British American Tobacco Invests $10 Million in Development of Neurological Disease Drugs

Today’s news, April 7: According to foreign media reports, British American Tobacco (BAT) has made another investment as part of its diversification efforts away from cigarettes. This time, it is partnering with CBD company Charlotte's Web to develop an undisclosed drug for neurological diseases.

BAT subsidiary AJNA BioSciences PBC and the joint venture formed with Charlotte's Web, which BAT invested in last year, plan to seek U.S. Food and Drug Administration approval for a treatment based on cannabis extracts.

AJNA has invested $10 million in the deal. According to a statement, Charlotte's Web and AJNA each own 40% of the entity, while BAT controls the remaining stake.

Despite the obstacles facing the cannabis industry, tobacco companies are increasingly investing in the sector as they move away from traditional tobacco products such as cigarettes, where demand is declining.

BAT has also invested in Canadian cannabis company OrganiGram and German cannabis company Sanity Group, joining Snoop Dogg’s Casa Verde Capital.

So far, although cannabis has medicinal value, few companies have made concrete efforts to pursue FDA-authorized drugs. Only one such drug has been approved by the agency: GW Pharma’s Epidiolex.

However, the agency has noted that it has also approved three synthetic cannabis-related drug products.

“This is tobacco’s first step into drug development,” said Jefferies analyst Owen Bennett in a research note.

He said the outlook is attractive, given that Epidiolex, a CBD-based treatment for seizures associated with epilepsy, generated $740 million in sales last year.

The influx of major tobacco funding is a boon for an industry struggling with low wholesale prices, political challenges, and a crowded competitive landscape that includes illegal cannabis growers.

The joint venture will begin clinical development this year and described the candidate as a novel botanical drug for neurological diseases. BAT declined to provide further details about the condition the drug is intended to treat. 

Charlotte's Web shares rose 21% on Thursday. BAT shares gained 1.5%.