In the first of a two-part interview with Cannabiz, Cann Group chief operating officer Shane Duncan reveals how the company’s new acquisition could unlock unique opportunities.
Victims of cybercrime, a revenue downgrade, a fluctuating share price and a trading halt triggered by an administrative blunder.
It’s been a far from serene February for Cann Group.
The month started with the cyber theft, which saw $3.6m vanish into the underworld of online crime.
An investigation has yet to be concluded, but it seems unlikely Cann will recover the funds, which had been destined for a Dutch-based contractor.
The revenue downgrade, meanwhile, which cut Cann’s $15m target by at least one third, was blamed on health regulators’ preoccupation with Covid, their other tasks relegated to the back of an ever-lengthening queue.
Understandable as that may be, missing targets, regardless of the reason, can make investors edgy.
As for Monday’s enforced trading halt, an “inadvertent administrative oversight” was blamed for a failure to lodge correct paperwork relating to a shares issue. A minor infringement in the grand scheme of things, but the ASX takes a dim view of such procedural errors.
Add the Covid-related difficulties of flying in overseas specialists to work on its Mildura facility, and it’s been an uncomfortably choppy period for Cann Group.
Yet amid this series of irritating setbacks, it was another announcement this week that turned heads.
And it has the potential to change the game for Cann.
If the company felt the need for positive news, inking a deal to buy Satipharm, the medicinal and wellbeing arm of Canada-based Harvest One Cannabis, appears to have delivered it.
The acquisition, in a CAD$4m all-scrip deal, will give Cann Group access to a cannabinoid delivery platform that it believes will unlock significant short and long-term opportunities.
Among other things, it just might accelerate the appearance of an S3 CBD product on the shelves of Australian pharmacies.
Established by Harvest One in 2015, Satipharm holds the licence to exclusively develop and distribute Gelpell capsules using micro-encapsulation technology. Together with Switzerland-based manufacturer, Gelpell AG, it also has a 20-year hold on the patent.
Satipharm currently markets its Gelpell over-the-counter CBD products in the UK and Ireland, with additional distribution agreements in “several” Eastern European markets.
It has forecast revenue in the six months to June of $1m, with a “material” sales increase predicted to follow.
Additionally – and importantly – approximately 300-400 Australian patients are understood to be taking the Gelpell 50mg capsules through the TGA’s Special Access Scheme, with pain, sleep, anxiety and IBS among the indications the medicine is targeting.
According to chief operating office Shane Duncan, the Satipharm acquisition provides Cann Group with two distinct opportunities; a potentially early route into the S3, over-the-counter low-dose CBD market in Australia and, perhaps more pertinently, the ability to produce capsules for a range of medicinal cannabis products.
“The low-dose CBD market, both in Australia for S3 and the existing European business, is probably the short-term opportunity,” Duncan told Cannabiz. “But what we’re really interested in is how you take the Gelpell microsphere technology and add the THC formulations to it.”
To explore those possibilities, Cann will apply for a licence to manufacture THC and THC:CBD balanced products – using Gelpell equipment – at its Mildura plant when it opens towards the end of 2021.
“The Swiss manufacturer can’t handle THC, they only take CBD with less than 1% THC so we’re bringing a manufacturing line into our Mildura facility,” Duncan explained.
“We’ll manufacture for the over-the-counter business in Europe, out of Switzerland – which just makes sense – and we’ll manufacture the prescription, pharma-grade products here in Australia.
“The bit that got us really excited is the ability to do pharma-like manufacturing of THC-containing products, so really getting away from unsophisticated formulations like soft gel capsules, tinctures or dried flower.
“The beauty of this technology is you can microsphere up different actives and combine them into a capsule and then you stop them interacting with and degrading each other. We’re looking at precision medicine and that has got us really excited.”
The potential exists to create more specific formulations, he said, with the 20-year patent “giving us an opportunity to take a patented formulation through to registration”.
“As we’ve seen from Jazz buying GW, the value in building target drugs that could be registered is incredibly high. That’s the end game that we’re really all chasing,” Duncan said.
“It’s the ability to get a registered medicine, and this is very much a platform technology which, once we’ve landed on a formulation and a therapy, we could take forward.
“We see this as a double-edged opportunity. The low-dose CBD is an existing business that we can drive now. And over the horizon, in 12 months’ time, we’ll have these other THC-containing formulations and potentially other cannabinoids that we see as being differentiated targeted cannabis products.”
As far as registering an S3 product in Australia is concerned, the portents also appear encouraging.
Satipharm contends it has data that supports claims that the delivery mechanism exhibits improved stability and bioavailability of cannabinoids compared to other formulations.
There is also data from Australian patients who have been taking the twice-daily 50mg Gelpell capsule.
“The technology and the product comes with an existing data set that we’ll need to supplement with further efficacy studies to complete the data required for a dossier,” Duncan said. “Our aim is to have something ready for submission by the end of the year.”
An indication for any S3 product – a requirement for registration purposes – has yet to be determined, he added.
Speaking to Cannabiz prior to the announcement of the Satipharm deal, Duncan said the company viewed tinctures and flower as “short-term solutions” for medicine.
Future success lies in presenting medicinal cannabis in a way that is familiar to patients, and the wider medical profession, he said.
“We’re really keen on a differentiated product portfolio,” Duncan said. “There are other ways of doing things that are much better for doctors and will give them, and patients, more confidence about the medicine that’s being prescribed.
“Tinctures and smoking are not similar to other medications people are taking. Certainly in my view, if you want broad-based support from clinicians and patients, medicine needs to look and feel like other medications they are taking.
“Whether it’s tablets, capsules or metered dose inhalers, there are presentation forms that will do a better job of delivering medicines in a more predictable way.”
Satipharm and Gelpell could do just that.