With President Elect Trump expected to formally take the seat of POTUS in the coming weeks, biotechnology has begun to see and increase in attention. Recent progress by current POTUS Obama has also sparked attention as the approval of a new Bill could give a large infusion of cash to companies in the space. Furthermore, the expansion of cannabis has now crossed into the biomedical sector, which could create compounded excitement in the coming year; a space investors should pay attention to.
The Senate approved complex health care legislation earlier this month. The bill, a $6.3 billion legislation known as the 21st Century Cures Act, is designed to give funding to pay for things like cancer research, the epidemic of opioid abuse, mental health treatment initiatives, and what may be most important is that it helps the US FDA speed up drug approvals to push for better technology in medicine overall. But what’s funny is that this move could spur activity in a more unassuming segment of this industry overall.
As the current POTUS steps down after this final legislation, it’s clear that the new Trump presidency could have a lot more questions than answers right now for the budding world of cannabis. He has said before to leave it up to the states to decide but those who have filled his cabinet are a bit more conservative on the topic.
Despite this case, there has been much more attention surrounding the matter as much more of the popular opinion has grown in favor of legalization. In response many new states have come online for recreational and/or medicinal marijuana legalization including much of the North East, traditionally known for having a bit more of a conservative stance outside of major cities like New York.
Under the guise of the populous, there has been a large thrust of investment into a more “unassuming” segment of the cannabis industry and could hold the key for investors to unlock the true profit potential that is behind the industry. That so-called key may be found in the biotech sector. Even the President-elect has shown soft support for marijuana’s health benefits, "Medical marijuana...? I'm in favor of it 100%," he told Bill O'Reilly in a recent interview. "I know people that have serious problems and they did [use cannabis-based therapies] ... it really does help them."
So, with this has come much more attention on the medical impact cannabis could have. Companies like GW Pharmaceutical (GWPH) have helped to pave the way for more pharma and biotech driven companies to have less fear of entering the medical realm. The company reported 4th quarter earnings results this month and posted a net loss of $0.89 per share on a little over $2 million in revenue.
This was down from the same period last year where the company posted a loss of $0.85 per share on $8.46 million in revenue. The street expected this number to be almost $1.60 per share net loss on over $3.5million in revenue thus beating street estimates for the quarter.
The company has completed 3 positive Phase 3 trials for its lead cannabinoid pipeline candidate, Epidiolex in patients with several different rare treatment resistance forms of epilepsy in children. And this is just one example of the new drive for biotech to take hold of and unlike the potential of the cannabis plant beyond the simple ideology of “let’s get stoned.”
Vitality Biopharma Inc. (VBIO) has also targeted this industry and has gone further to enhance methods of use of CBD’s. Vitality Bio has created a new class of cannabinoid prodrugs, known as cannabosides. These can overcome the limitations of raw Cannabis sativa or synthetic cannabinoids, in comparison. Cannabosides are considered “prodrugs." This means that after being taken and ingested, they are converted into pharmacologically active drugs in the body.
Vitality’s cannaboside prodrugs have several key advantages over raw marijuanaor synthetic cannabinoids. Targeted delivery is one of the majors, it is also easier to be administered orally and there are fewer side effects. To be able to provide an oral cannabinoid pharmaceutical that doctors can prescribe could be a game-changer for investors and for patients alike. But it hasn’t been just the public taking notice of cannabis applications within the biotech space. Many of the industry’s experienced leaders have also become involved with Vitality.
For instance, CEO Robert Brooke is a biomedical engineer but has also experienced great successes in the public markets through founding the company that eventually became Lion Biotechnologies (LBIO). Avtar Dhillon, MD, the company’s chairman and co-founder has served on and is serving on the boards of some of the most recognizable names within the arena. These include Inovio Pharmaceuticals (INO), Oncosec Medical (ONCS), and even Arch Therapeutics (ARTH).
Most recently, Vitality announced that it will be advancing its cannabosides pharmaceuticals for treatment of narcotic bowel syndrome, a severe form of opiate-induced abdominal pain. Vitality’s VB100 directly targets inflammation & pain. The company is currently doing formulation work and finalizing preclinical toxicology & safety studies. Preclinical efficacy studies are also ongoing with a goal to file the U.S. investigational new drug application during the second half of 2017 with a Phase 2 trial planned for 2018. This is where the new 21st Century Cures Act could come into play especially as states continue to pursue further legalization.
The unique part of the use of cannabis in pharmaceutically focused applications is when cannabis is consumed, cannabinoids bind to receptor sites throughout our brain (receptors called CB-1) and body (CB-2). Different cannabinoids have different effects depending on which receptors they bind to. For example, THC binds to receptors in the brain whereas CBN (cannabinol) has a strong affinity for CB-2 receptors located throughout the body. By aiming the right cannabinoid at the right receptors, different types of relief are achievable.
However, despite the positive impact cannabinoids can have, there are still addressable problems. In fact, sales are being suppressed by several things such as poor oral bioavailability, irregular metabolism of drugs (they aren’t being metabolized by the right part of the body), inconvenient administration, short active response, poor tolerability, and in some cases, can have psychoactive side effects. Though many companies targeting the market have worked to tackle these risk factors, some have fallen short. Zynerba Pharmaceuticals (ZYNE), for example, has not been one of them and the company has found a way to bypass the metabolic process all together with some of its therapies.
The company’s ZYN002 CBD gel that is a transdermal product meaning that it is absorbed through the skin. Like GW Pharma, the company has taken the application and targeted its therapy to those suffering from things like epilepsy and osteoarthritis. Currently it is being evaluated in the ongoing STAR1 (Synthetic Transdermal Cannabidiol for the Treatment of Epilepsy) Phase 2 multi-center, double-blind, placebo-controlled, multi-dose clinical trials in patients with refractory focal seizures (or simply put, seizures that are not controllable by any known medications). Initial results from its Phase 1 trial showed encouraging outcomes. The study involved 32 adults who were given ZYN002 and demonstrated that the dosing levels were well tolerated.
Further to this, increased doses in a multi-dose study also revealed that there were no impairments produced in areas of cognitive function. There were also no measurable adverse changes in mood or decline in psychological measures. Of course, since making this announcement, the market has reacted favorably to these results and overall, most of the third and fourth quarters have shown a general bull market for the stock.
The long and short of it is that there is much more to the cannabis crazy than legalization for medical or recreational dispensaries. Much of the true potential for the industry can be found in the pharmaceutical space. The large infusion of government funding that could be helping to spur fast track approvals should be paid attention to as many of these CBD applications have been designed to meet the needs of patients that have no stand out therapy to address their diseases. And with a new president elect in office, many analysts are already anticipating a resurgence in biotech overall, during the coming years.
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