How to Get Ahead in Legal Cannabis: Two Pioneers Share Essential Secrets

Mary's Medicinals has worked its way into the industry's skin, in the good way.

These are the days in more than half of the United States when medical-marijuana patients and recreational adult consumers can smoke, vape, and eat legal weed. If those delivery methods fall short, the plant's varied healing and anti-inflammatory cannabinoids can also systemically enter the bloodstream via transdermal patches made using CBD-infused gel. 

What a time to be alive

A mile above the sea, in Denver, Colorado––an epicenter for the legal-marijuana business––Mary's Medicinals has for four years maintained its position as a first-wave pioneer of weed products that are ingested through your skin. The maker of widely distributed and renowned transdermal and topical products is currently represented on retail shelves in seven states, with four more set to be added this year. And notably, Mary's topical-transdermal formulation technology is protected by a government-issued patent. 

Ben Karris / KINDLAND

KINDLAND spoke with Mary's Medicinals' CEO Lynn Honderd and the company's chief chemist, Noel Palmer, PhD.,  by conference call between California and Colorado. Read on to glean insight into licensing and marketing CBD-infused merchandise with "universal appeal" across state lines, trademarking and owning your cannabis brand's product offerings, and glimpses into the science behind CBD and CBD-N transdermal patches, 

"In our industry, something that is 92 percent pure isn't really all that different from something that is 98 percent pure."

KINDLAND: What is the process of making products available in multiple states?
Lynn Honderd: Unfortunately, the regulations in each state are very different; so our structure and strategy will differ from state-to-state. Every state’s licensing and regulations are overseen by different [governmental] departments. In Washington, the Department of Health handles cannabis. In Colorado, it’s the Department of Revenue. For Oregon, it’s the State Liquor Board. So moving a brand from state to state is extremely challenging. In Colorado, one of the biggest challenges we face is the consistency of raw materials. Here, the laws that pertain to testing for pesticides are always changing, and it’s not as if [a cannabis business] can go to the Department of Agriculture to have its product tested. In some states, there is a residency requirement in order to get a license. Others have different metrics you must meet in order to operate. 

KINDLAND: How do you navigate this landscape?
Lynn Honderd: We look at the different legislation in each state, and then decide how we will enter that state. We vet different people who are interested in producing our product, we teach them how to do it, and enter into a partnership with them. The brainpower is ours. The product is ours. The intellectual property is ours. The product is just manufactured in a facility with the proper licensing. In states like Nevada, we share space, but we own and operate the entire entity, which is very similar to Colorado. In each case, we’re very cautious to vet the people we work with, and the local legislation, inside and out.

Image via Company Week

KINDLAND: Mary’s medicinals holds a patent for its gel technology used on the CBD and CBD-N patches. Were there any difficulties securing the patent, considering the patent is for a cannabis brand?
Noel Palmer, PhD: Our patent is for the formulation that is in the transdermal product. Of course, there are other patents that exist for cannabis-related products or technology. I imagine someday, one or a few of these patents will be challenged in court. But cannabis is still a Schedule I substance; so it will be very interesting to see how that plays out. 

KINDLAND: How do you see the recent DEA re-classification of CBD to a Schedule 1 substance affecting your business? 
Lynn Honderd: I recently spoke on a panel at a conference in New York City. One of the other speakers said something that really stuck with me: If you’re going to stand still, you’ll get left behind. We’ve taken the stance of business-as-usual. Since we cultivate our own CBD here in Colorado, which comes from plants grown under a Department of Agriculture license, we’re, for lack of a better term, game on. And we’re taking the approach that the DEA ruling doesn’t apply to us, as we’re not importing or exporting CBD. 

Noel Palmer, PhD: It will be very interesting to see how the Trump Administration handles the federal enforcement of cannabis. For example, if Jeff Sessions is appointed as Attorney General, he could definitely be super aggressive. Even going a more subtle route, and suing two states, scares me. It could cause other states to pull their marijuana programs.

'Not being able to deduct expenses like marketing and payroll taxes really hurts our bottom line, and our ability to hire more employees.'

KINDLAND: What are the varied processes of extracting different cannabinoids? Is isolating THC different than isolating CBD?
Noel Palmer, PhD: There are countless ways to do extractions, anymore. People are getting really creative, which is great, but at the end of the day, it’s like finding 20 different ways to crack an egg. For example, a lot of companies in the industry spend up to $400,000 on C02-extraction systems. You’ll get nice C02 oil using those. If you’re really good, you can isolate some terpenes with a C02 system, which is great. But you can essentially do the same thing with an alcohol-based system, or alcohol recycler, for $10,000 to $15,000.

So, with Mary’s, I’ve taken the K.I.S.S. (keep it simple, stupid) approach. It saves us money, the machinery is easier to operate and doesn’t require extensive training, we don’t have to worry about a butane system or butane pumps breaking down, and we can create a final product that is as pure as it needs to be. I’ll concede, with an alcohol-based extraction method like the one we use at Mary’s, you won’t be able to create a shatter or wax, as you would with butane. But for our product line, simple works best. In our industry, something that is 92 percent pure isn't really all that different from something that is 98 percent pure. 

KINDLAND: What advice would you give to young women thinking of entering the legal cannabis space?
Lynn Honderd: Do your due-diligence, and do it well. There is this perception that the Green Rush is super easy to jump into, and that everyone is going to make millions of dollars. That is simply not the case. It’s not that easy. It’s very important to choose your partners wisely. In order to protect your brand, align yourself and your company with people who possess strong business acumen. As the space evolves, and we potentially see re-scheduling, or national legalization, it will be very important for companies and brands to retain ownership of their IP.

KINDLAND: What differences exist in processing extracts for topical consumption as opposed to vapor?
Noel Palmer, PhD: Some of the items in our product line are topically applied, but they’re designed to be transdermal-–which means they’re going to soak through the skin, and enter the bloodstream to become systemic. Because of this, we take quality control measures to ensure that the products are highly pure. The coolest thing about molecular distillation is that you’re isolating cannabinoids, and can remove or separate out any unwanted contaminants or properties.

It’s very important to choose your partners wisely. In order to protect your brand, align yourself and your company with people who possess strong business acumen.

KINDLAND: Where is there room for the industry to improve?
Lynn Honderd: I hope to see change this year in the 280E tax reform. There is a tax stipulation faced by cannabis companies that makes it almost impossible to operate at a net-positive income. Most of us are hit with around a 70 to 80 cent tax. We can’t make deductions like mainstream businesses. Not being able to deduct expenses like marketing and payroll taxes really hurts our bottom line, and our ability to hire more employees, or reinvest resources into building our business. If you ask anybody in the industry about the 280E tax code, they’ll all roll their eyes. Because they are unable to deduct any costs, it hurts dispensary owners and brick-and-mortar shops more than manufacturers. But take my word for it: This frustration is felt by everyone

KINDLAND: What is new legal marijuana industry getting right?
Lynn Honderd: What has been really fascinating to observe over the past two years is the growing number of women occupying executive roles in the marijuana industry, which, like most other American industries, has traditionally been male-dominated. So, to see women take the lead, and push that movement forward is definitely something we’re working toward.