How good is marijuana at treating inflammation, a condition marked by swelling and redness that's also a cause of an entire class of diseases? Two high-profile Stanford researchers are about to find out. They are specifically exploring CBD, the compound in cannabis that has some medicinal properties and doesn't get you high.

On Wednesday, Jonathan Rothbard and Lawrence Steinman — both of whom have decades of experience at Stanford University Medical School and have previously founded drug companies — launched a new medical company aimed at developing CBD-based therapies for conditions like arthritis, inflammatory bowel disease, and multiple sclerosis. The common hallmark of all of those conditions is that they are inflammatory diseases, or diseases in which the body's normal protective response to external threats like infections spirals out of control.

Called Katexco Pharmaceuticals, Rothbard and Steinman's new private equity-backed company will be based in Toronto, Canada but maintain a US subsidiary in Silicon Valley, California's lucrative startup hub.

The new company is part of a bigger trend. A handful of pharmaceutical startups — some supported by larger drug companies like Johnson & Johnson — have their headquarters north of the border, where the legal framework for marijuana is clearer. In the US, despite a recent green light for CBD from two federal agencies, the legality of marijuana as a whole plant remains murky.

Katexco's goal is to develop the first CBD-based drugs to treat inflammatory conditions. While other drugs like Remicade and prednisone already treat these conditions, the researchers hope the new drug will produce fewer negative side effects. They should know: joining Rothbard and Steinman in their efforts is Sir Marc Feldmann, the Oxford professor who helped develop Remicade.

Rothbard and Steinman told Business Insider that they have exclusive technology licenses from Stanford to pursue the treatments, which also involve creating a non-addictive form of nicotine to complement the effects of the CBD. Both drugs would act on a receptor found in the brain and throughout the body called the A7 receptor.

"We're making compounds that hit that receptor and turn on the anti-inflammatory response," Steinman told Business Insider.

Why CBD could hold promise for inflammatory diseases like MS and inflammatory bowel disease 

The scientific research on CBD, the second main compound in marijuana after THC, remains largely in its infancy. Researchers have linked the ingredient with a range of potential therapeutic benefits, from reducing pain to suppressing anxiety.

The most well-researched of those benefits is related to how the drug works in people with two rare forms of epilepsy. In children with those forms of the disease, an ultra-high dose of CBD appears to powerfully curb seizures. These findings enabled the landmark approval this summer of America's first CBD-based drug, a syrup called Epidiolex.

But for CBD to have therapeutic benefits on diseases like MS and Crohn's (a form of inflammatory bowel disease characterized by abdominal cramping, weight loss, and diarrhea), it would likely need to reduce inflammation. That's something that marijuana as a whole appears to do.

In 2005 for example, the scientists behind a small, preliminary study of people with rheumatoid arthritis (one of the conditions Katexco said it aims to study), concluded that a THC- and CBD-containing drug called Sativex appeared to significantly reduce pain. And the authors of a small 2014 study of people with Crohn's disease found that 10 out of 11 subjects given cannabis saw a decrease in symptoms, compared with just four out of 10 subjects given a placebo.

The problem is that most of the existing research looks at the effects of the whole plant — THC, CBD, and all the rest. In order to identify how CBD affects these conditions, researchers need to study it in isolation like they did for Epidiolex. Which is precisely what Rothbard and Steinman aim to do.

'A whole new frontier ahead of us'

From left to right: Lawrence Steinman, Jonathan Rothbard, and Sir Marc Feldmann. 

Rothbard, Steinman, and Feldmann are all heavy-hitters in the pharma world. As a result, they're confident that their approach will lead to new treatments within the next two years, Rothbard and Steinman told Business Insider. "We have a whole new frontier ahead of us that could lead to pharmaceuticals for a variety of clinical needs that aren't currently being met," Steinman said.

He's chairman of Katexco, while Rothbard is the company's chief executive officer and chief scientific officer. Feldmann, the researcher who helped develop Remicade, is Katexco's third co-founder and chair of its scientific advisory board.

Rothbard currently works as a senior researcher at Stanford. In the 1990s, he founded Amylin Pharmaceuticals, a drug company that was acquired by drug giant Bristol-Myers Squibb in 2012. Steinman is an immunologist at Stanford who leads a lab dedicated to the study of autoimmune diseases. He already has four other life science companies under his belt and currently leads the scientific advisory board for one of them, a private drug development company called Transparency Life Sciences.

The A7 receptor

During the course of Rothbard's research at Stanford, he did lots of work on a special receptor known as the A7 receptor. Initially identified by scientists only in the brain, the receptor was once a primary target for a handful of pharmaceutical companies hoping to find new treatments for Alzheimer's and schizophrenia. Their efforts ultimately failed.

But Rothbard found the receptor outside the brain as well. Most importantly, he found it all along the gut, which is where inflammatory bowel disease appears to arise. Currently, the symptoms of the disease can only be managed; there is no cure.

He and Steinman believe that by narrowly targeting the A7 receptor in the gut with both CBD and nicotine (which they claim have synergistic effects), they'll reduce inflammation and avoid the issues of addiction which arise when nicotine enters the brain.

The team is planning to run clinical trials to test formulations of the drug as soon as next year. The first condition they plan to pursue is constipation, which has been on the rise thanks to high opioid prescribing rates. (Constipation is a side effect of opioids, and is also linked to inflammation.) They expect the results of those trials in 2020. Depending on the outcomes, the team will decide what condition to pursue next. "You're not necessarily going to change the world the first time you try," Rothbard said.