Curaleaf Trades Lower After FDA Sends Warning On CBD Products

The Food and Drug Administration issued an open "warning letter" Monday to Curaleaf Holdings Inc CURLF stating the vertically integrated cannabis operator is making illegal or false claims on its website and social media accounts.

What Happened

The FDA said it has determined several products that are for sale on Curaleaf's website and promoted across its social media accounts are "unapproved new drugs."

These products are "misbranded drugs," and selling them across state lines may be a violation of the FD&C Act, the regulatory agency said. 

Curaleaf's "CBD Lotion," "CBD Pain-Relief Patch," "CBD Tincture" and "CBD Disposable Vape Pen" are not considered a safe and effective tool for the conditions the company references, according to the FDA.

For example, Curaleaf in one instance wrote on its Facebook account that CBD "can be a powerful ally if you're suffering from chronic inflammation and pain," the FDA said. 

"New drugs may not be legally introduced or delivered for introduction into interstate commerce without prior approval from the FDA, as described in sections 301(d) and 505(a) of the FD&C Act, 21 U.S.C. 331(d) and 355(a). FDA approves a new drug on the basis of scientific data and information demonstrating that the drug is safe and effective."

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Why It's Important

Protecting and promoting public health remains the FDA's "top priority," acting FDA Commission Ned Sharpless said in a statement obtained by CNBC.

The regulatory body is making Curaleaf aware it is making "unfounded claims about more than a dozen different CBD products," Sharpless said. 

"Today's action demonstrates that the agency stands firm in its commitment to continue monitoring the marketplace and protecting the public health by taking action as needed against companies that deceive consumers and put them at risk by illegally selling products marketed for therapeutic uses for which they are not approved, such as those claiming to treat cancer or Alzheimer's disease." 

What's Next

The FDA instructed Curaleaf to respond within 15 days with specific steps it has taken to correct any violations.

Curaleaf said in a Tuesday statemnet that it will respond to the FDA within 15 days. 

"Compliance is a top priority for Curaleaf and the company is fully committed to complying with FDA requirements for all of the products that it markets. We can affirm that nothing in the letter raises any issues concerning the quality and consistency of any Curaleaf product or calls into question the high safety standards of the Company's cultivation and manufacturing processes," according to the company.

The company said its CBD products are hemp-derived and meet the requirements of the Farm Bill.

If an assessment can't be completed within the timeline, the company needs to explain the reason for any delay and the time frame needed to complete any corrections, the FDA said. 

Curaleaf shares were down 5.26% at $7.56 at the time of publication Tuesday. 

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