Charlotte’s Web, which is based in Boulder, CO, started as a company manufacturing CBD products that were used by families to treat children suffering from seizure disorders that were not responding to standard drug therapies. In the years since the US Food and Drug Administration has approved a CBD-based drug called Epidiolex for that purpose. The drug is manufactured by English company GW Pharmaceuticals.
Charlotte’s Web has pivoted into manufacturing a range of consumer products and is now completing what CEO Deanie Elsner called “A transition from startup to a standup CPG company capable of servicing the mass retail channels.”
Acquisition of Canadian company
Part of that growth process is that the company is now in a position to acquire other companies. Charlotte’s Web announced yesterday that it has entered into an agreement to acquire Canadian company Abacus Health in an all-stock transaction valued at $69 million. The transaction is expected to close in the second quarter, after which Abacus shareholders will own 15% of Charlotte’s Web.
According to Charlotte’s Web, Abacus is a leading provider of over-the-counter ("OTC") topical products for pain relief and skincare containing CBD hemp extracts. Abacus distributes the industry's widest portfolio of topical CBD SKUs through more than 12,000 doors including the three largest US pharmacy chains, and also reaches 16,500 health care practitioners.
In the year end earnings report, Charlotte’s Web reported year over year revenue had increased by 36% to $94.6 million. Fourth quarter year over year earnings increased by 6% to $22.8 million. For the full year the company recorded a loss on an adjusted EBITDA basis of $1.7 million.
Charlotte’s Web said its direct to consumer online sales are ramping up. Ecommerce sales accounted for 57% of revenue for the full year and 65% in the fourth quarter.
Regulatory uncertainty complicates finances
But the continued regulatory uncertainty has cast something of a pall over the company’s future prospects. Charlotte’s Web found it necessary to chalk up a $13.9 million fourth quarter inventory provision against “[D]elay of anticipated adoption of ingestible products by F/D/M channel.”
“The Company had anticipated more progress by the end of 2019. The delay has stalled broader adoption of CBD dietary supplements within the F/D/M channel. Recent public comments and reports from the FDA have been more encouraging towards establishing regulatory oversight for hemp derived dietary supplements. A definitive timeline has not been provided. However, the enormous hemp CBD wellness market opportunity remains intact and Charlotte's Web believes it is well positioned to dominate the category,” the company said in a statement.
Also, earlier this month Charlotte’s Web launched a science division called CW Labs with operations based in Boulder and Buffalo, NY. The division is headed by newly hired Senior Vice President of Innovation, Tim Orr.
“Infrastructure investments will continue throughout 2020 and position the Company to launch into the F/D/M channel once an appropriate regulatory framework is passed,” Elsner said.
