Scientus Pharma considering go-public transaction on heels of financing

Closely-held Scientus Pharma hopes to go public in mid-year, possibly through a reverse takeover of a publicly traded shell company, following a successful $15.8-million private equity financing, which closed last week.

“We hope to do a financing in the range of $40-million to $60-million, subject to favorable market conditions, concurrent with a potential reverse takeover,” chairman and CEO, Har Grover, says in an interview with BioTuesdays.

Proceeds from the latest stock sale will be used to prepare for commercializing the company’s line of pharmaceutical-grade cannabis products and for working capital.

“As a four-year-old private company, we have now raised $45-million and built a shareholder base of 17 institutions, which is pretty remarkable, and some 250 retail investors,” he adds.

From a regulatory point of view, Health Canada currently permits the sale of cannabis oils and capsules, and Mr. Grover predicts Scientus can create value with its initial products in this sector.

He says Scientus has 12 products ready for launch over the next 18 months, of which three would be ready in the next six months.

The furthest along is the company’s three soft gel caps for neuropathic pain, epilepsy and anti-seizures, and post-traumatic stress disorder (PTSD), which could be launched as early as April. “These currently fit within the product definition of what is approved under Health Canada’s Access to Cannabis for Medical Purposes Regulations,” he adds.

The company also is developing a delayed release gelcap, which Mr. Grover says is a minor amendment to regulations already in place and could be launched at the end of 2018, along with a transdermal patch; a sublingual capsule, which could be launched in 2019; a buccal spray, also with a 2019 launch target; and an extended release capsule.

“All of these products depend on Health Canada broadening its cannabis product definition,” he adds.

Cannabidiol (CBD) and tetrahydrocannabinol (THC) are the two most prominent cannabinoids found in cannabis. “THC is what gives you the high but when combined with CBD, the pycho-active component of cannabis is dampened,” he points out.

In non-clinical terms, he says Scientus’ pain formula is a balanced THC-to-CBD cannabinoid profile, epilepsy requires a higher CBD and lower THC cannabinoid profile, and PTSD requires a lower CBD and higher THC cannabinoid profile.

Mr. Grover explains that unlike traditional supercritical fluid extraction to treat cannabis with CO2, Scientus uses a continuous flow process with microwave energy to do its extraction in a single step.

“Our continuous flow process results in an active pharmaceutical ingredient (API) that is 100% decarboxylated so that it is fully active and standardized,” he contends. “That compares with supercritical fluid extraction, which results in a decarboxylated API of 60% to 95%.”

Scientus’ platform technology also can achieve 70% to 90% savings in energy costs and 40% savings in labor costs, compared with standard extraction methods. With its continuous flow process, he notes that the company can run up to six manufacturing cycles per day, compared with one-to-three for traditional extraction.

By the end of 2018, he is anticipating that the company will have leading metrics on extraction of cannabis.

Scientus has filed patent applications for methods of using microwaves to achieve 100% decarboxylation to create a standardized (API); apparatus design; and composition of matter.

The company expects to complete construction of its 45,000-square-foot pharma-grade plant by the end of March. Mr. Grover says the plant has a strategic advantage of housing both cultivation of cannabis and manufacturing of finished products, as well as lab space for R&D to ensure a long term and consistent supply of cannabis.

The plant also has a capacity to produce 200,000 gel capsules an hour, which Mr. Grover figures represents a potential daily revenue of $1-million based on an average retailing selling price of $1 per capsule.

“Ideally, our products are best suited for distribution by pharmacies and we are also pursuing branded opportunities with global pharma companies,” Mr. Grover points out. Several national pharmacy chains in Canada are awaiting Health Canada approval to dispense medical marijuana. Ontario plans to distribute recreational marijuana through its beer and liquor retail outlets.

Pointing to new additions to its board, including Mike Cloutier, former CEO of AstraZeneca Canada; Greg Gubitz, a former SVP and general counsel of Biovail; Bruce Cousins, a former CFO of Arbutus Biopharma and Aspreva Pharmaceuticals; and Dr. Linda Maxwell, a prominent physician, entrepreneur and innovator, Mr. Grover says Scientus is building a “truly blue-chip corporate board.”

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This article does not constitute an offer to sell or the solicitation of an offer to buy any securities of HydRx Farms Ltd. (d/b/a Scientus Pharma Inc.) and shall not constitute an offer, solicitation or sale of any security in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

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