Here’s how Australia offers a strong operating environment for cannabis biotech stocks

In the wake of the 2019 cannabis bear market, plenty of ASX-listed pot stocks are still working to validate their business model in the eyes of investors.

But as the space matures, investor attention is also turning to companies adjacent to the space that are working towards clinically approved biotech solutions.

One such company is Medlab Clinical (ASX:MDC), who’s product range includes a medicinal mouth spray product, NanaBis which earlier this year was shown to reduce breast and prostate cancer pain by well over a third.

Speaking with Stockhead Medlab CEO Sean Hall stressed his company was a biotech.

“First and foremost, we’re not a pot stock – we don’t grow it, we don’t package it into bottles. We’re a biotech,” he said.

“Everything we do is to build a drug for the end goal of drug approval.”

 

Purpose of regulators is to help

With this clarification, Hall then noted Australia was a great place for biotech stocks. He noted while investors may have perceived regulators were being too slow, they were doing their job.

“(In Australia) we have the R&D [Research & Development] grant which is biotech projects that are more commercial in nature. There’s good industry experience here and the TGA (Therapeutic Goods Administration) also still have their gateway process.”

“Their research agenda historically is very willing to work with you, and I find it’s the same with the US FDA (Food & Drug Administration) too.”

“But it’s good to do early [trials] in Australia because you can get to humans quite quick if you checked the right boxes. If you don’t do that original work, its not going to come into play.

Like any other biotech, clinical evidence is a non-negotiable for medicinal cannabis companies to get to market.

“I think they [regulators] get a lot of cannabis companies globally saying a lot of interesting things – some very colourful – about what their product is capable of doing.”

“The purpose of regulator is help you, providing you’re capable to get through the gates, because their job is protecting public health.”

“I think they want to show it is capable for a product to get through their system on the proviso that you do the homework. That’s my general attitude towards it.”

 

All about the money

Hall also noted money was more important than market share.

He pointed to the example of GW Pharma’s CBD-based drug Epidiolex. Epidiolex is the only cannabis drug approved for sale in the US and it has generated hundreds millions of dollars in revenue despite not having a high market share.

“They’ve been on the market for 9-12 months. They got their product through the FDA for a narrow, specific claim and a real small population value,” Hall noted.

“First quarter, $60 million ($83.3 million) in revenue – that beats the revenue of most pot stocks here and overseas. Second quarter $100 million ($138.8 million), third quarter $130 million ($180.5 million).”

“Three days ago they just got a second claim for that product.”

Earlier this week, the FDA approved Epidiolex for seizures related to tuberous sclerosis complex (TSC). This is a rare genetic disease that causes non-cancerous tumours to grow in the brain.

Epidiolex’s earlier approval was likewise for another rare form of epilepsy.

“So if you do the work and you create that value, and at the same time you can carry shareholders through that journey, — the potential revenue cycles are significantly greater than any amount of bottles you’re going to sell via a compassionate or unregulated market,” Hall said.

“So this is what we have to convey to potential investors – that the slice of the pie is that big. Even if you get 5 or 10 per cent of it, it’s still very significant.”

The post Here’s how Australia offers a strong operating environment for cannabis biotech stocks appeared first on Stockhead.

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