A plants beauty lies in its leaves, but its strength lies in its roots.
“…I am excited to be buying more OCT personally. Given the recent Phase I results, the Company appears to me to be significantly undervalued. It is for this reason that I, along with other shareholders and employees of Kingsley, have chosen to increase our direct holding in the business…”
Oxford Cannabinoid Technologies (LON:OCTP), developing prescription cannabinoid medicines, has continued to transition into a clinical-stage business this year, passing Phase I clinical trials for its flagship candidate treatment targeting neuropathic and visceral pain caused by nerve damage or disease, and submitting an application to trial a second lead candidate. The company has also broadened its platform, moving into oncology with the development of a potential ‘first in class’ immunotherapy agent for the treatment of solid tumours.
For readers new to OCTP, which listed on the LSE Main Market in May 2021, the company is focused on cannabinoid-based pharmaceuticals (rather than commercial medical cannabis products), prescription medicines that meet rigorous regulatory requirements. The reward would be market exclusivity for a suite of new treatments for chronic pain sufferers, a 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 half a billion dollars a year through sales of Epidiolex, a cannabis-derived treatment for childhood epilepsy, after taking the long road to US regulatory approval.
OCTP is researching medicines to relieve inflammatory and autoimmune disorders such as rheumatoid arthritis, systemic sclerosis, fibromyalgia and osteoarthritis, and debilitating neurological and neurodegenerative disorders including multiple sclerosis, Parkinson’s, Alzheimer’s, and epilepsy. Current treatments for the 1.5 billion people across the world suffering from chronic pain tend to be opioids and anti-inflammatory drugs: OCTP is developing treatments that would act more precisely, focusing on the body’s endocannabinoid system (ECS) that helps regulate physiological functions such as pain, mood, memory, sleep, appetite, and immunity.
Cannabinoids have shown exceptional capacity to map onto ECS receptors in the brain and the peripheral nervous system, receptors that OCTP says its cannabis-based compounds would target much more efficiently than the blunt process of ingestion that cannabis flower and extract products offer. The company’s proposed treatments will have to pass through a tough regulatory process, but the commercial incentive is clear: medically-proven cannabinoid derivatives qualifying for a period of market exclusivity of up to 20 years.
OCT461201 passes Phase I trials
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 five years. OCTP’s research indicates that OCT461201 can reduce pain within models of chemotherapy-induced peripheral neuropathy and irritable bowel syndrome, markets that analysts estimate could be worth some $2.37bn in the next five years, and possibly more than $7bn once combined with other small fibre neuropathies.
After completing extensive pre-clinical work on OCT461201, OCTP secured regulatory approval this spring for Phase I clinical trials in which healthy volunteers submitted to dosage protocols designed to demonstrate the drug’s safety and tolerability, and to gather pivotal information on its pharmacokinetic profile. Earlier this month OCTP was able to announce that ‘no safety or tolerability concerns were exhibited with any dose tested’, allowing the company to proceed to the next stage of clinical development. CEO Clarissa Sowemimo-Coker said: ‘This is a significant milestone in OCTP’s journey as we cement our transition into a clinical-stage business … We look forward to moving OCT461201 into the next phases of its development’.
Further research
Although OCT461201 is currently the company’s headline asset, OCTP is active on several other fronts, notably the progression of a second lead candidate, OCT130401, a drug-device combination that delivers phytocannabinoids (pCBs) 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. OCTP’s proposed treatment sends pCBs to the lungs via inhalation using a simple pressurised metered dose inhaler (pMDI) similar to an asthma inhaler.
The company says this alternative route of administration bypasses issues associated with oral delivery of cannabinoids such as onset time, poor bioavailability and high first-pass metabolism. Fast onset of the medicine is particularly important for indications where the pain is sudden and severe, as with TN. Low-dosage administration is designed to deliver a therapeutic effect while controlling side effects and managing the risk of abuse. The programme is now ready to enter Phase I clinical trials, subject to a fundraise.
Since going public OCTP has rapidly expanded the library of proprietary cannabinoid derivatives the company draws on for research. It initially held a library of 93 proprietary cannabinoid derivatives, soon supplemented through a license agreement with Canopy Growth Corporation opening access for their entire pharmaceutical cannabinoid derivative library, including 335 derivatives and intellectual property rights including 14 patent families and associated research data. The company continues to expand its library, which now includes some 500 proprietary compounds, through ongoing research.
OCTP moves into oncology
OCTP also researches the potential of cannabinoids to alleviate cancer symptoms, and even treat their underlying causes, work which began to bear fruit this summer when the company confirmed it is expanding its research and development strategy into oncology, having identified a potential ‘first in class’ immunotherapy agent for the treatment of solid tumours. Analysis of the initial data showed ‘excellent drug-like potential in terms of in vitro potency and selectivity to target, as well as in vivo availability in blood’, implying ‘substantive potential for the development of a cannabinoid-based medicine that could be taken at home, as a tablet’.
Existing cancer immunotherapies work by helping the human immune system to attack and destroy cancers, and by preventing or considerably delaying cancer reappearance. OCTP’s internal analysis shows that its asset is based on a mechanism which removes the ‘brake’ which the cancer sets on the patient’s immunity, triggering the patient’s own immune cells to attack the cancer again. Announcing the breakthrough, the company said that while ‘current therapies based on antibodies or cell therapies are expensive and hard to access (usually requiring travel to cancer centres), OCTP’s asset – like the other cannabinoids developed by the Company – has the potential to provide an efficacious drug which can be taken at home as a tablet, potentially making it cheaper for both public and private healthcare providers and more convenient for patients.’
The programme is targeting a share of a market of therapies against solid tumours projected to be worth $532bn by 2032. In 2021, the immunomodulators segment accounted for more than 20pc of an immunotherapy drugs global market worth $110bn which is expected to expand at a compound annual growth rate of 6.92pc from 2022 to 2030. OCTP will now focus on further in vitro and in vivo studies to highlight the full potential of its lead oncology candidate, undertaking a safety-pharmacology assessment before forwarding it for final candidate selection, ‘likely during 2024’.
The company’s cancer research will be carried out using its existing cash resources. OCTP’s final results for the year ended 30 April 2023 reported reserves of approximately £2.3m at year-end (2022: £9.2m), which it expects to last until next April: £7m was invested in the company’s 2022-23 operations. OCTP saved some £130,000 through the closure of its London office, and has developed a partnership model, paying for research on a ‘fee for service’ basis that saves costs while allowing the company to retain IP rights. It has service agreements with drug discovery and development company Evotec and clinical research organisation Simbec Research for the development of OCT461201.
Outlook
OCTP’s commitment to securing regulatory approval for its cannabis-based prescription treatments means this stock might best be considered as a longer term hold. As the company puts it, 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.’ And as the example of GW Pharmaceuticals indicates, the commercial reward may be very great for investors prepared to stay the course through the regulatory and financial challenges the company will have to negotiate.
OCTP was unfortunate to go public just as the market turned against biotech and other growth stocks in 2021, its IPO price of 5p subsiding to less than 1p at the time of writing, taking its market cap to £7.7m. However, although its price has been volatile this year, occasionally spiking at 1.5p, OCTP is up 40pc this year (albeit from a low base), and has begun to turn upwards in the past week or so.
Indeed, in another sign of confidence to investors, last week the Company announced that Kingsley Capital Partners LLP has sold 39,464,286 shares in the Company to Shareholders of Kingsley and has transferred 15,400,000 shares in the Company to employees of Kingsley.
This announcement follows a recent reorganisation of Kingsley’s relationship with its co-investors and its desire to bring on board and incentivise new members of its management team.
Clarissa Sowemimo-Coker, Chief Executive Officer of OCT, said: “This announcement is an important one. It enables a number of investors who have long been part of the OCT story to be able to express their support for the business as individual shareholders. I welcome the clarity this brings. It is a sign of growing confidence in OCT that investors want personally to become a part of our journey following last week’s Phase I announcement. I am delighted the business is able to benefit from their belief in our future mission and this clear endorsement of the progress we are making. Kingsley continues to be the largest shareholder in OCT.”
Neil Mahapatra, Non-Executive Director of OCT and Managing Partner of Kingsley Capital Partners LLP, said:
“I am excited to be buying more into OCT personally. Given the recent Phase I results, the Company appears to me to be significantly undervalued. It is for this reason that I, along with other shareholders and employees of Kingsley, have chosen to increase our direct holding in the business.”
Through it all OCTP has nonetheless stuck to its course, passing its planned milestones, notably the completion of Phase I trials for its flagship candidate, without recourse to the markets for further funding. The company has other interests, an application for Phase I trials for a second product, and, of course, the possibility of new cancer treatments. The company’s growing library of derivatives continues to open fresh opportunities for identifying additional research candidates.
Though a relative newcomer to the markets OCTP has exhibited competence and innovation. When the market turns, as it always, eventually, does, the company would seem well placed to start moving back towards its IPO price. Prospective investors should look to the progress of its OCT461201 and OCT130401 candidates for nearer term value triggers.
