After more than a year of banging his head against the wall of a cannabis business model he could not rationalize, at the urging of a friend who had not revealed his need to succeed, entrepreneur and financial advisor Dean Petkanas appealed to heaven for guidance.
“I was really stuck, and couldn’t find a way forward. So I asked God, “What is expected of me?””
To better understand his supplication nine years ago in 2009, let’s back up a few steps. A year earlier, Petkanas’ business partner had asked him to try to figure out a workable model by which they could build a scalable enterprise to seize early-mover’s advantage in an industry that some believed could be huge. Petkanas was interested because legalization was in its infancy and few understood the market potential; the stigma and federal legal pressure around it would make many potential competitors hesitant to enter.
“Barriers to entry” are as sweet as cotton candy to hardcore entrepreneurs.
It’s said that nine years seems like ninety in the cannabis industry, and to put their starting point into perspective, most know that today cannabis is legal for medicinal purposes in 29 states and the District of Columbia, and the entire countries of Uruguay and Canada have announced full legalization. In 2009, it was only legal for medicinal purposes (and only in 14 states) and had yet to be legalized for recreational purposes anywhere (Colorado’s Amendment 64 legalizing recreational use was still three years away, and was a fringe industry in almost every way.)
After a year of research and brainstorming, Petkanas reported his conclusion to the business partner: “I’m afraid there’s no scalable model in cannabis”.
The friend urged him to go back to the drawing board, to try again. It’s important, he seemed to say. “We agreed that the opportunity could be immense, if we could nail it down, so I agreed to try again. I tried every path I could think of, and was still frustrated. I prayed, and what I heard was “You have some experience in pharma… There might be real medicine here.”
From the Kannalife website: “Mr. Petkanas’ background in pharmaceutical extends to his work as investment banker and subsequently V.P. of Business Development for Xechem International, Inc. where he was principally responsible for Xechem’s IPO and EXIM Bank rounds of financing. Mr. Petkanas was involved with Xechem from 1992 to 2007. While at Xechem, he was involved in the financing of Xechem’s lead target drug candidate (generic paclitaxel) and later on from 2003 to 2007, was the lead petitioner for Xechem International in steering their federal anti-trust lawsuit against Bristol-Myers-Squibb for their illegal monopoly of the drug market for the anti-cancer drug, Taxol®. Mr. Petkanas also was an integral part of the development team that named, trademarked and commercialized Hemoxin (Nicosan), a phyto-pharmaceutical compound for the treatment of Sickle Cell disease.”
“To that point, nothing in cannabis fit a typical model of medicine as understood by the organizations that define medicine – the Food and Drug Administration, the American Medical Association. No testing, no standardization of growing, production, dosage… All anyone could say was “It makes me feel better…” Well that’s not a model that’s ever going to get approval by regulators!”
He explained, “I took 8 more weeks of research on gene response, chemical response, begging for the answer to, “Is there a disease I can focus on?”, his sole objective to put a fence around something specific, with controls that would slow down inevitable competitors.
“I found a very narrow 507 patent available for licensing from the National Institute of Health to research a specific type of disease called “Hepatic Encephalopathy” (the words comes from the same roots as ‘hepatitis’ and ‘dying cells’– in other words, “liver disease”).
“I took what I’d learned back to my business partner, and he told me, “That’s the disease that killed my father.”
[For those Dear Readers who wonder about our quest to find The Why– the deep, sometimes intangible emotional driver whereby impassioned professionals commit their talents and fortunes to this risky cannabis industry – look no further than Dean Petkanas’ prayer, and an available license to control the precise market that was so important in his partner’s personal history… Mr. Petkanas had just given us a very divine Why, indeed.]
In 2010, Petkanas and his partner formed Kannalife Sciences, Inc.,built with the goal to create ethical pharmaceuticals from cannabis, with an understandable focus on Cannabidiol (CBD), and the opportunity to scientifically exploit “two unique but interlinked licenses to study HE and CTE (Chronic Traumatic Encephalopathy)…”
Pretty sure my face went blank at this moment, and the fact that I was typing the interview instead of recording must have seemed frustrating. Fortunately, he’d given a very clean description in a previous interview to Men’s Journal:
“We knew we had to get a license. So we specified the disease pathology that we wanted to focus on as the brain-liver connection, and the toxicity brought on through the liver through either cirrhosis, alcohol, portal hypertension, and hepatitis C. We posed that Hepatic Encephalopathy (HE) falls in the range underneath the patent and we wanted exclusive use of the patent. They gave it to us. We found out that cannabinoids are a neuroprotectant and when we got to that stage last year, I turned my attention to concussion injuries.”
At Kannalife, Petkanas and partners created and patented a CBD-derived molecule called KLS -13019.
The next part of the story reads like a James Bond outtake, though Petkanas’s accent gives it a less-genteel edge, not so much “Shaken, not stirred” as “Bond… what’s it to ya’?”:
“In 2012, I was approached by ‘a fellow from Chicago’ who gave me the number of a ‘well-known chemist’ whose name I won’t use… who understood our need to ‘optimize the compound.’ ‘The Chemist’ says ‘When can we start?’ but a year later when we were ready to go, The Chemist says ‘My work has become ‘more complicated’ and can’t help you now … but call my ‘friends at ‘the Hep B Center’. Turns out to be a former J&J guy who’s now our CSO...”
Now we jump into acronym hyperdrive: “So we started to focus on CBD in the HE model. Learned very interesting things about CBD, that there are some limitations that need to be tested against KLS-13019.” My QWERTY memory is being stretched to the max.
“So we got a Temple University grant from NIH for a KLS-13019 vs CBD study regarding the effects of on chemotherapy, neuropathic pain vs neurotixicity, oxidative stress, all of which are relevant to traumatic brain injury.” I mentioned that I was about to interview Leonard Marshall, famous NFL player for his CTE diagnosis and survival using CBD. It might not have been relevant, but my fingers were begging for mercy.
I’d broken the rhythm of the story so I breathlessly asked Petkanas whether he favored Re-scheduling or De-scheduling of cannabis, should Prohibition end?
Not surprisingly, his response was dense and regimented. [Fair warning to anyone who’s expecting a quick switch from the current Prohibition regime: the following will bum you out]:
“For cannabis to broadly be considered a real medicine, three things need to happen. One, medical schools need to understand the endocannabinoid system - - does that seem likely any time soon? Two, med schools need to understand the concepts of personalized medicine and individual dosing, instead of the one-size-fits-all model they currently have. Again, a tectonic shift would be required. And even if those first two steps happen, it is likely that the federal government will allow medicines from a unregulated, unmeasured highly complex plant? A plant that doesn’t have standards about how it’s grown? About how it’s processed? About how it’s ingested? Not likely!”
Like an express train on the local track, he wasn’t even slowing down.
“In terms of Recreational Cannabis, there are many problems that no one seems to want to talk about. The Abuse/Addiction profile for opiates is 18% - that is, 18% of people who use opiates will become addicted. For alcohol, it’s 17%. The profile for cannabis is 12% - this is a problem the medical community is aware of, but no one out here [gesturing at the Expo crowd] wants to speak about it… Also, there are so many unknowns, such as the effect on younger brains. Decidedly negative, so I recommend legalizing at age 25, to mitigate those effects on younger brains.”
“… Then, there are three Paths to Federal Legalization: One: Executive order. Congress will balk at this on principle. Look what’s happening now – they’ll never allow it! Two: Legislative intervention – not likely, pal, cannabis is not as high priority as many in this industry would like to think. So the most likely path would be through the Supreme Court. The fundamental moving issue for The Court is The Commerce Clause – a case must be brought that has commercial portion to it. I don’t see a case like that on the horizon at this time.”
“A path could be to move cannabis control to ATF – which could work to regulate the REC market, but ATF can’t govern medicine, that’s the purview of the FDA. The FDA won’t allow a medicine that has not been tested – won’t happen! Recreational cannabis needs a similar regulatory scheme as alcohol. If someone can figure that out, it just might work.”
Dear Readers – Angels always show up when I need them.
While walking toward the subway after the Petkanas interview, I passed a guy trying to get people to ante-up for his three card monty game.
You know three card monty, right? Fast-talking guy has three cards lined up on a table. He turns over the Red King, and two other black cards. “All you gotta do is keep your eye on the King, folks…” he says, moving the cards around slowly. He stops with a flourish; a kid points at the King - - “Hey, great job kid. He’s a winner! See how easy it is? Now who’s gonna bet me they can keep an eye on the king?”
The lesson from this interview is: Keep your eye on the King, folks:
For all the negatives, hurdles, roadblocks, and impossible obstacles Dean Petkanas described in the cannabis industry, with Kannalife, the KLS -13019 molecule, and a mission and license to solve Hepatic Encephalopathy and Chronic Traumatic Encephalopathy, Petkanas himself is all in.