Anticipated CMMI Medicare Pilot Program Participation, Regulatory Momentum, and Cost Structure Improvements Position Company for Growth and Pathway to Profitability
LOUISVILLE, Colo., March 31, 2026 /PRNewswire/ - (TSX: CWEB) (OTC: CWBHF), Charlotte's Web Holdings, Inc. ("Charlotte's Web" or the "Company"), a botanical wellness innovation company and the market leader in cannabidiol $(CBD)$ hemp extract wellness products, today announced results for the quarter and year ended December 31, 2025. All amounts are expressed in U.S. dollars, unless otherwise stated.
SUBSEQUENT MATERIAL EVENTS
BAT Transaction
Prior to this earnings release, Charlotte's Web announced a transaction (the "Transaction") with BT DE Investments Inc. ("BAT"), a subsidiary of British American Tobacco p.l.c. (LSE: BATS and NYSE: BTI), comprised of two components: (i) the amendment and conversion of BAT's outstanding C$75.3 million (approximately US$54 million at current exchange rates for estimation purposes) convertible debenture, in addition to all accrued interest (C$14.2 million, or approximately US$10 million); and (ii) a concurrent additional equity investment by BAT of US$10 million (approximately C$13.9 million) by way of a private placement. Following completion of the Transaction, BAT will hold approximately 40% of the Company's then-issued and outstanding common shares on a non-diluted basis.
The debenture conversion eliminates Charlotte's Web's largest outstanding balance sheet liability and significantly strengthens shareholders' equity, while removing approximately $3 million in annual interest costs. The net proceeds of the cash will be used to support the Company's participation in the anticipated Centers for Medicare & Medicaid Innovations (CMMI) Medicare pilot program and other permitted purposes if the CMMI program does not proceed.
The Transaction is subject to TSX approval and the approval of Charlotte's Web shareholders at the Annual General and Special Meeting scheduled to be held on or about May 28, 2026.
CMMI Medicare Pilot Program and CMS Beneficiary Engagement Incentive (BEI)
On December 18, 2025, the Washington Administration announced a Center for Medicare and Medicaid Innovation ("CMMI") Medicare pilot program, the first federal initiative designed to enable federally authorized CBD access for senior patients through Medicare. Charlotte's Web is participating as a CBD launch partner for the pilot, beginning with senior oncology patients, with a broader expansion to additional Medicare beneficiary segments expected in 2027.
Subsequently, on March 20, 2026, the Centers for Medicare & Medicaid Services ("CMS") issued related guidance establishing the Beneficiary Engagement Incentive ("BEI"), the specific mechanism through which the CMMI pilot will operate. The guidance confirmed that hemp-derived CBD products, including non-intoxicating full-spectrum products containing up to 3 mg per serving of tetrahydrocannabinols, are eligible under the program. Charlotte's Web believes that its core portfolio of full-spectrum CBD wellness products qualifies under this federally authorized incentive program, with participating healthcare organizations permitted to fund up to $500 per beneficiary annually toward eligible CBD wellness products beginning in April 2026.
Under the BEI, participating healthcare organizations, primarily accountable care organizations ("ACOs") and oncology model providers, may elect to purchase eligible hemp-derived CBD products from compliant suppliers using their own funds and furnish them to aligned Medicare beneficiaries for symptom management. Costs are covered by the participating organization from its own program economics. CBD wellness products may help reduce reliance on higher-cost treatments, and participating organizations have a financial incentive to help their patients achieve better outcomes at lower cost. Participants in the ACO REACH Model and the Enhancing Oncology Model ("EOM") may begin offering the BEI effective April 1, 2026, with the Long-term Enhanced ACO Design $(LEAD)$ Model following on January 1, 2027.
Regulatory Developments and Federal Policy Momentum
Federal policy developments during and after the fourth quarter of 2025 represented some of the most meaningful progress for hemp-derived CBD since the 2018 Farm Bill, signaling a potential turning point for the industry.
HEMP Act
Driving a federal legislative framework is the Hemp Enforcement, Modernization, and Protection Act (the "HEMP Act"), introduced by Congressman Morgan Griffith, Chairman of the House Energy and Commerce Subcommittee on Health. This congressional committee is responsible for FDA oversight. The HEMP Act presents a science-driven federal framework that preserves access to responsibly produced full-spectrum CBD products. The HEMP Act is expected to proceed through regular committee order. Some industry stakeholders also believe the legislation could advance through Congress' September Continuing Resolution.
Policy momentum has been further driven by congressional and executive actions. In November 2025, Congress passed the Agriculture, Rural Development, FDA, and Related Agencies Appropriations Act as part of a government funding agreement that included restrictions on the total THC content of hemp-derived products, with an implementation window set for late 2026. Subsequently, a December 18, 2025, Executive Order directed senior White House leadership to work with Congress to update the statutory definition of hemp-derived cannabinoid products, ensuring continued access to full-spectrum CBD while preserving Congressional intent to restrict products that may pose health risks. Simultaneously, the Administration announced a Center for Medicare and Medicaid Innovation ("CMMI") Medicare care innovation pilot program, underscoring a broader federal interest in research and evidence development to support hemp-derived wellness products.
"2025 was a defining year for Charlotte's Web," said Bill Morachnick, Chief Executive Officer. "Our participation as a launch partner for the CMMI Medicare pilot marks a landmark breakthrough, bringing physician-authorized CBD access into the healthcare system for seniors, with Charlotte's Web at the forefront. We see this as an early model for potential healthcare integration across additional segments of Medicare's approximately 67 million beneficiaries. Alongside the Presidential Executive Order and growing bipartisan momentum for a rational federal framework, we believe our industry is at a pivotal inflection point. We've built this Company for moments exactly like this."
DeFloria: Advancing Cannabinoid Pharmaceutical Development
DeFloria, Inc., a collaboration between Charlotte's Web, Ajna BioSciences, and British American Tobacco, achieved significant clinical and regulatory milestones in 2025, advancing AJA001 Oral Solution as the most advanced cannabinoid drug program utilizing the FDA's Botanical Drug Pathway.
In 2025, the FDA completed its review of Phase 1 data and cleared DeFloria to proceed with Phase 2 clinical trials for AJA001, a treatment for irritability associated with autism spectrum disorder (ASD). The Phase 1 trial demonstrated that AJA001 was well-tolerated across a wide dosage range with favorable pharmacokinetic profiles, establishing the foundation for Phase 2 evaluation of safety, tolerability, and effectiveness in adolescents and adults with ASD.
According to the CDC, ASD affects approximately 1 in 31 children in the United States, and existing treatments are limited and often poorly tolerated. AJA001 employs Charlotte's Web's proprietary full-spectrum CBD hemp extract derived from its patented cultivars, representing a multi-compound botanical approach rather than traditional single-molecule synthetic drugs.
DeFloria's progress carries substantial strategic value for Charlotte's Web shareholders:
Validation of Botanical Science: Clinical advancement of Charlotte's Web's proprietary genetics through FDA-regulated pathways validates the therapeutic potential of the Company's hemp formulations and strengthens the scientific foundation underlying its consumer products.
Manufacturing Rights: Charlotte's Web holds exclusive commercial manufacturing rights for AJA001 upon potential FDA approval, representing a significant long-term revenue opportunity in the multi-billion-dollar ASD treatment market.
Equity Ownership: Charlotte's Web owns approximately one-third of DeFloria, providing direct participation in value creation from pharmaceutical development milestones and potential commercialization.
Phase 2 Clinical Program Update
DeFloria has been actively preparing for entry into its Phase 2 clinical program, with key elements including clinical site selection, protocol optimization, and manufacturing readiness now substantially advanced. Building on the favorable safety and pharmacokinetic data from Phase 1, which established the dosing parameters for Phase 2 evaluation, the Company expects to initiate its Phase 2 trial in mid-2026, subject to the completion of customary development activities and the alignment of required resources.
Phase 2 represents a pivotal milestone for AJA001, designed to evaluate safety, tolerability, and early signals of therapeutic effectiveness in adolescents and adults with ASD. Drawing on Charlotte's Web's extensive real-world experience within the ASD community and the consistency of outcomes observed with similar cannabinoid profiles, the Company is optimistic about AJA001's potential to address irritability associated with ASD--an area with significant unmet need and limited well-tolerated treatment options.
"Our partnership with Ajna and BAT through DeFloria demonstrates our leadership in advancing hemp-derived compounds from consumer wellness into FDA-regulated pharmaceutical development, and it reflects the same commitment to science-backed innovation that drives our core business," said Mr. Morachnick.
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