Time to look hard and close at debt free, cashed up Oxford Cannabinoid Technologies ?
“…Prospective investors should look out for the next major stage in the company’s journey, the completion of Phase I trials in Q3…”
Oxford Cannabinoid Technologies (LON:OCTP) has continued to make robust progress towards securing regulatory approval for its flagship cannabinoid-based pharmaceutical candidate, last month getting the green-light for Phase I clinical trials.
TMS has followed OCTP’s story closely since the company listed on the LSE Main Market in May 2021, but to recap: OCTP is focused on cannabinoid-based pharmaceuticals rather than commercial medical cannabis products, aiming to develop prescription medicines cleared by rigorous clinical trials set by regulators. The reward for doing so would be market exclusivity for effective treatments for those suffering chronic pain, the path followed by another UK-based cannabis biochemistry company, GW Pharmaceuticals, which was sold to US drugmaker Jazz Pharmaceuticals in a multi-billion deal. GW has earned more than $500m a year through sales of Epidiolex, a cannabis-derived treatment for childhood epilepsy, achieving its spectacular breakthrough only after securing US regulatory approval, the first cannabis-derived medicine to do so.
OCTP plans medicines that would relieve inflammatory and autoimmune disorders like rheumatoid arthritis, systemic sclerosis, fibromyalgia and osteoarthritis, and debilitating neurological and neurodegenerative disorders including multiple sclerosis, Parkinson’s, Alzheimer’s, and epilepsy. The company is also researching the potential of cannabinoids to alleviate cancer symptoms, and even treat their underlying causes.
There are an estimated 1.5 billion chronic pain sufferers worldwide – more people suffer from chronic pain than cancer, heart disease and diabetes combined – with most current treatments being opioids and anti-inflammatory drugs. OCTP is researching medicines that would be more precise, acting on the body’s endocannabinoid system (ECS), which helps regulate physiological functions including pain, mood, memory, sleep, appetite, and immunity to cancer and infective agents. Cannabinoids have shown exceptional capacity to map on to ECS receptors in the brain and the peripheral nervous system. OCTP is working to develop cannabis-based compounds that target those receptors more efficiently than is possible through the ingestion of cannabis flower and extracts.
Such treatments can only be verified through a demanding regulatory process, but the commercial incentive is clear: unlike natural cannabis treatments in which the plant is simply ingested, licensed drugmakers of precision-tested, medically-proven cannabinoid derivatives qualify for a period of market exclusivity of up to 20 years in recognition of their investment. An OCTP video published earlier this month, featuring new CEO Clarissa Sowemimo-Coker, provides a useful introduction to the company’s technical and commercial goals.
Phase I clinical trials underway
On joining the LSE OCTP raised £16m, most of which has been dedicated to pre-clinical trials of its flagship drug candidate, OCT461201, which targets neuropathic and visceral pain caused by nerve damage or disease, and which the company’s current forecasts suggest could be commercialised within the next five years. Analysis of pre-clinical data has indicated that OCT461201 can reduce pain within models of chemotherapy-induced peripheral neuropathy, the market for such treatments forecast to reach $2.37bn in the next five years, and possibly more than $7bn once combined with other small fibre neuropathies.
Rather than building an extensive in-house team OCTP has developed a partnership model, paying for research on a ‘fee for service’ basis that saves costs and allows the company to retain IP rights. The company has service agreements with drug discovery and development company Evotec and clinical research organisation Simbec Research for the development of OCT461201.
Following the successful completion of extensive pre-clinical work on OCT461201, OCTP submitted a combined clinical trials application for the programme to the UK Medicines & Healthcare products Regulatory Agency (MHRA) and the Wales Research Ethics Committee in January, securing approval in May. In this Phase I first-in-human clinical trial healthy volunteers submit to a single ascending dose protocol intended to demonstrate the drug’s safety and tolerability, and to provide pivotal information on its pharmacokinetic profile: OCTP expects the trial to be completed ‘during Q3 2023’. Ms Sowemimo-Coker said: ‘We are absolutely thrilled to have passed this very significant milestone. Getting approval for our first Phase I trial so soon after our listing is a huge achievement and is a fitting testament to the hard work and dedication of both OCTP’s talented team and our external partners’.
OCTP is also progressing a second lead candidate, OCT130401, a drug-device combination that delivers phytocannabinoids to patients suffering from trigeminal neuralgia (TN) with a pressurised metered-dose inhaler. TN causes debilitating and excruciating pain, can take hold with unexpected speed, and is difficult to treat with conventional systemic medicines. Pre-clinical work on OCT130401 has been completed, with the candidate now ready for Phase I trials.
OCTP continues to research other compounds: on going public the company had a library of 93 proprietary cannabinoid derivatives, extended in September 2021 through a licence agreement with Canopy Growth Corporation for exclusive use of their pharmaceutical cannabinoid derivative library. With the library now standing at just under 500 derivatives, OCTP has started multiple screening programmes for drug-like compounds able to target multiple therapeutic areas, including pain, neurology, immune-inflammation and oncology.
OCTP’s interim results for the six months to 31 October 2022 reported robust finances: the company is debt-free with cash reserves of around £5m (30 April 2022: £9.2m), which are expected ‘to be fully utilised during Q1 2024’. Lead drug candidate OCT461201 accounted for about half of the £3m spent on research.
OCTP had the misfortune to list just as the market turned against biotech and other growth stocks in 2021, gradually subsiding from its IPO price of 5p to less than 1p. Its value rallied earlier this year, hitting 1.5p in March, before falling back to 1p at the time of writing, taking the company’s market cap to £10m. OCTP’s commitment to securing regulatory approval for its cannabis-based prescription treatments means that patience comes with the territory with this stock. To use the company’s words, in ‘a cannabis market where unlicensed medicines remain abundant and unproven … it is only the development of cannabinoid-based medicines through existing channels of licensed drug development that allows the medical community to prescribe drugs with confidence and in volume which gives us patent protection and market exclusivity.’
But as the example of GW Pharmaceuticals demonstrates, the commercial reward can be very great for investors prepared to stay the course. The ups and downs of the market notwithstanding, OCTP has continued to move smoothly past landmarks along its roadmap, achieving regulatory approval as forecast for its flagship candidate. Prospective investors should look out for the next major stage in the company’s journey, the completion of Phase I trials in Q3. If OCTP can maintain its current steady progress then the company’s price is unlikely to get much cheaper than it is now.