SoRSE CEO talks emulsion technology, Pascal collaboration, challenges, opportunities and more
In this edition of "Rising High," The Fly conducted an exclusive interview with Howard Lee, chief executive officer of SoRSE Technology, a water-soluble CBD, hemp and terpene emulsion provider for infused CPG brands. Here are some of the highlights:
WATER-SOLUBLE EMULSION TECHNOLOGY: SoRSE, founded in 2016, is a Seattle-based emulsion supplier for CPGs and other food, beverage and topical manufacturers. “We’re a bunch of food scientists that wanted to solve a really hard problem and the first problem we tried to solve was in the THC space by making THC water soluble,” Lee said. “Three years ago, we realized that there’s much more to the world than just THC water solubility and we got into CBD.” He added SoRSE will also be entering other spaces shortly, getting into more emulsion specific technology for other adaptogens and hard-to-emulsify oils. “SoRSE is powering the number one drinks in Washington, soon-to-be California, and has over sixty customers today,” the CEO said. When asked about the company’s key differentiators, he pointed to the company’s science, team and infrastructure as main factors that give it a competitive edge. “We think we have better science and better technology in terms of the actual science behind emulsification but that’s not the whole story,” Lee said. “Even if you emulsify THC or CBD, you have to have a great taste profile because unless you’re a medical patient, you’re not going to buy a drink that tastes horrible.” SoRSE is designed to blend and complement flavor profiles, he said, and if the taste doesn’t meet a customer’s standards, the company has 35 different scientific process engineers to help design a product to fit the right case profile for that customer. “There’s nobody in our space today that has as many people who are actually involved in science and process engineering than we do,” Lee said. “We have over 55 people on our team, just focused on the food science of THC, CBD and other hard to emulsify oil.” He added the company’s infrastructure also allows SoRSE to produce emulsions reliably and accurately every time. “None of our competitors today have multiple sites to do emulsification services, we actually do,” the CEO said. “We have two separate sites around the country that can actually emulsify CBD for you. For THC, we do it at other licensees and we actually do the manufacturing in four licensed locations.” He noted the company also has mobile units in the East Coast and the West Coast, which go to the licensees’ location, produce emulsion on site, clean equipment and leave. “We’re actually more mission-critical,” Lee said. “We have more resiliency in our system than any other provider today.” He added if someone gets COVID in the production team, it will only be defined in one site. “We think we have better science, we have better ability to create the right case profiles and mouthfeel that you need and we have a better team,” the CEO said. “The last thing is we have probably the best infrastructure right now in the world to produce emulsification services on site or in a large production capacity."
PASCAL COLLABORATION: In December, Pascal Biosciences and SoRSE Technology announced they have validated and optimized a formula for oral cannabinoid delivery, advancing cannabinoid PAS-393 towards clinical testing against cancer. The move marks the first pharmaceutical use of the novel formulation technology developed by SoRSE. “Pascal was able to validate that our current formula is better for cannabinoid receptivity to enhance T-Cell receptivity,” Lee said. “It’s in a petri dish but it looks really promising. But more important, the medical delivery system that we’re developing with Pascal is less toxic for those cells.” The CEO added the companies still have a long way to go before approval as a medical delivery system but they are working toward trials and making good progress.
FCM JOINT VENTURE: In November, the company announced a joint venture with FCM Global to incorporate a new company in Colombia. Under the venture, SoRSE will possess a license to apply its technology to THC, CBD and other cannabinoids in the country as well as a manner in which to export products from Colombia throughout other Central and South American countries. “There’s three aspects for why we’re doing the FCM venture,” Lee said, “One is we wanted to have an entry point in the South American market. It’s not easy to do business in South America unless you actually have a South American presence and now we do.” The second reason for the partnership was FMC’s capabilities and expertise, according to the CEO. “They have all the licenses for CBD production and capabilities, so we partnered with them,” Lee said. “They’re going to be a leading producer of CBD in South America.” He added the final aspect of the collaboration is Colombia’s status as a center of business activity. “It has a hub of activity around development of food products and coffee and other things so it’s a great place to start,” he said.
LEGALIZATION: When asked about the potential federal legalization of cannabis in the U.S., the CEO said he anticipates it will take place in less than three to four years. “The legislators want the tax revenue,” he said. “They see people out of Washington state, California and Oregon just generating enormous amounts of money through cannabis and I think everyone is going to want that.” Lee noted legislators have also seen that the incidence of impaired driving from cannabis has not gone up substantially. However, the more important issue is the people who are incarcerated for having small amounts of weed, Lee said, adding those incarcerated are primarily minorities. “The whole social justice issue is absolutely a critical issue,” he said. “They need to implement the idea that you can use cannabis legally and it’s not a tool to incarcerate minorities on, which unfortunately it still is today.” When asked about ways legalization can be implemented compassionately, the CEO said the first step is vacating the people who are serving sentences for cannabis use and the second step is vacating convictions. “That’s harder to do, there’s an enormous amount of paperwork,” Lee said. “I don’t know the legislators have the stomach to do that but eventually they’ll need to.” He added there is also the idea of providing licenses to minorities, however the execution of that idea is very, very difficult. “How do you define a way to giving people that access?” he said, “There is no reason not to, but at the same time, demanding that someone who gets a cannabis license in a certain state have to be a minority causes incredible dislocation.” The CEO also said even if licenses are provided to minorities, it still doesn’t really help the individual in the industry because they just don’t have the same infrastructure. “Cannabis tax revenue is so large, I can’t imagine why we can’t direct some of those funds to help the people that need help,” Lee said.
CORONAVIRUS: The coronavirus pandemic has impacted many companies in the cannabis industry globally and Lee said he thinks it has improved the THC space. “In many states, cannabis sales are an essential service,” he said. “People are looking to use cannabis as an alternative to alcohol, so the sales of THC products have gone through the roof.” However, CBD products have not fared as well during the outbreak, according to the CEO. “For CBD products, its tamped it down because most of the market for CBD sales were small grocery stores,” he said. “They’re the ones hurting the most in the pandemic, so even though we gained an enormous number of CBD customers, we’re not seeing the growth in the CBD space just yet.” Lee added the pandemic has also taken focus from establishing regulations for CBD. “As the pandemic hopefully soon subsides, it will help the CBD market and THC market as well,” he said.
CHALLENGES: When asked about the biggest challenges facing the industry, the CEO noted consolidation following legalization and the lack of diversity within the industry. “Cannabis is creating a lot of jobs but I think the interesting dynamic of creating jobs is the challenge there will be when federal legalization happens,” he said. “Consolidation will happen, efficiency will happen.” The biggest forward-facing hurdle in the space is how to take the people who created the industries in the states and let them participate in the federal market as things grow, Lee said. “The challenge for the industry is how do you take what one would consider mom-and-pop shops and compete with larger conglomerates that will come in once legalization will happen,” he said. “That’s going to be an interesting challenge…There will be many, many losers and those losers will be most of the original players in the space.” Lee said the other obstacle the industry faces is the lack of women and minority leaders in the space today. “How can our industry be so lily-white?,” he said. “The reason why I say that is, everyone expected I think a different attitude but it’s amazing how dominated our space is in terms of the leadership.” The CEO added there are a few minorities who own licenses but the space is primarily driven by the current establishment. “You’re going see this next layer of federal legalization only driving toward consolidation in larger companies and still larger companies are run by what we look at as the majority not the minority,” he said. “More regulation and more money into the industry will actually force more minorities out of the business and I think that’s going to be an interesting dynamic.”
OPPORTUNITIES: As the cannabis space develops, Lee said he believes SoRSE’s opportunities lie in its work with Pascal and on the medical side. “I think opportunities for THC and CBD and their benefits will finally come out,” he said. “A lot of people believe there are true benefits to both molecules. I’m looking forward to researchers and scientists to tell us what those benefits are and really deliver them.” The CEO also said he believes the cannabis industry will create opportunities in the form of job growth. “I see some people who started out in the business getting more and more responsibility and succeeding,” he said. “I think that’s going to be great. I’d like to see more women and minorities gaining that ground but there are many, many opportunities. As it becomes legal and as it starts growing, there are just more and more opportunities.”
CANNABIS STOCKS: Other publicly-traded companies in the space include Acreage (ACRGF), Akerna (KERN), Aleafia (ALEAF), Aphria (APHA), Aurora Cannabis (ACB), Auxly Cannabis (CBWTF), CannTrust (CTST), Canopy Growth (CGC), Canopy Rivers (CNPOF), CordovaCann (LVRLF), Cresco Labs (CRLBF), Cronos Group (CRON), CV Sciences (CVSI), CURE Pharmaceutical (CURR), Delta 9 (VRNDF), Emerald Health (EMHTF), FluroTech (FLURF), General Cannabis (CANN), Greenlane (GNLN), Green Thumb Industries (GTBIF), GrowGeneration (GRWG), Harborside (HBORF), Hemp (HEMP), HEXO (HEXO), IM Cannabis (IMCC), India Globalization Capital (IGC), Indiva (NDVAF), Indus Holdings (INDXF), Inner Spirit (INSHF), Innovative Industrial Properties (IIPR), Khiron Life Sciences (KHRNF), Liberty Health Sciences (LHSIF), MediPharm Labs (MEDIF), MedMen Enterprises (MMNFF), MJardin Group (MJARF), Neptune Wellness (NEPT), Omnicanna (ENDO), Organigram (OGI), Planet 13 (PLNHF), Sproutly (SRUTF), Stem Holdings (STMH), Sunniva (SNNVF), Supreme Cannabis (SPRWF), Valens (VLNCF), TerrAscend (TRSSF), Tetra Bio-Pharma (TBPMF), Tilray (TLRY), Trulieve (TCNNF), Village Farms (VFF), Vireo Health (VREOF), WeedMD (WDDMF), Wildflower Brands (WLDFF), YSS Corp. (YSSCF), Zynerba (ZYNE) and 4Front Ventures (FFNTF).