The first pharmaceutical cannabis company in the U.S. is on its way to opening in the California desert.
Royal Emerald Pharmaceuticals, slated to open in March in a former Kmart in Desert Hot Springs, will be the first private company to secure a Drug Enforcement Agency license to grow cannabis for the purpose of researching and developing medicines to be approved by the Food and Drug Administration.
The company plans to spend $400 million within the next five years on developing its facilities and hiring more than 600 people. Company leaders say they aim to create non-addictive, non-psychoactive medications that use cannabis as an alternative to opioids for pain management.
CEO Mark Crozier, a veteran who served as a U.S. Army Ranger and has spent decades in federal law enforcement, said there’s a need for more scientific testing to prove what the cannabis plant can do as a medicine.
"Nobody knows what it will do and nobody knows all the effects," he said. "It's all been word of mouth."
This type of research has been a moonshot goal for many in the cannabis industry. The federally illegal status of cannabis as a Schedule I drug under the Controlled Substances Act puts severe limits on research and testing.
Crozier said his company has been able to navigate the licensing process due to his background in the federal government and diligence in navigating the bureaucracy, which has taken about three years of development.
“We felt confident from the beginning we’d get the license,” he said.
As their application is pending approval, the company recently passed its final inspection and expects a stamp of approval soon. The company is also finalizing federal contracts that will help Crozier achieve his ultimate goal: create non-addictive pain relief medications for veterans.
The havoc and heartbreak caused by opioids that he's seen as a law enforcement agent, and the addiction of fellow veterans suffering from pain and post-traumatic stress, led Crozier to want to do something to help those who are addicted and in pain.
“I saw the opportunity to make medicine, and do something good for somebody,” he said.
Desert Hot Springs mayor banks on boon
The company has put about $15 million toward renovating an abandoned Kmart in a shopping plaza, about 5 miles north of Interstate 10. It will have similar features to other cannabis cultivation facilities, with rooms for growing, trimming and drying cannabis.
Royal Emerald plans to hire 100 people for the Palm Drive facility by the end of the year, including scientist positions, trimmers and general building management. That facility will in total employ 258 people, Crozier said. But that's just the first part of their footprint.
Royal Emerald also will construct a 200-bed opioid rehabilitation facility, which will create another 100 jobs, and the company also plans to build a 3-million-square-foot grow facility that will employ 400 people at a to-be-announced location.
The federal classification also means that everyone who works at the facility has to undergo a background check and test negative for cannabis use every 90 days, Crozier said.
Royal Emerald has committed to hiring valley-based construction contractors and to filling open positions with local residents, although it will bring in some scientists from Europe for its employee training.
Crozier said he chose to set up in Desert Hot Springs after meeting with other desert cities including Palm Springs, Cathedral City and Coachella. Because his facility is not a state or locally licensed cannabis company, they won't be paying cannabis-related taxes, and Crozier said Desert Hot Springs Mayor Scott Matas was the most enthusiastic about the economic development Royal Emerald could bring.
"These are good jobs coming to the city and Scott was the first one to say, 'What do we have to do to make this happen?'" he said.
Starting pay for all jobs the Kmart facility will be $43,000 plus benefits.
Royal Emerald has donated $37,000 to local Little League operations, $15,000 to the football league, and $16,000 to Food Now, a large food pantry located in Desert Hot Springs. And it intends to support $100,000 worth of scholarships for Desert Hot Springs High School students.
Matas said the city didn’t give out any tax incentives or economic development packages to Royal Emerald. Rather, he forecasts significant tax revenue from the jobs the company will bring.
Matas, who is running for re-election this November and is being challenged by former mayor Adam Sanchez, said he hopes Royal Emerald's opening will be the first step toward building a larger pharmaceutical industry in the desert.
“I truly believe when Mark gets up and running here, others are going to follow,” he said.
Company to capitalize on historic license
Once the DEA license is official, the business will be the first in the nation to legally research cannabis. There’s only one other license, and that’s the federal research facility at the University of Mississippi, which has been undergoing cannabis research since the late 1960s. It supplies all the cannabis that gets used for any FDA-approved research.
One of the biggest hurdles to obtaining the license is that a company cannot have previously been involved in cannabis, cutting out the thousands of "green rush" participants in the legal recreation industry.
“We have to take (hire) people that have never touched the industry,” Crozier said.
Once granted, the license is tightly restricted. Grantees are not allowed to obtain cannabis from any companies in California or anywhere else in the U.S., because those companies are not federally legal. So, Crozier said they have partners overseas that will supply their seeds and strains instead.
Other than the hint in the name, the company downplays its association with the cannabis plant. Its own marketing materials don’t even mention the word cannabis. The latest press release says it's developing "state-of-the-art medicines derived from THC and CBD,” which are two components in the cannabis plant.
While there are thousands of cannabis products available for purchase in California and other states where cannabis is legal, none of those have the approval of the nation's top drug regulators. Instead, the FDA has only approved three synthetic cannabis-related drugs, and one with CBD.
Royal Emerald, which is privately funded and backed by two investment groups, has already heard from universities that want to partner on research and clinical trials.
To Crozier, this is where his company gets to break ground.
While people in the cannabis industry are careful not to make official claims that their products will heal any ailments, many products are marketed with the goal of pain relief or as sleep aids. Proposition 215 in California, which governed medicinal cannabis before the recreational industry opened up, allowed physicians to approve or recommend cannabis to people with "cancer, aids, anorexia, or any other illness for which marijuana provides relief."
“There are a lot of people who say it does all these things, but nobody’s been able to prove or disprove it. We’re going to be the first (company) where they do real clinicals to see what the effect of the attributes really are, and develop medicines,” Crozier said.
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The actual formula of the cannabis-based medications developed at Royal Emerald will likely be combined with other additives to achieve the right effects, Crozier said. But he estimates the first drug could be ready to put to market within two years.
Jocelyn Kane, vice president of the Coachella Valley Cannabis Alliance Network that advocates for the local cannabis industry, said while Royal Emerald is more of a pharmaceutical company than a cannabis business, she's hopeful their work can ease stigma around cannabis.
“The value of this is that it’s pushing on the medical establishment to recognize cannabis as a legitimate pharmaceutical for medical purposes,” she said. “There are many people who would like to get a prescription from a doctor, otherwise they don’t feel comfortable.”
She also said the pending federal license application could be a sign that the federal government is moving away from the idea that cannabis belongs in the same Schedule 1 category as other controlled substances like heroin and cocaine.
“I think it’s a good step in the right direction," she said.
Melissa Daniels covers business, hospitality, and economic development in the Coachella Valley. Reach out at (760)-567-8458, melissa.daniels@desertsun.com, or on Twitter @melissamdaniels.
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