FSD Pharma: New drugs from Cannabis

The Financial Post has an excellent article on cannabis IP. It’s long, but here’s a quote,

“I don’t think the industry has fully embraced the role that intellectual property of the cannabis plant will play in the next phase of growth,” said John Kagia, chief knowledge officer at New Frontier Data, a cannabis-focused data and analytics firm based in Washington, D.C. “For so long, there had been so little research on the plant. Now we’re seeing many products that are too similar across the market. Companies that secure unique IP first will have a competitive advantage.”

In a recent conversation with FSD Pharma (C.HUGE) Founding Director Anthony Durkacz, the intellectual property potential of cannabis was front and centre.

“We’re staying with the pharma/medicinal model,” said Durkacz. “Our takeover of NASDAQ listed Therapix Biosciences is one step. We expect a lot more action.”

“Where’s the action?” asked Durkacz. “We think cannabis biotech.”

Durkacz does not dismiss the recreational marijuana market but notes, “Recreational was just not ready on October 17,” said Durkacz. “The government needs more product. Quebec stores are operating three days a week because they can’t get supply. Alberta is sold out.”

HUGE would like to help. But it, like many other Canadian cannabis companies, is waiting for the “sales licence” it needs to legally sell its product. [As I write this, FSD Pharma has announced that it has received its sales licence.]

“We have a dedicated focus on indoor growing,” said Durkacz. “In the recreational market, the results to date show that the highest prices per gram are being received for top quality, indoor grown, product. It’s what sells the fastest and there is a very limited supply.”

That limited supply is something FSD Pharma wants to change. “Our build partner, Auxly, is full steam ahead building out our Coburg facility. Right now we have 25,000 square feet built and licenced. We have four grow rooms in production and with our recent expansion licence will add another 4 grow rooms by the end of the year.”

The business challenge is that while legal recreational pot is scarce a month out from legalization, that situation is not likely to last long. While the Canadian grow industry was not ready for October 17, there is little doubt that supply will meet demand in Q1 of 2019. Then what? [Durkacz says, “It will go longer than Q1, it will be sometime end of 2019.”]

“The market caps of the straight producers,” said Durkacz, “will be hard to maintain.”

Which is a very polite way of saying that straight producers will face very stiff, very smart, competition in a market which will go from scarcity to glut in a matter of months. Putting all a company’s eggs in the recreational marijuana basket is a potentially disastrous move if, as predicted, and demonstrated in the US, the wholesale price of marijuana, even indoor grown marijuana, is driven down by competition and oversupply.

“We’re committed to pharma,” said Durkacz. “The real action is going to be on the medicinal side. The discovery of treatment and cures.”

Durkacz is referring to the huge potential of cannabis as a source of active agents which actually cure disease and treat symptoms. Because cannabis has been largely illegal until very recently, very little research has been done on exactly what cannabis and its derivatives can do to alleviate disease and chronic conditions. The research has been, effectively, illegal.

While there has been a great deal of anecdotal evidence about how cannabis, and molecules derived from cannabis, have helped people, the actual science is very minimal. In fact, the whole “medicinal marijuana” meme has been a stalking horse for legalization, not for medicine. Simple, but basic issues such as dose, strain, and actual molecules have not been addressed with any sort of scientific rigour. FSD Pharma wants to change that. And Durkacz sees the resignation of US Attorney General Jeff Sessions and Trump’s wanting to win the next Presidential election as keys to the legalization of medical marijuana at a US Federal level.

“Right now, 34 of 50 US states are legal for medicinal marijuana,” said Durkacz. “There is a polling majority in favour of legalization. Trump needs an issue and legalization might be that issue.”

If there is even a hint at federal legalization of cannabis for medicinal purposes, marijuana stocks which trade in the US will soar. “If cannabis is legalized for medicinal purposes at a federal level,” said Durkacz, “it will be like the Internet in the nineties.”

“We want FSD Pharma to be positioned for that,” said Durkacz. “We want to own valid IP, legitimate pharma. We want to use industry experts to build an exciting portfolio of molecules.”

“There are very few experts on the science side,” said Durkacz. “Because, up until now, even the research has been illegal. We’re uniquely positioned.”

Today’s announcement of the appointment of David Urban, a well-respected Washington Republican lobbyist and Trump campaign mensch, to the HUGE Board of Directors, is a big step forward for FSD Pharma as it approaches the US cannabis market.

In the release Durkacz is quoted as saying, “Our vision for FSD Pharma to become a global leader in medicinal cannabis is beginning to solidify. David’s legislative acumen will be of vital importance as we embark on a quest to affect the conversation on this very important topic in the US capitol.”

In this same release HUGE Co-Founder and President Zeeshan Saeed said, “David’s joining the Board as an independent Director is an important milestone for the Company and we welcome his expertise in advancing education and awareness about the potential contribution that cannabinoids can have in addressing the opioid epidemic.”

Urban has the sort of political ability which any company seeking to enter the US cannabis market absolutely needs to guide it through the regulatory swamp lands of Washington, DC.

HUGE is looking to the US market as both a growth area for cannabis pharma but also as the very best place to list a cannabis driven stock.

“Right now, we’re in the process of being listed on the NASDAQ,” said Durkacz. “There are different ways it can be done and we’re looking for the best option from a regulatory and a tax perspective. But we’ll be listed in the next five months.”

There are two scarcities in play here. First, investable, US-listed cannabis shares. Second, the scientific talent to develop a portfolio of cannabis-derived, pharmaceutical, products which meet the health needs of ordinary people. In many ways, the scientific talent is the real bottleneck. There are just not that many scientists with much experience with the molecules you can derive from cannabis and even fewer who can create, develop and test those molecules as drugs.

Through acquisitions and alliances, HUGE is aiming to build out its pharma molecules portfolio and become an industry leader in real medicinal cannabis.

It is also deadly serious about being listed on the NASDAQ so that when real research into cannabis biotech becomes legal in the United States it will be positioned to take on the 1990’s Internet levels of investment Durkacz foresees.