Business is about execution. Create a plan and execute. Today FSD Pharma (C.HUGE) (OTCQB:FSDDF) pulled the trigger on a USD 48 million dollar, all share deal which will give it control of NASDAQ listed pharmacological research company, Therapix Biosciences (TRPX), which is at the cutting edge of medical cannabis research.
It is a big deal for the emerging Canadian cannabis industry and foundational for FSD Pharma.
When FSD Pharma first emerged in the Canadian cannabis world it was reasonable to ask what value it would be adding to an already overcrowded space. Yes, HUGE did have a large facility that it was planning to turn into a high value, hydroponic, cannabis production operation. It had a deal with Auxly to actually build out the facility on a royalty basis. It also had 52 million dollars in the bank and 1.3 billion shares outstanding. But what was the plan?
In late August 2018, in an interview at motherlodetv.net, FSD Pharma founding director Anthony Durkacz shared the insight HUGE is based on, “The pharmaceutical market is much bigger than the recreational marijuana market. A single medicine can have a value over 7 billion dollars but there are many different medicines for many different health ailments so compared to the recreational market it is huge,” said Durkacz. “There are over 200 compounds in cannabis. Literally billions of possible combinations. Creating entourage combinations is what creates medicine and we are at the forefront of that medicine research.”
On October 22, 2018 FSD Pharma took a huge step towards realizing the company’s vision. The company announced it has signed a letter of intent to acquire Therapix Biosciences in an all share transaction which values Therapix at 48 million USD.
FSD Pharma was already developing a new class of novel cannabinoid-based treatments for several central nervous system disorders, including
- chronic pain,
- irritable bowel syndrome and
- several other disease areas
Therapix is at work on, among others,
- the Therapix’ investigator-initiated Phase IIa study at Yale University Medical Center in the U.S. for Tourette syndrome Program,
- the preparations for commencing anticipated subsequent Phase IIb studies at the Hannover and Munich University Medical Schools in Germany for Tourette syndrome program,
- and collaboration with Assuta Medical Centers in Israel to develop therapeutic products in the field of sleeping disorders
As Ascher Shmulewitz, MD PhD, Chairman and interim CEO of Therapix, put it, “Our research at Therapix is focused on a multifaceted, clinical drug development program that is poised to potentially yield novel, breakthrough therapeutic discoveries to benefit mankind and medicine in ways we have never before seen… Our combined resources and highly competent scientific and business leadership teams, position the combined entity well to execute upon our shared vision to deliver proprietary cannabinoid platform technologies to both the professional and retail markets globally.
Our proprietary technologies and active, mature clinical research programs are focused on delivering safer, more effective cannabinoid-based products that address a broad spectrum of large-market diseases with high unmet clinical needs.”
From a market and business perspective, the Therapix acquisition vaults FSD Pharma to the front ranks of serious companies looking at the pharmaceutical opportunities of cannabis and cannabinoid technologies.
Since legalization day on October 17, 2018 many of Canada’s leading marijuana companies have seen their shares sell off. It is dawning on investors that the recreational market, while very attractive, is limited and that the extraordinary valuations placed on some of the primarily recreational marijuana companies had got well ahead of the actual market for recreational pot.
Now it is time for investors to begin to discern the difference between companies which are principally engaged in getting people high and those which looking to serve “large-market diseases with high unmet clinical needs.”
As FSD Pharma founding director Durkacz put it in the motherlodetv.net interview, “Looking ahead we see the greenhouse, outdoor recreational market as a race to zero. Pharma is going to be bigger than recreational, a lot bigger.”
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.