The most valuable marijuana company in the US plummets after the FDA warns some of its products were never properly approved
- Shares of Curaleaf - the most valuable marijuana company in the US - fell as much as 15% on Tuesday after the FDA warned the cannabis retailer doesn't have the necessary approval for four of its CBD products.
- The agency found that Curaleaf's "CBD Lotion," "CBD Pain-Relief Patch," "CBD Tincture," and "CBD Disposable Vape Pen" are all "new drugs" that require approval before being introduced into interstate commerce.
- Curaleaf became the largest cannabis retailer by revenue after it acquired Grassroots Cannabis on July 17 for $875 million.
- Watch Curaleaf trade live here.
Shares of Curaleaf - the most valuable marijuana company in the US - dropped as much as 15% on Tuesday. The losses came after the US Food and Drug Administration warned that several of the cannabis retailer's products don't have the necessary approval to be sold in the US.
In a letter to the company sent Monday, the FDA ruled the way Curaleaf markets four of its cannabidiol products designates them as drugs, as "intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease."
Since the CBD products are not "generally recognized as safe and effective" for the uses Curaleaf describes, the FDA said the items require agency approval before hitting the market. The products are also misbranded, as their labeling doesn't include "adequate" usage directions, according to the FDA letter.
The four CBD products mentioned in the letter are Curaleaf's "CBD Lotion," "CBD Pain-Relief Patch," "CBD Tincture," and "CBD Disposable Vape Pen."
The agency also noted that the company's "Bido CBD for Pets" products were never approved as new animal drugs. The FDA found the products are intended for the "mitigation, treatment or prevention" of animal disease, therefore requiring federal approval.
The letter states that "introducing or delivering these products for introduction into interstate commerce for such uses" violates the Food, Drug and Cosmetic Act.
Curaleaf became the largest US cannabis company by revenue after it acquired Chicago-based Grassroots Cannabis for $875 million on July 17. The deal bolstered Curaleaf's presence in the Midwest and led its stock to jump nearly 20% Wednesday.
"We have a strong presence on the East Coast and we're working to fill out the West Coast," Curaleaf CEO Joe Lusardi said at the time. "What we really didn't have was a Midwest presence, and so Grassroots really fills in the map."
The FDA warning follows an April study from cannabis-testing company CannaSafe that found only three of 20 tested CBD products to contain what their labels said. The study even found some of the blindly-tested products to include dangerous gases like ethylene oxide and ethanol.
CBD, a product of hemp, was legalized in the US via the Farm Bill in late 2018. The FDA put together a working group in March to investigate the product and how to regulate it.
Curaleaf's stock is still up more than 50% year-to-date.
Now read more markets coverage from Markets Insider and Business Insider:
Trump threatens to slap tariffs and other penalties on Guatemala in immigration fight
Coca-Cola hits a record high after smashing profit estimates on strong low-sugar drink sales