June 11 2024 Webinar: How We Are Investing | Rescheduling & The Future of Medicine


Did you know that rescheduling of cannabis is reshaping the future of healthcare? Join us to learn more about how to navigate the complicated regulatory, scientific and venture capital landscape to generate extraordinary returns and be a part of shaping the future of medicine.

At BVE, our mission is to look around the corner, understand what others don’t yet, and use those insights to ensure our investors come out on top while changing as many lives as possible. The rescheduling of cannabis is confirming and accelerating what we’re doing through our Pharmaceutical Development Fund II.

Join us to learn about:

  1. Our investment thesis, portfolio, and opportunities.
  2. The scientific advancements and research potential being driven now that rescheduling is happening.
  3. What’s actually happening in DC.
  4. How you can best position yourself as an investor in the current landscape.


The webinar will feature three speakers:

  • Ross O’Brien, Founder & Managing Partner at BVE
  • Mike McCormick, PhD, Venture Partner at BVE
  • Michael Werner, Head of the Healthcare & Life Sciences Practice at Holland & Knight

We will share unique perspectives on the investment strategies, scientific advancements, and regulatory changes already transforming the pharmaceutical landscape.


The visuals shared in this presentation can be explored here.

Full Transcript

Note: This transcript was automatically generated and, as such, may contain errors.

[00:00:00] Ross O’Brien: Great. Thank you, Alex. Welcome, everybody. Thank you for joining us for our webinar today. We’re really excited for the conversation. You’re going to hear from thought leaders on our team and our expanded team. On some pretty important happenings in the world of controlled substances and pharmaceutical investing.

[00:00:19] Ross O’Brien: We have a brief agenda scheduled for everyone today. I’m just going to give you a little bit of an introduction around us, how we’re looking at the space and specifically, how we invest in this space. And then I’m delighted to have with us here today. Dr. Mike McCormick who is on our team at Bonaventure Equity, our IP expert and resident chemist who also works with our portfolio companies and our partner Michael Werner of Holland at night, who heads up the life sciences practice and is always gracious for all my many trips up to DC throughout the course of the years to meet with him on these matters and, and talk about the future.

[00:00:57] Ross O’Brien: So with that, if you have any [00:01:00] questions, we’re going to open it up at the end for Q and A, feel free to drop them in the comments, Alex will grab the questions and this is your time. So we’ll leave plenty of time at the end here to have have a discussion. So, we see controlled substances at, in our investing thesis at the intersection of regulatory easing, scientific discovery and policy, right?

[00:01:26] Ross O’Brien: So, when we think about the investments that we’re looking for, we view controlled substances, in particular cannabinoids and psychedelics, as a powerful new technology that is impacting how we treat people with pharmaceuticals. And, and this is a really exciting moment for us to be investing in this.

[00:01:45] Ross O’Brien: As many of you know, we’re in our second fund. If you’d like to see some of our portfolio companies, you can go to bve. vc. And having been on the forefront of this space for several years focused on this one of the things that we’ve been tracking to Really closely [00:02:00] is what’s happening with the different regulatory agencies like the DEA.

[00:02:04] Ross O’Brien: So for us, things like the FDA is very important because a lot of our companies are developing new drugs and new therapies that will be seeking FDA approvals. And the DEA rescheduling in the headlines recently is a really exciting moment for us. where really we see now a clear clear lines being drawn between the recreational markets and what we consider to be the the actual medical markets where you’re looking at applying the traditional pathways of pharmaceutical development to some of nature’s most powerful compounds.

[00:02:37] Ross O’Brien: Now as with everything we always like to say we go beyond the headlines of BV as investors we have to but for our investors network and the people who, who follow our newsletter and, you know, join us on this, on this mission we think it’s really important to sort of double click on these headlines and really understand, well, well, what does this mean?

[00:02:54] Ross O’Brien: And that’s the purpose of today’s conversation. Now, in the context of how we [00:03:00] invest and how we think about things like, like the DEA’s role you know, we view controlled substances as playing a role in healthcare. There’s 486 different compounds across five different schedules. The interesting thing that we’re tackling in this space is that cannabis is only one of two plants that are listed on the Controlled Substances Act.

[00:03:20] Ross O’Brien: Whereas everything else on the Controlled Substances Act, are different compounds and chemistries. So for us, that becomes a really interesting opportunity as investors to say, well, wait a minute, has anybody stopped to really understand the therapeutic potential of what’s contained within these, these, these plants?

[00:03:38] Ross O’Brien: And we think that they are very powerful for treating a lot of major diseases because of, and we’re, we’re finding this out with the early data that Mike’s going to talk about. So in the early that we’re seeing that you know, how these These occur in nature and how they interact with our central nervous system lays the groundwork for really tackling some of healthcare’s biggest challenges.

[00:03:58] Ross O’Brien: Now, [00:04:00] historically, the pharmaceutical industry has always had you know, new innovations that have impacted how pharmas, pharmaceuticals are developed, right? And all of these use a basis of what occurs in nature in order to develop, you know, drugs. So in the 19th century, we look at the trends for vaccines onto morphine through to targeted therapies and genomics.

[00:04:23] Ross O’Brien: We see this as a moment where we’re now on the forefront of a new class of small molecule because of this interaction with the central nervous system. And we believe that cannabinoids and psychedelics will be the basis for the next big. big mark, big frontier in the pharmaceutical industry to develop a myriad of different drugs and treatments.

[00:04:44] Ross O’Brien: Why do we think that? Well, pharmaceuticals are built on nature already. 74 percent of everything we consume in the pharmaceutical industry comes from plants, 18 percent from fungi. And really what the challenge is here is that because of the controlled substances act in particular with cannabis and psychedelics, [00:05:00] we’ve had a moratorium on core scientific research because of the schedule one nature of these nature of what occurs in nature.

[00:05:09] Ross O’Brien: So because these are on schedule one, we haven’t really been able to understand scientifically yet. And thankfully, because of easing regulations, we’re now at a moment where we can start to do that. So this DEA rescheduling is really material to our Our investment thesis and has a heavy impact on positive impact on the companies that we invest in.

[00:05:27] Ross O’Brien: And across the board, we’re looking at really the potential to treat some of healthcare’s biggest challenges. And, and, you know, from Parkinson’s to fibromyalgia to Alzheimer’s, you know, mental health, we’re also looking at, at addiction treatments, epilepsy. These are major indications that early data is showing us that there’s potential.

[00:05:49] Ross O’Brien: To have viable treatments derived from controlled substances. The hurdle now being schedule one versus other schedules. How do you bring these things into the traditional pharmaceutical [00:06:00] pathways and how do you do that through entrepreneurial ventures and early stage investing? So for us you know, we have to approach this with a specific thesis.

[00:06:09] Ross O’Brien: And our thesis is that we invest in entrepreneurship. We invest in science and we invest in policy and public perception. For us, the science and the IP always comes first. What is, what is the potential and, and what is the scientific rigor? That we’re applying in order to identify new treatments and novel therapies.

[00:06:27] Ross O’Brien: What is the entrepreneurship pathways for building companies? We will incubate companies where there aren’t ones already in existence. So as investors, we’re looking very early. Can we put the right teams in place? And I’m delighted today because you get to meet a couple of the key folks from our team that works actively with us, with our portfolio companies and There is a regulatory arbitrage, meaning that as policy is changing and regulations are easing, we can now start to bring these things into these traditional entrepreneurial pathways.

[00:06:59] Ross O’Brien: And a lot [00:07:00] of what we have to work, work against in the space is also the public perception and the stigmas that are associated with this because of because of the, the controlled nature of these substances. And. And that makes it a lot more difficult, but where there are difficulty and challenges is we also see significant opportunities.

[00:07:18] Ross O’Brien: And so with that, the, this is one of the, the largest, I think most significant developments on the regulatory side, and certainly in the last three to four years is this conversation around DEA rescheduling. So what I’d like to do now is hear from Mike and Michael, as we start to talk about this issue.

[00:07:37] Ross O’Brien: So I think, Mike, the right place to start here is we talk about science and, and innovation being on the forefront of our thesis. For us, the good news is, is we don’t need DEA rescheduling in order to, for any of our investments to be successful. We’ve always said we have everything we need to bring legal drugs to the market.

[00:07:57] Ross O’Brien: It’s called the FDA. The issue [00:08:00] is, is are we getting, are the pathways equally open to the companies we’re working with? And is there. The ecosystem around these, and in particular, Mike, maybe you could speak a little bit about you know, the research side of this first from the, the, you work a lot with the different research organizations.

[00:08:16] Ross O’Brien: And what is this DEA rescheduling conversation doing to support research?

[00:08:22] Mike McCormick: Sure. So, I mean, just, just back to your, your earlier comments that a lot of existing therapeutics come from plants. The, the basis for those you know, initial thoughts and leads onto what something from nature that could be used as a therapeutic to treat something comes from typically academia.

[00:08:40] Mike McCormick: But also to some degree, the work of, you know, small companies, but startup biotech startups and pharmaceutical startups who do the preclinical work needed to establish something to indicate that a certain compound would be therapeutically valuable. And so it’s it. Anything that restricts that kind of work is going to [00:09:00] restrict the final outcome.

[00:09:02] Mike McCormick: And so in the case of, for example, Tylenol, which comes, which came, comes from a tree bark originally, there’s, there were no restrictions on studying that kind of plant and therefore building the basis for what could be, you know, therapeutic development. In the case of say, Cannabis, there’s this heavy restriction on a hundred plus compounds that are in Cannabis plants that could be studied and that are studied and have been over the past 100 years, but it’s been heavily restricted due to the fact that cannabis or marijuana as referred to by by law enforcement is Schedule one, and that makes it very difficult to do research on on a Schedule one substance on DSO.

[00:09:42] Mike McCormick: Right now, that includes all of the cannabinoids except for CBD on DSO. There’s a question surrounding, you know, what can we improve research by CBD. possibly rescheduling. But the, the, the devil is in the details, of course, because all of the rescheduling [00:10:00] comments to date center around quote unquote marijuana, which is again, a law enforcement term that doesn’t include necessarily individual cannabinoids.

[00:10:10] Mike McCormick: THCs are listed separately, for example, and grouped into a group in the schedule with just quote unquote other cannabinoids. And so, you know, there’s, there’s a There’s some questions surrounding exactly what would be descheduled and how that could help research and if it’s just the plant or if it is compounds as well.

[00:10:30] Ross O’Brien: So that’s really interesting and I want to key off of that Michael, definitions matter, right? So we’re talking about conversations of cannabis, cannabinoids, CBD, THCs, marijuana Michael, maybe you could talk a little bit about just generally the process where we’re at with this process from the insider’s perspective, what’s actually happening conversationally and maybe give us a little bit of your perspective on, on what those signals might be [00:11:00] that we’re, that we’re seeing at this stage.

[00:11:02] Michael Werner: Sure. So the big, the sort of big news is that the U. S. Drug Enforcement Administration, the D. A. Last month, almost a month ago now, May 16th issued its proposed rule to move marijuana from its current classification as a schedule one drug to a schedule three drug, which loosens D. A. restrictions. And since you mentioned definitions, the DEA is very clear that as per the Controlled Substances Act, marijuana is defined very specifically as the plant cannabis Sativa L.

[00:11:43] Michael Werner: Whether growing or not, the seeds thereof, the resin extracted from any such plant, from any part of such plant, every compound, manufacture, salt, derivative, mixture, or preparation of such plant, its seeds or resin. [00:12:00] So that’s what they’re talking about when they talk about marijuana and reschedule and rescheduling.

[00:12:07] Michael Werner: Now, the way the process works is that in order to reschedule, the DEA has to do what it did, which is it gets a recommendation from the The FDA, i. e. the Department of HHS, and it acts on that recommendation and issues a proposed regulation, which it did, and in this proposed rule, by the way, it cites HHS very often and says HHS has found that It has, you know, marijuana has these properties per addiction or these properties potentially for health care, right?

[00:12:43] Michael Werner: So they cite HHS is recommendation to reschedule. They publish this in the federal register with a 60 day comment period, which means that any stakeholder. can submit comments to the [00:13:00] Federal Register in response to this proposal. So that means anybody can, can issue a comment kind of about anything. It can, we can say, we like this.

[00:13:11] Michael Werner: We can say, we don’t like this. We can say, we’re not sure what you mean by X or Y or Z. If you mean this, we like it. If you mean that, we don’t. anything. By law, a federal agency is required to read and respond to every comment during a proposed or to a proposed rule. The DEA has already received over 8, 000.

[00:13:38] Michael Werner: There’s still a month to go. So that means two things. First thing it means is if you’re a stakeholder and you feel strongly about this, you absolutely should submit comments to the docket because Crassly, everyone else is, so you might as well get your opinion in there, and more importantly, the DEA [00:14:00] will see it and will read it.

[00:14:02] Michael Werner: They have an obligation to you under the law. It also means that we’ve got a long way to go. If this comment period ends in the middle of July, right, 60 days from May 16th, and then the DEA has to go through all of these comments, So if there’s already over 8, 000 in the first month, let’s assume there’s 12, 000, 14, 000.

[00:14:27] Michael Werner: So they have to read all of those submissions, synthesize them, figure out how they want to respond to them, and make a determination if based on all of that public input, they want to change some of the provisions in their proposal. The other key player here is the U. S. Congress. Because when I say every stakeholder can submit comments, I mean the U.

[00:14:53] Michael Werner: S. Congress can submit comments. And they often do, and I would expect them to do it here. And they [00:15:00] could, of course, also hold hearings. They could try to enact legislation and the like. So what you’ve got now is the federal government engaged, right? For a long time, people have been saying, Keeping marijuana as a schedule one drug is a bad idea for research reasons, as you guys just said, for all kinds of other reasons.

[00:15:23] Michael Werner: States, of course, have moved in to try to legalize use of marijuana in particular instances and regulate it. Now we’ve got the DEA issuing a proposal. Now we’re going to have Congress getting very involved. So the federal government is going to get involved in this. And frankly, it’s going to take them. I would say we’re not going to know anything for a year about where this is going to end up, but there’ll be a lot of conversations and a lot of debates.

[00:15:56] Michael Werner: And for folks who are participating in this call, [00:16:00] lots of opportunities for you to weigh in with your opinion.

[00:16:06] Ross O’Brien: So that’s really interesting. What would you advise to founders and entrepreneurs and people that are operating in the space how to manage towards the timelines? And so obviously, you know, making comments.

[00:16:22] Ross O’Brien: Submitting your comment. Great. We’re going to do so, as you know, but what’s next from there? How does, how do you, how should they be thinking about this status quo versus what the future state might look like?

[00:16:35] Michael Werner: So that’s a really good question because what the future state will look like is completely unknown, right?

[00:16:43] Michael Werner: Because I’ll give you a couple of examples. One I gave you, which is we don’t really know what the DEOs final Word is going to be, and by the way, just to state the obvious. There’s an election in November. We could have a different White House. We could have a different DEA [00:17:00] administrator. We could have a different attorney general.

[00:17:02] Michael Werner: We could have a different FDA commissioner. Any, you know, right? So just to add to the unknown about where the federal agencies are going to be, and we of course don’t know exactly what Congress is going to do. A second thing is that what’s not clear from the proposed rule, which I think is an opportunity or a challenge for people to think about and an opportunity.

[00:17:29] Michael Werner: if in fact marijuana is rescheduled to be a schedule three drug. Well, the rule does say, I’m going to find a direct quote that basically says, you know, just because we’ve rescheduled this drug to schedule three doesn’t mean that all the requisite federal rules aren’t in force. In fact, I’m going to say exactly what the rule says.

[00:17:59] Michael Werner: It says [00:18:00] a substance within the CEA’s definition of marijuana would still need U. S. Food and Drug Administration approval to be lawfully introduced or delivered for introduction into interstate commerce. So what that means is that DEA is saying, well, now that we’ve got a marijuana drug, That’s schedule three.

[00:18:22] Michael Werner: Well, guess what? You need to go to the FDA and get that drug approved Just like everybody else who has a schedule three drug approved There’s no drug on the market that’s schedule three that does not have an FDA approval and so How is that going to play itself out all of the marijuana products are now suddenly They’re schedule three.

[00:18:45] Michael Werner: So people think hey, maybe it’s more available, but maybe it’s not because You You need to have some kind of FDA authorization in order to market that drug. And what does that mean for all the state dispensaries? Are they going to have to get [00:19:00] pharmacy licenses? How is that going to work with state regulation?

[00:19:04] Michael Werner: So a lot of moving parts there. And then the last thing I’m going to mention is just going back to Congress. So Congress is reauthorizing the Farm Bill kind of as we speak, right? In real time, Congress is doing two things. They’re reauthorizing the Farm Bill and they’re appropriating money for the FDA and the Department and the USDA.

[00:19:28] Michael Werner: And in both instances, within the last week, the House Republicans in the House put forward amendments that significantly influence the marketplace for marijuana. By that, I mean, they have put forward amendments that change the legal definition of hemp. So remember hemp was excluded from the definition of marijuana and the control of substances act by the last farm bill.

[00:19:58] Michael Werner: And the DEA [00:20:00] proposal absolutely respects that and says, Hey, if you’re, if you meet the definition of hemp under the farm bill, none of this applies to you. You go, you know, right, live your life, but that’s not what Congress just did. Or I should say, that’s not what the house of representatives just did.

[00:20:19] Michael Werner: They did two things. One in the new farm bill, they basically said, Hey we’re going to restrict the definition of legal hemp to quote, naturally occurring, naturally derived and non intoxicating cannabinoids.

[00:20:37] Ross O’Brien: So that means Delta eight and Delta nine goes away.

[00:20:40] Michael Werner: Presumably that’s what it means. The second thing that they did in the appropriate, in the agriculture appropriations bill.

[00:20:48] Michael Werner: This week, they said, we’re going to define legal hem as follows. Cannabis plants and derivatives with no more than point 3 percent THC. [00:21:00] And we got that those products are still are still okay. But, it outlaws any products derived from hemp with cannabinoids that were quote, not naturally produced, unquote, in the plant, or have quote, quantifiable amounts of THC.

[00:21:22] Michael Werner: So again, now that’s the House committees still has to be passed by the full House, the Senate versions of those bills contain no such provisions, but it’s just examples of how this landscape is so fluid. And so constantly, you know, changing, which I guess is redundant from being fluid. It’s so fluid that I think the best thing for folks to do really is to two things.

[00:21:56] Michael Werner: One, you’ve got to keep your eye on what’s happening [00:22:00] because those two amendments I just read, which happened within the last week, completely could pull the rug out from under some folks, right? The second thing I think you have to do is understand that if Congress enacts those changes to the Farm Bill of the Appropriations, those take place immediately.

[00:22:22] Michael Werner: Those take place upon enactment, which will be immediate. What the DEA is doing, as we talked about, has a much longer time horizon. So ironically, The changes to the definition of hemp could be more of a challenge for companies in the shorter term because they will take effect if they went into effect, right?

[00:22:44] Michael Werner: We’ve got ways to go for that, but those bills will be finalized before the end of this year. So the DA is not going to finalize its rule before the end of this year, but Congress is going to finalize the farm [00:23:00] bill and the appropriations bills maybe before election day. So I think you’ve got to really be paying attention to what’s happening.

[00:23:10] Michael Werner: If you’re involved with hemp, you have a shorter term problem. If you’re thinking about, you know, marijuana as, as we think about it, kind of, right? Like we want to develop a drug with, you know, that, you know, uses cannabis or whatever, there’s still going to be DEA issues. Those are going to be longer term, and ironically, the world might be better for you than what I’m describing in terms of hemp.

[00:23:41] Mike McCormick: If I can comment on a few of those things, I mean back to the FDA approval, like, let’s say that cannabis products make it to Schedule 3, and then there’s a question of being able to distribute them federally, then you need that FDA approval.

[00:23:53] Mike McCormick: Right.

[00:23:53] Mike McCormick: When the FDA looks at a substance, That is being considered for approval.

[00:23:58] Mike McCormick: They’re looking for it to be well [00:24:00] characterized and well understood. And that’s why a lot of the things that make it through FDA approval are single compounds or biologics, basically things that have been synthesized or purified. So that they are very clearly one thing and that the, the actions of that thing are understood.

[00:24:19] Mike McCormick: Now, of course, there are combination drugs out there and stuff like that, but we live in a one drug, one indication type of world. And, and that’s the way that the FDA operates. And so, It’s already a daunting task to bring something to the FDA and try to get approval one way or another, be it one of the various routes to becoming a supplement or a food product or a pharmaceutical.

[00:24:41] Mike McCormick: There are different routes for this, but they’re all difficult and they all require characterization. And it’s very difficult to characterize a plant that can be grown in a variety of ways. And that can be different from its next door neighbor on a farm as well as even within the same plant. And so, the, the option that’s being [00:25:00] opened up is not necessarily a, a real one in the sense of that case, because it’s going to be different, difficult, if not impossible, to bring to the FDA a cocktail of drugs, which is quite cannabis based.

[00:25:13] Mike McCormick: and cannabis extracts are in most cases and try to get approval on that because there’s a lack of consistency and a lack of understanding on the details of those types of products to support that kind of application to the FDA. And so I think that’s a, that’s an important consideration. And then I want to comment on the, on, on, you know, what she said about the farm bill and, and the importance of that and how, how hemp has been sort of carved out away from cannabis that happened in 20 started to happen in 2018.

[00:25:44] Mike McCormick: And that was around the same time that Epidiolex came out as a drug. And so one of the big hangups of schedule one versus schedule three is the label that something that schedule one has quote unquote, no medicinal value. So when we had in [00:26:00] 2018 Epidiolex rolling out of CBD extracted from hemp in England into a company called GW Pharma and had established that this pure CBD, essentially pure CBD was a very, very effective drug at treating Dravet’s syndrome, which is a kind of childhood epilepsy.

[00:26:21] Mike McCormick: So you had this company in England that was free to operate because they weren’t operating under DEA restrictions and was able to develop the CBD drug, which is night and day, clearly effective on various types of childhood epilepsy. And so, Epidiolex became a drug. The 2018 Farm Bill passed, carving hemp out.

[00:26:41] Mike McCormick: And since the CBD that’s used to make Epidiolex is extracted from hemp and not used, cannabis, where the THC content is higher, there is now an opening for this important pharmaceutical to come out and save a bunch of children. And that thing, whether we, whether the powers that be like it or not, CBD is just as [00:27:00] prevalent in cannabis as it is in hemp.

[00:27:03] Mike McCormick: And so The label that, that cannabis and hemp or what either one, however you want to cut it, marijuana has no medicinal value as an incorrect one. And so that needs to be corrected scientifically speaking for the sort of foundation of what the, the CSA is supposed to be doing.

[00:27:21] Michael Werner: So a couple of things one is that you know, look, the no medicinal value comes from the fact that it’s scheduled one, right?

[00:27:29] Michael Werner: And so rescheduling maybe helps move that ball down the field a little bit. Right. And I think, so a couple of things, first of all the FDA 100 percent makes decisions. Often on a case by case basis. 100%. That’s what they do, right? People bring them science. They make a decision. Is this drug safe? Is it drug effective?

[00:27:57] Michael Werner: You know, they don’t usually say like this class of [00:28:00] drugs is safe, right? I think that there. Big concern, of course, is, you know, they see themselves as a public health agency. They see themselves as kind of the last stop to make sure that consumers don’t get sold things that are dangerous or don’t work.

[00:28:21] Michael Werner: So, I’m not excusing behavior. I’m just saying that’s their mindset. And it does make them a less risk tolerant because of that. Right. And we’ve seen that across the board with FDA. So what, in my experience, you, you said a very important thing, which is that FDA gets comfortable slowly. when they really just start seeing lots and lots of good science that makes, makes the point.

[00:28:54] Michael Werner: That’s one thing. The second thing that I think really helps a field go [00:29:00] forward is when the industry itself starts to coalesce around a set of standards. So when you talk about characterization of a product, what are we, what are we looking for? How can we show Right. What are our tools for characterization?

[00:29:18] Michael Werner: How can we show that this product is what we say it is, and therefore we’ll do what we do. And we, again, we see that over and over and over with different kinds of biologics and the like, that that’s what it takes. So I think your point is right because both of what I just said are things that take a long time, you know, it’s not like instantly people understand that or instantly the FDA is going to say, you know, we were just waiting for that one person to tell us that this was safe, right?

[00:29:53] Michael Werner: And so, you know, So your point is correct in the sense that [00:30:00] it’s not something that is going to have a short term, let’s call it a short term solution. It’s not like to me, there’s going to be this flood of approved right? Marijuana products, right? Or even a flood of applications, maybe even to FDA. So it’s going to take a while, but I do think that ultimately that’s the way people are going to get the drug, right?

[00:30:25] Michael Werner: Ultimately. Companies, scientists, researchers are going to figure out how to be able to do this. They’re going to have to work with the FDA collaboratively on what are the care, how do we characterize this? What should be the standards? What’s the definition of safety here? How do we isolate these compounds in a way that we can do it?

[00:30:48] Michael Werner: Then of course, all those copies are going to have to figure out. And then how do we do this consistently and to scale? Right. That’s every drug company has had to do. It’s, it’s really [00:31:00] hard. And so I think that now, you know, at the end of the day, you maybe you get a drug approved, you get insurance coverage and people buy it and you charge what you want and all of those things.

[00:31:14] Michael Werner: But you’re quite right that this is a process that can take many years To to accomplish, I would say we know that what’s important about what’s happening to me is that you’re getting movement from the government. So before it was just, this is never going to happen. This is never going to happen. No, no, no.

[00:31:41] Michael Werner: Now, I think you’re seeing. Okay. Now we’re having a conversation of, well, how would it, how’s it going to happen, which is a different conversation and hopefully a more hopeful one. Right. But that doesn’t mean that, you know, right tomorrow, you know, this, it gets rescheduled. And then, you know, [00:32:00] by the end of that year, there’s a whole bunch of, of drugs.

[00:32:03] Mike McCormick: Yes.

[00:32:04] Michael Werner: Unless what we’re talking about is the drugs that are already out there and figuring out, you know, there’s some kind of, I’m making this up, grandfathering or such. Or the FDA says, Hey, we will let you, so one thing that companies could do would be if they could, is collect data about how people do when they’re using their.

[00:32:30] Michael Werner: product. Maybe they don’t want to. Maybe it’s hard to do all that. But you could, you could see a company going to the FDA and saying, look, we sold this cannabis product for five years in, you know, these states. These were the adverse events we got. This is what we found out about these people. We followed them.

[00:32:51] Michael Werner: We know how they did. We saw what, how it didn’t work and we want to be able to shortcut a little bit so we don’t have to do [00:33:00] clinical trials. We’ve got all this patient data about how people do and maybe that can expedite our application. It’s what companies in the rare disease space do all the time.

[00:33:12] Ross O’Brien: Yeah. So, so that’s a great point. I’d love both of your takes on this. Mike put on your PhD had an Michael from the regulatory standpoint when you say collecting data. You know, we view this as a moment where the finally we see some separation between what we call the recreational intoxication market and the actual medical pharmaceutical market, right?

[00:33:35] Ross O’Brien: So, you know, going into a dispensary and buying some pre rolls does not feel to me like that’s actual medicine, right? Or that you’re getting medicine or, or certainly it would not be an FDA approved product. How, how does that play out when you’re talking about something that you can grow naturally that just pull like the natural, the, the, as it occurs in [00:34:00] nature has an intoxication effect versus like, so Michael, are you suggesting that You know, I could sell pre rolls to my buddies for five years or to a marketplace and say, you know, my strain of marijuana, that’s not actually that unique or anybody else, you know, because I grind it up a certain way is good for Parkinson’s.

[00:34:23] Michael Werner: I don’t think you’d be able to get an approval. Right, right. I’m being dramatic, right. But

[00:34:28] Ross O’Brien: yeah, but this is

[00:34:30] Michael Werner: how

[00:34:30] Ross O’Brien: people think about this space though.

[00:34:32] Michael Werner: Sure. And look, I mean, part of the. And Mike, you should go here too. But part of the challenge here is that this is not a monolithic world, right? We’re talking about all different kinds of products being sold in all different ways, manufactured all different ways from all different kinds of raw materials and all of that kind of stuff.

[00:34:54] Michael Werner: So for sure, the example you used. Wouldn’t really fit into what, [00:35:00] into what I was talking about, right? Like you, especially like for recreational purposes or all that. No question, no question about that. I wasn’t, I wasn’t suggesting that. I was suggesting that if you’re thinking that You may need an FDA approval slash license to be able to sell your drug.

[00:35:23] Michael Werner: Well, what is FDA going to want? Well, they’re going to want information. They’re going to want data. Yeah. And so if you’re just selling stuff, you know, like you described Ross, well, you know, you’re not going to be going for an FDA approval, but if you, but if you are selling something that you really do think not for recreational purposes has medicinal value, you’ve done some early studies and you’ve seen it and, you know, you, so, you know, the potential is there, or you’ve worked with academic collaborators who know the potential [00:36:00] is there.

[00:36:00] Michael Werner: Those are the people I think. who are gonna find their way in an FDA process. And those are the people I think you might as well start. You don’t have to do it now. Like I said, this isn’t going away anytime soon.

[00:36:14] Mike McCormick: Yes.

[00:36:15] Michael Werner: Could be going away in five years and

[00:36:19] Mike McCormick: I totally agree with all that. And I can tell you from from my experience and knowing enough people in this space, particularly the academic side of cannabinoid research, that people who do that kind of work are not working on the plant.

[00:36:33] Mike McCormick: They’re working on individual compounds, maybe at most a combination of one or two or maybe three cannabinoids. That because those individuals know that you’re not gonna bring a cocktail of an unknown ratio of 100 plus compounds to the FDA and actually get something out of that. That’s never gonna happen.

[00:36:51] Mike McCormick: And so, so the people that are doing the kind of research that and and and building the kind of preclinical data to support an FDA approval are all [00:37:00] working on cannabinoids. They’re not working on cannabis, they’re working on cannabinoids. And I don’t want to discount some of the great work that’s been done, particularly in Israel and some of the other places where people have done significant work on cannabis strains, and they’re trying to grow them very consistently and, and characterize what’s in them in a way using standard procedures.

[00:37:18] Mike McCormick: And I agree, Michael, that it would be nice if the whole cannabis community, if they were going to study this and get feedback on people had standards in place, but it’s very difficult to do that with the state by state breakdown.

[00:37:29] Mike McCormick: Because there’s different forces in each state and 90 percent of those are not scientific.

[00:37:34] Mike McCormick: And so what’s, what’s happening in testing laboratories is not, in my opinion, sufficient to support the kind of data collection that, that, you know, we would like to have. And so what it comes down to, if we want to advance cannabinoid therapeutics, for example, and this extends to psychedelics in some cases as well, but since we’re talking about cannabinoids, let’s stick to that.

[00:37:55] Mike McCormick: Then there needs to be. Loosened restrictions on studying THC. [00:38:00] THC has been labeled as the psychoactive, the intoxicating, the bad actor, and it’s difficult or if not very impossible to study that even in an, even in a lab with money. I worked in a lab at Scripps Research Institute for five years that had a DEA schedule one license.

[00:38:14] Mike McCormick: We had LSD, we had THCs, a bunch of other stuff, but to get that license is an incredible amount of red tape and everybody in the lab’s got to be investigated and all this stuff. It’s a huge production that only a small group of laboratories that already have millions are going to go for. And so there’s a chokehold on understanding THC, the best used, the most widely used, the one that people will go to a dispensary for day after day so that they can do what they need to do to get to sleep or to kill their anxiety.

[00:38:47] Mike McCormick: The, the, the sort of major player in the game is still being, is still being sort of hedged out by this. throw you a bone, we’re going to, we’re going to legalize cannabis quote unquote, or take a step in the right direction with the schedule three. [00:39:00] That doesn’t really help research on the drugs that could become things as pharmaceuticals and as supplements even, but particularly just thinking about pharmaceuticals, real drugs.

[00:39:09] Mike McCormick: When you take THC out of the picture and when you restrict cannabinoids then that’s what you do is you kill the research on those things. And it kind of doesn’t really matter what’s happening with the whole plant. And, and so, so it’s, it’s an interesting, Yeah, look,

[00:39:24] Michael Werner: I’m, I can’t, I don’t want to argue.

[00:39:26] Michael Werner: I think you’re right. And I think that, you know, the, there’s, there’s so many layers to this, right. But, but. You’ve got all these competing things, right? You’ve got the government agencies who either see themselves as a public health agency and don’t want anybody to be marketing stuff that they think they don’t know is safe.

[00:39:49] Michael Werner: You’ve got law DA’s. You know, D. A. Is law enforcement, right? You’re not a health agency, law enforcement, right? They knocked [00:40:00] down your door and they’re like, let’s go, we’re going to jail. So you’ve got, you know, if it were up to them, probably if it were up to them, they wouldn’t do any of this, right? So you’ve got that, you’ve got, you’ve got all these factors playing out in the States.

[00:40:17] Michael Werner: And then of course you’ve got. People who are trying, you’ve got some people who just are not interested in the government are just in recreational, just want to do their thing. And then you’ve got some of the people you’re talking about, who are scientists who are actually seen potential and. the cannabinoids or implant, what have you, and are actually trying to figure out how they can make a product that’s safe, that can really, they know is going to help people and how they can do that legally because they want to do it legally and, and make it accessible and all of that.

[00:40:53] Michael Werner: And, and all of those things, you know, make this more complicated [00:41:00] than Reg, you know, drug development or biological development, which is already unbelievably complicated.

[00:41:06] Mike McCormick: Yes.

[00:41:07] Michael Werner: I mean, you’ve got all this societal stuff.

[00:41:10] Ross O’Brien: And that’s why it’s, and that’s why it’s such a compelling investment opportunity as well, though, is that there are major diseases that we can actually go take the fight to now, if we can start to take these.

[00:41:23] Ross O’Brien: compounds and small molecules through the traditional pharmaceutical pathways. There’s real, real treatments that can be developed. So Alex is back on, I think that means it’s time for Q and A.

[00:41:37] Alex: Yeah, excuse me. I’m happy to facilitate that. My goal here in the next couple of minutes is just to drop the two questions that have been shared in the that I reshared in the comment section onto the screen and let you three tackle them.

[00:41:51] Alex: So here’s the first one. How will this DEA discussion impact the ongoing discussions regarding the [00:42:00] Safe Banking Act?

[00:42:02] Michael Werner: So I asked Congressman, former Congressman Perlmutter this exact question. And you know, I think especially because of the way As we’re talking about the way marijuana is defined, and especially because this may not take effect for a long time, and we don’t know how and because safe banking actually addresses sort of a little bit is a little bit broader.

[00:42:31] Michael Werner: I think this supporters of safe banking would say, yeah, this is great, but we still need safe banking. People are still doing this now. People are going to be doing it for a while. We don’t know how this is all going to shake out what products are gonna be in what products are made out all of those kinds of things.

[00:42:50] Michael Werner: And the challenges that Are the challenges that exist that led to safe banking are still there.[00:43:00]

[00:43:02] Mike McCormick: Agreed. I know those are ongoing discussions and I think that actually the latest version is safer banking,

[00:43:08] Mike McCormick: but just from

[00:43:10] Mike McCormick: following it loosely, I know that it’s moving, it continues to move forward. So it’s not like it’s working on it.

[00:43:17] Michael Werner: That’s right. And that the people who are advocates of it. Know, I guess they’d be out of a job if they said, Oh, no, it has no chance.

[00:43:24] Michael Werner: But they keep saying this year it’s, it’s even, you know, a better chance. And look, again, people are talking about these issues, right? We haven’t even talked about the fact that Congress. Several months ago issued essentially an RFI saying what can we do to allow marketing of CBD and food and dietary supplements, right?

[00:43:50] Michael Werner: So, so there’s a lot of talk about how to change existing regulatory frameworks. So, the people who support [00:44:00] safe banking think they can. You know, that could be true for them, too.

[00:44:08] Alex: All right, I’m going to flip us to the next question here. What did the changes to the Farm Bill mean for the emerging synthetics market?

[00:44:18] Michael Werner: A really good question. The farm bill. Hold on. If you, if I would say, go to the next question and I’ll pull up from the farm bill,

[00:44:30] Mike McCormick: let me add while you’re looking, let me add.

[00:44:34] Mike McCormick: So, so I, I, I really raise an eyebrow at the term synthetics. I really want to know what you mean. Because that’s one of those things that’s a huge distinction between what we’re talking about, something like K2 spice, something like that, that ends up in a gas station as fake weed and people smoke it and they die.

[00:44:51] Mike McCormick: That’s the kind of, or, or, or Delta 8, which is something that people bought CBD and converted CBD over to Delta 8 and are now selling it [00:45:00] for intoxication purposes. Is that it? Or are we talking about what, what a lot of people in, in which I’m guessing. The question is not coming from this angle, but when when chemists and people that work in medicinal chemistry and in medicine, think of synthetics, they think of something that’s made in a laboratory.

[00:45:17] Mike McCormick: And that’s not what actually go down.

[00:45:19] Ross O’Brien: Why don’t you? Why don’t you define that for us, Mike? Yes, it makes that distinction.

[00:45:25] Mike McCormick: Yeah, so, okay, so, so if we talk about something like MDMB, FU and naca, which has its own entry in the CSA and is K two spice, it’s one of these compounds that’s made its way into gas stations is the term I use, but basically markets in, in gray area markets and has cannabis or THC like effects, but is definitely not a cannabinoid.

[00:45:46] Mike McCormick: It is not a phytocannabinoid. That’s what I mean. I mean, it’s not a phyto cannabinoid, something that’s naturally occurring. And that’s what I think some of the 2018 Farm Bill is trying to hit. They’re trying to get rid of those things by making sure that they don’t fall into sort [00:46:00] of any sort of hemp definition.

[00:46:01] Mike McCormick: Then there’s the idea of something that’s partially synthesized. This is where Delta 8 and Delta 9 that’s hemp derived comes from. Someone buys a vat of CBD oil and performs a reaction or two on it to convert it into Delta 9 or Delta 8. And depending on the area you’re in or where you plan to use or sell that, that substance it could be a different thing.

[00:46:23] Mike McCormick: For example, you can walk down the street in Texas and find vending machines on the street that are selling Delta 8 vape cards. And so that, that’s, that’s something that’s come from partial synthesis of CBD extract. Somebody grew hemp, extracted CBD from it, and turned it into that product. Those are very different things than saying, Oh, I’m in a laboratory, I’m in an academic research laboratory, and I’m synthesizing CBD.

[00:46:46] Mike McCormick: a rare cannabinoid that has only ever been observed in plants at 0. 0001%. And we have reason to believe that that could be some sort of new therapeutic. There’s no way to extract it from any sort of plant. And so we have [00:47:00] to synthesize this naturally occurring cannabinoid so that we have enough. Of it to do a study on with cells or with receptors or with mice or with people.

[00:47:09] Mike McCormick: And so there are different sort of synthetics out there and that’s why I think it’s really important to, to understand exactly what type of referring to,

[00:47:23] Ross O’Brien: so. So Michael, when we think about the pharm bill what do you think the implications are? Let’s go through the lab pathway. So it, it, so, you know, my perception is, is that this is closing the loop, Delta eight and delta nine is a loophole. Right. Which is, I don’t think anybody ever ended the farm bill to say, Oh, you could take hemp and turn it back into THC and people can get intoxicated.

[00:47:46] Ross O’Brien: The whole idea was that it was different from the intoxication piece. So if we’re closing that loophole, so, so Mike, that speaks to the gas station, gray markets, which I think is the right way to articulate that. So let’s go the other direction though. [00:48:00] What, what does this mean now for something that is developed without you, without being derived from the plant.

[00:48:08] Ross O’Brien: It’s, it’s chemically produced in a lab and, and isn’t an extraction from, or you know, process from the plant.

[00:48:20] Michael Werner: Right. So you guys are both correct that that is exactly what Congress was trying to do in the Farm Bill is close that, you know, and Ross, the way you described it is the way it’s described as a loophole. Now, the Farm Bill basically says is basically both the Farm Bill and the Appropriations Bill basically amend the definition of hemp of legal hemp.

[00:48:46] Michael Werner: Okay, just to be clear, that’s the way they do it. And they basically say, in the farm bill, they say the definition of legal help is restricted to naturally occurring, [00:49:00] naturally derived and non intoxicating cannabinoids. Okay, so they don’t, they don’t It’s not about the definition, you know, it’s about the definition of what is marijuana in the sense that hemp, right, legal hemp is excluded from the definition of marijuana.

[00:49:18] Michael Werner: So meaning if you no longer meet the definition of legal help, you potentially fall into the definition of marijuana and therefore You’re covered by the Controlled Substances Act. You’re covered by the DEA rule. The appropriations language, and I’m sorry I’m using my phone because that was the easiest way for me to find it, basically says hold on the, the, okay, hemp, blah, blah, blah, 0.

[00:49:49] Michael Werner: 3 percent, and it excludes any hemp derived cannabinoid product containing cannabinoids that [00:50:00] were, that are capable of being naturally produced by a cannabis sativa L plant and were synthesized or manufactured outside the plant. Okay, so that is an exception to the definition of legal hemp, meaning you fall within the definition of marijuana under the Controlled Substance Act.

[00:50:27] Michael Werner: So that’s what it says. Now, you know the second thing I’ve read too, I think is a little more explicit. The first thing, We know that they were trying to get at this loophole. Do we know if they were really thinking about some FedEx and all that? Well, quote unquote, I Mike’s right. But look for our purposes now, do we know if that’s what they were thinking about?

[00:50:52] Michael Werner: We don’t know. I have a doubt it, but we don’t, we don’t know. All the discussion was [00:51:00] about this, like the Delta 8, Delta 9. We didn’t realize, members of Congress saying, we didn’t realize that you could have an intoxicating substance, even if it met the definition of legal hemp, i. e. was 0. 3 percent or less.

[00:51:16] Michael Werner: less than 3 percent THC.

[00:51:22] Mike McCormick: Yes, an important distinction. And as we’re discussing this, I’d just like to remind everyone that there are a lot of drugs that are successful and effective for a variety of different indications that are also intoxicating. And I know that all, everyone knows that out there. I mean, there are, I mean, we could list them.

[00:51:38] Mike McCormick: Yes. any opioid, any benzodiazepam, all sleep meds. You know, all of these things have potential for abuse and are abused. And so just because something is intoxicating doesn’t mean that it might not be a great drug for something. And so, you know, sort of, It sort of cornering out a couple of things or compounds that are [00:52:00] understood from the political side of saying, well, CBD is safe.

[00:52:03] Mike McCormick: So everything else is intoxicating. It is a, is a dangerous route in my perspective from a patient standpoint, because there are a hundred plus compounds that are in cannabis alone that are, are poorly understood in terms of their science. And, and to, to get to those you may have to start with a THC.

[00:52:24] Mike McCormick: and synthesize something else from it. And so if people, companies, if research laboratories can’t even hold some THC for a minute or do it for comparison, if I’m really trying to make a, a, a drug that is not psychoactive and I kind of need to have the psychoactive best studied one in my lab as well to study that by comparison so that I can run it against my cells or my assays and say this compound is not as psychoactive as THC.

[00:52:53] Mike McCormick: There’s not enough in the literature to just rely only on that and those that the stuff that’s in there is old. And so we [00:53:00] need to be able to, labs need to be able to access these, including Delta 8, Delta 9, all of its versions so that they can do comparative studies and develop the next generation cannabinoid drug or extract the therapeutic value from those minor cannabinoids.

[00:53:15] Mike McCormick: And, and for us to just say, no, no one can touch these things because they’re intoxicating is kind of silly. Because, you know, we have other things out there like opioids, for example, you know, if we take a fentanyl kills 100, 000 plus Americans every year, and we have people that are millions of Americans that go out and buy and use cannabis every year and there’s no deaths.

[00:53:38] Mike McCormick: And so there’s already a first in human trial for literally all cannabinoids that come from a plant, and it says that they’re generally safe. And so it’s sort of it seems like there’s a landscape here that’s not considering the whole picture and yes, cannabis is a toxic intoxicating and people like it for that reason, but there’s also a ton of [00:54:00] therapeutic potential there and we’re kind of shooting ourselves in the foot in terms of of medically interested society if we don’t allow ourselves to access and study these things.

[00:54:09] Mike McCormick: It doesn’t mean that people need to be able to sell them on the streets or that we’re losing all restrictions and stuff like that. But it would be nice if particularly the research laboratories could have unfettered access to safe compounds like those that come from cannabis.

[00:54:26] Alex: Hey, I’m going to interrupt to with our last question.

[00:54:29] Alex: I’m looking at the clock and I want to make sure that we get this question in. So it should show up here. I will spare you me reading this out loud to you. I debated it with the shorter questions. I’ll just be quiet and hand it over to you.

[00:54:46] Mike McCormick: Yes, I can just chime in on this one, maybe to start. So, so it’s a tough situation. Like what you’re talking about is technology transfer in a way is that. You’re a small company and you want to own whatever is being [00:55:00] transferred from an academic laboratory, say research on a minor cannabinoid or on a psychedelic compound or something.

[00:55:06] Mike McCormick: The, the, it’s a tough situation and my answer would be that it depends on each case. And then also it would really start at the technology transfer office of any of those outfits that you would be working at academic outfits. And then, you know, it’s sort of a, it’s sort of the concept is that an academic laboratory can get something started or their work may get started the you know, preclinical work that a small company would do but it’s really up to the small company to take the next step.

[00:55:34] Mike McCormick: And, and at that point is exactly the point where that small company can say, all right, this stuff starts to become more hours than the universities, for example. And so as such, the licensing. Assignments of patent rights and so on can be sort of reconsidered at each of those stages as something moves along the development pipeline.

[00:55:58] Michael Werner: Yeah, I don’t have much more to add [00:56:00] to that.

[00:56:03] Ross O’Brien: Well, thank you. I think that was a great response. And Caitlin, thank you for the question. Thanks for joining us today. Anybody can can find us, Alex. Maybe we can put the back up on the screen. Just the last slide here for where people can find us. Michael, thank you so much as always for joining us.

[00:56:20] Ross O’Brien: You can find Michael at Holland and Knight, as heading up their life sciences practice out of DC. And Mike McCormick and I, you can find on our website at bve. vc. So this is exciting. This was a really great conversation. I think guys, we’re going to have to. Do a part two to this. I feel like we’re kind of just scratching the surface and a lot of this is moving in real time.

[00:56:41] Ross O’Brien: So thank you so much for joining us and thank you for everybody for coming on the webinar. We’ll make this available in a recorded format so that people can access it afterwards. And thank you for your support and in our mission to go do, do great things and, and really impact healthcare. Alex just sent the link for where you [00:57:00] can find the replay after the webinar.

[00:57:03] Ross O’Brien: So this was great. Thank you everyone. Enjoy the rest of your afternoon.

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