Biotech M&A Momentum Attractive for Cannabinoid R&D Space

Tuesday, November 7, 2017 General News
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NEW YORK, November 7, 2017 /PRNewswire/ --

Morgan Stanley's research

team in January 2017 forecast that biotech-pharmaceutical companies - with a combined $75 billion in cash on hand - would strategize to boost revenue growth through mergers and acquisitions
of smaller companies with high-potential product pipelines (http://nnw.fm/mN24x). Growth via strategic acquisition makes more sense to cost-conscious Big Pharma than does shelling out $2.55 billion (http://nnw.fm/3Qr3S) to develop a new drug in-house. With growing interest in the convergence of cannabis and medicine, companies like InMed Pharmaceuticals, Inc. (CSE: IN) (OTC: IMLFF) (IMLFF Profile), which has an innovative biosynthesis technology that addresses the regulatory concerns associated with consistent pharmaceutical-grade cannabinoids and logistical constraints on development, may find themselves on the radar of Big Pharma. Mid-tier cannabinoid developers such as Zynerba Pharmaceuticals, Inc. (NASDAQ: ZYNE) and Axim Biotechnologies, Inc. (OTC: AXIM) are also developing cannabinoid-based therapies, possibly on track for the same opportunity seen in the $847 million acquisition of Scioderm by Amicus Therapeutics, Inc. (NASDAQ: FOLD). According to Thompson Reuters, pharma deals in 2015 increased 94 percent to $59.3 billion over the prior year, which adds weight to Morgan Stanley's projections, and GW Pharmaceuticals' (NASDAQ: GWPH) position as the leader of the Marijuana Index biotech sector demonstrates how biotechs continue to drive value in the broader, acquisition-hungry pharmaceutical sector.

Global pharma and life sciences M&A values slumped over 60 percent in Q3 of this year, as compared to Q2, in all subsectors except biotech, according to Pricewaterhouse Coopers. Large companies losing revenue amid expiring patents and facing costly R&D is a pattern baked into the biotech market. As such, the acquisition of revenue-producing biotechs as a solution is a trend that will most likely hold fast in upcoming years. Such a robust, underlying market environment is great news for cannabinoid biosynthesis pioneer InMed Pharmaceuticals, Inc. (CSE: IN) (OTCQB: IMLFF), the developer of a proprietary, scalable biosynthesis process capable of manufacturing all of the more than 90 naturally-occurring cannabinoids at pharmaceutical grades in-house - a rare and possibly unattained ability for everyone else in the industry. What this means is that InMed provides a solution to a main hindrance of U.S. FDA approval of cannabinoid-based therapies: producing consistent, pharmaceutical-grade cannabinoids that are identical to those found in nature.

This capability also enables InMed to cost-effectively produce its own high-yield cannabinoids for its product pipeline, rather than outsourcing cultivation as does industry giant GW Pharmaceuticals and other cannabis-focused biotechs. InMed's lead product, INM-750 (http://nnw.fm/0Q5ia), is a topical product designed to treat epidermolysis bullosa (EB), a rare disease of the skin's connective tissues, for which there is a significant unmet medical need and no currently approved treatments. INM-750 contains a combination of biosynthetically-produced cannabinoids carefully selected to modulate levels of the key keratins (proteins) that are absent in EB patients and, thereby, it is hoped, modulate the disease itself. INM-750 is also designed to address the numerous symptoms of EB such as inflammation, wound healing, skin regeneration, itching, and pain.

Because INM-750 will be the first therapy of its kind, InMed filed an international Patent Cooperation Treaty (PCT) application to commercially protect this valuable IP across the participating 151 PCT member countries. Given the well-documented multi-mechanism anti-inflammatory, analgesic and wound healing properties of various cannabinoid compounds, as well as InMed's emerging pre-clinical data on the use of cannabinoids for the treatment of EB, the company is taking all the necessary steps to lock in access to what it sees as a potential $1 billion global market (http://nnw.fm/JjYk9s). InMed has even tapped advanced human tissue-engineering company ATERA SAS of France to develop 3D human skin models engineered from cells of EB patient biopsies in an effort to aid in the investigation of INM-750's impact at ultra-structural cellular and molecular levels via in vitro models using both normal skin cells and EB-derived skin cells.

With a market cap of just over US$45 million, InMed boasts a rare position as the owner of proprietary biosynthesis and bioinformatics technologies (http://nnw.fm/e069N) and is developing the technology to produce commercial quantities of cannabinoids without the production and maintenance costs and pitfalls associated with chemically-derived cannabinoid synthetics. InMed's approach to developing biosynthetic cannabinoids combines the inherent safety and established efficacy of natural drug structures with the kind of quality-controlled pharmaceutical manufacturing required by the FDA. This process also grants the company direct access to overlooked minor cannabinoids that are currently economically unfeasible to extract from the plant. Combining these advantages with the company's ability to rapidly identify and develop additional indications such as the company's INM-085 for the >$5 billion glaucoma market, or INM-405 for pain, results in all the right ingredients to potentially make InMed one of the sector's next big stars or M&A targets.

As noted earlier, the Scioderm acquisition is a hallmark demonstration of the potential for companies with clinical success, as at one point it was in a similar position before being acquired by Amicus Therapeutics (NASDAQ: FOLD) for nearly $850 million. Scioderm's development of Zorblisa™, its only asset that was a promising topical wound-healing agent for EB patients, made a natural and accretive opportunity for Amicus' IP portfolio. Notably, Scioderm's acquisition in 2015 by Amicus followed phase 2b study results from 42 patients. JP Morgan and Cowen estimate peak sales for a product in EB to treat only the symptoms will be USD$900 million-$1.2 billion (http://nnw.fm/fL6VH).

This acquisition story not only emphasizes the value of biotech to the pharmaceutical industry, but also demonstrates the potential for cannabinoid-based candidates from companies like InMed and Zynerba Pharmaceuticals (NASDAQ: ZYNE), which is focused on transdermal synthetic cannabinoids such as ZYN002, a first-of-its kind synthetic cannabidiol formulated as a patent-protected and permeation-enhanced gel. ZYN002 has been granted Orphan Drug Designation in a genetic developmental and cognitive syndrome known as Fragile X and is also being developed as a treatment for refractory epilepsy and osteoarthritis of the knee. ZYN002 recently met its primary endpoint in an open label exploratory phase 2 clinical trial, with a 46 percent improvement in patients' total ADAMS score (Anxiety, Depression, and Mood Scale). This clinical-stage cannabinoid developer was recently added to the Russell 3000® Index. Zynerba is currently valued at $130+ million.

Axim Biotechnologies (OTCQB: AXIM) announced in an October release news of the USPTO's allowance of the company's December 2015 patent filing for an "ophthalmic solution comprising cannabinoids for the treatment of glaucoma and symptomatic relief of conjunctival inflammation." This notice of allowance extends the company's already firm footing in cannabis-based pharmaceutical, nutraceutical and cosmetic products. Its position has been established by such products as the company's CBD-based, controlled release chewing gum CanChew+®, as well as the combination CBD/THC gum MedChew Rx®. Axim has a market cap of $350 million.

GW Pharmaceuticals (NASDAQ: GWPH) is a great example of the kind of success possible in in today's biotech space. GW Pharmaceuticals' share price has increased over 1,000 percent from humble beginnings in 2013 when the company closed its IPO at $8.90 per share. Since then, it has transformed into a sector powerhouse with a market valuation of more than $2.8 billion, trading in a 52-week range of $92.65-$136.95. This share-price performance precedes the anticipated receptivity by both the health care market and the FDA to indications such as the company's Epidiolex® (plant-derived cannabidiol) for severe, orphan, early-onset, treatment-resistant epilepsy syndromes, including Dravet syndrome and Lennox-Gastaut syndrome (LGS). The company has received Rare Pediatric Disease and Orphan Drug Designations for Epidiolex in both syndromes, as well as Fast Track Designation in Dravet syndrome, and it recently completed the rolling submission of a New Drug Application for Epidiolex as an adjunctive treatment of the seizures associated with both (http://nnw.fm/C2ybx). With three phase 3 Epidiolex safety and efficacy studies under its belt, each of which met primary endpoints with good tolerability, GW Pharmaceuticals continues to establish itself as a vanguard for cannabinoid therapeutics.

Whether it is commercial success with a novel drug to satisfy an unmet medical need or a buyout by a major player in the sector that wants to forego the risk and cost of developing a new drug in-house, the future looks bright for successful cannabinoid therapy innovators amid robust and ongoing biotech M&A activity. The cannabinoid medicines game is just getting started, and there are already projections for the global medical marijuana market alone to reach some $55.8 billion by 2025, growth which is said to be due, in large part, to the mounting number of therapeutic applications of the drug.

For more information on InMed Pharmaceuticals, visit: InMed Pharmaceuticals, Inc. (CSE: IN) (OTCQB: IMLFF)

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