacy, it just has to do with toxicity. And beyond that, there's something called an Ndi, a new dietary ingredient filing with the FDA. And so both grass and NDIS are available. And we will be looking to get that on some of these molecules as well, particularly ones that we have really good supplement potential claims. So things like a structure function claim, which is what we're working on for CBN with Sleep, where the data would support saying four out of five people who took CBN slept better or for 90% of people, CBN worked better than Melatonin on the study. Because we did run Melatonin as a control arm for that to kind of compare the two. So we really think there's opportunity in both of these. We think that not every compound needs to be a drug, and that not every kind of indication or disease state requires you to go to a doctor and talk about it. Light anxiety, minor aches and pains, these kind of things cannabinoids, could offer a great alternative to, say, an Advil and Ibuprofen. Certainly when it comes to some of the harder kind of drugs out there, it could be alternatives but

Alleh Lindquist 44:55

again, you can self treat those. What we really need is just basic appetite to support it.

Ross O'Brien    45:02

If you have the flu, you can eat chicken noodle soup and feel better. Well, chicken noodle soup medicine.

Alleh Lindquist 45:11

Yeah, the baseline here would be just proof of efficacy. Right. Data is really what matters. And the dosage discovery too, right? It's like there's no dosage information on any of this stuff. So if we're looking for kind of how we see the future of this, we would have a handful of potential indications that we pursued and we'd have a particular molecule or formulation that has been tested in certain dosages and proven that it does work. And that's kind of where we really see the future of this going. And that's the consumer confidence and trust that's needed with Cannabinoids. And arguably CBD has kind of eroded that by, for lack of a better term, being sold as snake oil for everything without proof. So it's not that there isn't potential efficacy in CBD for certain things, it's that it's not proven. And that unfortunately, people have told people that it works. And some people have tried and they say, oh, this is working great. And other people have tried and said it's not working great. The challenge here is the threshold is 50% for placebo. I mean, just the belief that something can work can be enough. So what we're really looking for is enough data to support significantly higher than that in terms of efficacy. And that's where the trust and the confidence will really come from.

Ross O'Brien    46:40

Well, this has been terrific and I think that's a great place to jump off because one of the key takeaways, and I'm sure people are getting this, listening, this conversation, just because you're in a frontier market doesn't mean there aren't fundamentals. Now you can build those fundamentals along the way. There are certain just baseline fundamentals. And one of the things I really admire about what you've built at Floralworks is your ability to bring the incumbent sort of thinking to this new paradigm, but also understanding that there's pathways and things that need to be leveraged in order to have said it several times. Bring these treatments,

Ross O'Brien    47:21

bring them to the people who need it the most.

Alleh Lindquist 47:25

Yeah, no, absolutely. I really appreciate coming on and definitely excited for the disruptive potential that cannabinoids offer to any of these other treatments that are out there. I mean, I think it's going to be highly disruptive to many lesser treatments that are available.

Ross O'Brien    47:43

Well, you've said a word that I love a couple of times, they're disruption. So those of you are listening, be on the lookout for our new BVE YouTube channel because Alleh and I just sat down for one of our Disruptors dinners, which is a new series of conversations, new format that we're having. Thank you so much for being on today. Before we leave, any advice for entrepreneurs up there? Any books you've read that you'd recommend?

Alleh Lindquist 48:10

Yeah, I mean, a lot of books don't stop reading.

Ross O'Brien    48:14

Any specific books about cannabis venture capital that you really like?

Alleh Lindquist 48:18

Yeah, no, there's a book by a gentleman named Ross O'Brien actually, Cannabis Capital. That definitely you might want to take a read. But, yeah, I think really the grit piece is important. Pursue with all of intensity and learn along the way, and I promise you'll get somewhere.

Ross O'Brien    48:37

Thank you so much. It's always a pleasure speaking with you and look forward and looking forward to having these conversations again really soon. Thanks for being here today.

Alleh Lindquist 48:47

Take care. Bye.

Ross O'Brien    49:05

Thanks for listening to today's show. To check out more great Cannabis podcasts, go to podconnects.com.

Produced by PodConX

Ross O'Brien - LinkedIn and Bio

Bonaventure Equity - bve.vc

Alleh Lindquist - LinkedIn and FloraWorks