By Gregory Daurer | Oct 26, 2021
Roxboro, North Carolina
CBD and rare cannabinoid ingredients, product development, and white labeling
In terms of Open Book Extracts' mission, just about the only thing the company doesn't do is market its own line of consumer products. Instead, it produces active ingredients in the form of distillates and isolates of CBD and rare cannabinoids, as well as formulating and producing white label cannabinoid-based products for its clients.
"We wanted to give [our customers] a supply-chain platform and innovation team that allows them to sleep at night, and allows them to deliver [to] their end clients the user experience they want," says Neundorfer, a Stanford MBA grad who transitioned from running an automation software company to piloting medical marijuana businesses in Ohio. While doing the latter work, he saw a new opportunity arise, leading him to co-found Open Book Extracts (OBX): "We saw many of those patients gravitate away from high-THC [products] and gravitate towards the high-CBD side [at] our dispensaries."
Working with hemp farms in North Carolina and Southern Virginia -- which are vetted by the company to insure they meet soil and water quality standards -- OBX contracts with farmers for its hemp biomass. The region, noted at one time for its tobacco cultivation, is "idyllic for the cultivation of hemp, just based on the soil quality and climate," says Brown.
But the region is also famous for its Research Triangle, which provides the company with access to "a lot of science and pharmaceutical talent -- many of whom we've poached from Big Pharma companies," boasts Neundorfer.
At its 76,000-square-foot facility in Roxboro, OBX uses cryo-ethanol extraction, and then further refinement, to produce a variety of cannabinoids -- including CBD, as well as the rarer CBN, CBG, CBC, THCV, and CBDV. Using those ingredients, the company produces gummies, tinctures, gel caps, oral strips, infused chocolates, water-soluble cannabinoid drink formulations, topicals, and dissolvable tablets.
OBX's customers include wellness brands looking to incorporate CBD into their products. There are also recreational and medical cannabis companies, which purchase OBX's ingredients in order to make their own products containing one or more of OBX's rarer cannabinoids along with THC in states where it is legal. CBN, for instance, is popular in sleep formulations when combined with THC. There are pet nutrition companies. And cosmetics businesses, too: "We have one client who refers to CBG as 'Botox in a Bottle,'" says Brown, who has a background in the beauty industry herself. "When put in eye cream or face serum, [CBG] has wonderful properties for creating ultra-rich, moisturizing products."
But the company is also seeing interest from a customer category which Neundorfer calls "The Buyers of Tomorrow" -- large consumer packaged goods (CPG) brands which see the potential for incorporating CBD, as well as other cannabinoids, into their products. But in order for that to happen, the FDA still needs to allow cannabinoids like CBD to be classified as dietary supplements suitable for food and beverages, he says. That hasn't stopped some CPG companies from looking into product development proactively, according to Neundorfer. "We are perfectly positioned to conquer the market that will be filled more fully by 'The Buyers of Tomorrow,'" he says.
Presently, the company counts "over 100 brand clients," says Brown. OBX's fast start has also attracted the attention of investors: The company closed on an $11.5 million Series B round in June 2021.
Through its partnership with functional ingredient manufacturer Prinova, OBX has a presence in 27 different countries, including offices in Amsterdam and Hong Kong. And it's leading innovation within the field: "We are producing more THCV than anyone in the world," says Brown regarding a cannabinoid which reportedly has energizing properties and which may assist weight loss. "It's the one product we can't make enough of."
The company's facility conforms to current Good Manufacturing Practices (cGMP) for food processing and dietary supplement/nutraceutical manufacturing. It's also a certified USDA organic manufacturer, and has begun offering USDA-certified products (thanks in part to its recent partnership with supercritical extractor PHCO2).
Lab analysis is available for all its ingredients, as transparency is key to OBX's business, says Brown. Unlike some secretive companies, she notes, OBX provides potential customers with a look online at its facility (which has its own extraction room, distillation room, and quality control lab) or in person.
Brown says, "We wanted to emphasize that [quality within] the name of our company: that we are an open book, That when you work with us, we are open to you. We are collaborating with you. We are part of your team. And we wanted a name that would convey that."
Challenges: According to Neundorfer, it's "the fact that [the CBD industry is] still operating in an unregulated environment" in which standards have yet to be set "when it comes to ingredient manufacturing production, mandating things like GMP [Good Manufacturing Practices], identifying what levels of standards, of certificates of analyses. None of that exists. That's challenging. There's no playbook. But that's also an opportunity, because that gives us the opportunity to set the standards." Certifications which OBX lists on its web site include cruelty-free, kosher, gluten-free, and non-GMO.
Opportunities: Brown says, "We now have this unique position to drive toxicology studies -- safety studies -- and then efficacy studies to help brands leverage the power of this next wave of cannabinoids -- and innovate and differentiate [themselves] from the rest of the market." She cites a partnership agreement with San Diego-based Radicle Science, a company with a team of clinical researchers who will test the CBD-containing products.
Needs: Brown cites "education and research" as the primary needs: "There is still a lack of understanding -- and a big trust gap that exists with consumers in the market, not necessarily understanding what CBD does. People are still concerned, 'Is CBD going to get me high?' There's still even that basic level of education to do, in order to unlock the true potential of where this industry can go. And what's going to bridge that gap is the research -- and we are conducting a great deal of research ourselves."