The CEO of one of the largest manufacturers of cannabis vaporizers and accessories says CBD (cannabidiol), the non-intoxicating form of cannabis, is overhyped. Speaking at DCM’s CannTech panel on Tuesday in San Francisco, Bharat Vasan, who joined Pax Labs nearly a year ago after Juul (the e-cigarette branch of Pax Labs) spun out from the parent company, expressed skepticism when asked about the quasi-legal cannabinoid. “Space feels overhyped right now because it’s the only federal form,” Vasan told the crowd.“The FDA won’t let you make any medical claims so how are you describing it?”
Pax, which closed a $420 million funding round in April, is a beneficiary of this “overhyped” CBD market, which is expected to reach $22 billion by 2020, according to cannabis research firm Brightfield Group. And it does so while avoiding the byzantine regulations of the cannabis industry. The electronic vape company does not grow, process or sell any version of the plant. Instead, it operates on via the Keurig model, partnering with local brands who fill and distribute custom Pax pods with THC extract and its popular non-psychoactive counterpart, CBD. Shipping to six medical and seven recreational states, Pax works with cannabis brands in each state as pod filler partners, with most companies (even the hardline THC advocates) carrying CBD: THC ratioed options in their product line.
The CBD explosion kicked off as 2018 ended, when the Farm Bill passed, removing hemp from the federal list of controlled substances, which allowed farmers to grow and sell the crop as an agricultural commodity under very specific circumstances. From there the cannabidiol craze took off, with brands infusing almost anything with CBD from deodorant to dog treats to hangover patches.
“You go to New York, it’s in shakes, it’s in everything,” Vasan said. “It’s like the next coming of quinoa or bee pollen,” he added, referencing the so-called “superfoods” that usurped lesser grains and cane sugar among fitness-conscious Americans with disposable income to burn.
As brand recognition emerges in the cannabis industry, companies are championing hemp-based CBD products as wellness tool and investors are pouring millions into the ingredient, which is being marketed as a miracle elixir.
Last month FDA commissioner Scott Gottlieb issued a statement warning consumers about the unsubstantiated health benefits of CBD companies. “These products have not been shown to be safe or effective, and deceptive marketing of unproven treatments may keep some patients from accessing appropriate, recognized therapies to treat serious and even fatal diseases.” To date, Epidiolex is the only FDA approved CBD drug.
Investors are jumping in on the CBD hype as well and bringing their checkbooks with them. Earlier this year, the hemp genetic lab Socati raised $33 million and CBD manufacturer Mile High Labs borrowed $65 million to buy ‘a mountain of hemp’ after it raised $35 million Series A round six months prior. “I think one of the open questions with hemp-based CBD is what’s the promise?” said Vasan. “For those who say that maybe this will get rolled back, it’s hard to put the genie back in the bottle at this point.”