Zelira Therapeutics (ASX:ZLD) Presentation, FNN Online Investor Event, June 2020

Company Presentations

Zelira Therapeutics Limited (ASX:ZLD) Managing Director Ex USA, Dr Richard Hopkins talks about the company's pipeline of products in clinical development for insomnia, chronic pain and autism, and strategy to bring products to market much faster than typically is the case with new drugs.

Clive, thank you very much. And thanks to FNN for the opportunity to be able to present today.

I'm really excited to be able to give you an update, and to introduce Zelira Therapeutics (ASX:ZLD). We're a leading global medicinal cannabis company. What I'd like to focus on today is our unique "Launch, Learn, & Develop" model, for fast-tracking pharmaceutical-grade medicinal cannabis into global markets. It's a unique proposition, and the company is right on the cusp of being able to reposition itself from a clinical development company, into a revenue-generating company, with access to the biggest and fastest-growing global markets in medicinal cannabis.

So, a normal disclaimer. Just by way of a very brief introduction, we're a publicly listed biopharmaceutical company focused on developing and marketing clinically-validated medicinal cannabis medicines. We actually resulted from a recent merger with a US-based company called Ilera Therapeutics, and ourselves, previously known as Zelda Therapeutics. And that has given us a footprint in both the United States, Australia, and also Europe, which in turn gives us access to the largest and fastest-growing cannabis markets, including the US, which is around 250 times larger than Australia.

The combined company has a leading pipeline of products undergoing clinical development. This is really focused on addressing the key unmet need for medicinal cannabis, the clinical data to support the claims. We also have access to a leading portfolio of branded products, targeting consumer and pharmaceutical markets, which have already launched in the United States, and are set the launch globally for the second half of 2020. Accelerating and driving all of that is this disruptive "Launch, Learn, & Develop" model I'll discuss in just a second.

And we were really pleased to announce our maiden revenues in first quarter of 2020, for our first US licensing deal for a product line called HOPE, which is focused on addressing the needs of patients with autism. And that was an upfront payment. And it also gives us access to access to a double-digit royalty in one state in the United States, and we're looking to roll that across other states in the US over time.

Just by way of a bit of background as to the sector, some of you may be familiar with the traditional drug development model that pharmaceutical companies normally have to work through. This typically takes 10 years and costs something like a billion dollars to bring a product to market. Cannabis is quite unusual, and it's turned the concept on its head, because it's perceived, ironically, as being very safe. And it's already been extensively used by people who have purported to have these medicinal benefits.

The regulators all around the world have actually provided access to medicinal cannabis as an unregistered prescription medicine. That just means that we don't have to go through all the clinical trial process in order to be able to bring those products to market. And from that has exploded a whole new segment around the globe for medicinal cannabis products as unregistered prescription medicines.

So, typically what our peers have done is they've gone through the cultivation process, they'll process those flowers into oils, or they use people to sell the flowers directly, and they'll take those products as generics, straight to market, and they'll generate revenues. And that's proved to be a very successful model. In the case of Zelira, we've taken a different approach. We've all come from pharmaceutical backgrounds. And we've wanted to, I think, tackle that problem, or that opportunity a little bit differently.

So, using our "Launch, Learn, & Develop" concept, what we're able to do is undertake a deep study of the science. We develop proprietary formulations, which are demonstrated to have efficacy against specific indications. For instance, insomnia or autism. We're then able to launch those products at a very early stage of their development immediately into the market, generate revenues. We can learn from real-world data and the patient experience to refine those products, improve them where we need to, gather that information, and then use it to inform the process of clinical trial and clinical development in standard, randomised, blinded formats that the industry well recognises.

All the way along, what we're doing is, we're generating revenues from patients, and that's helping to support the clinical programs, but it's also driving revenues for the company. Once it's gone through the clinical phase, it adds further value, which allows us to extract better returns through branding of our products in the generics market.

So, it's quite an exciting concept. Importantly, and I think you heard this from Elixinol Global (ASX:EXL), it's also capital-light. It doesn't require us to invest significant amounts of capital, in terms of capex expenditure. Really, it's just the investment in the science, and the expertise around generating proprietary formulations.

So, the commercialisation model then, is really focused, as I just mentioned, on this value-adding step. It's generating those proprietary formulations. It's validating them in a real world context. Supporting them with clinical data to attach clinical claims. It's working with very high-quality manufacturers, and it's protecting, most importantly, the intellectual property. Something that's core to any biotech or pharmaceutical company. We've been able to brand them, and turn them into high-margin products by virtue of the fact that, typically with clinically validated products in the healthcare industry, they do attract premiums from a margin perspective.

Because of our unique positioning as a merged company, we now have access to those global markets and we can distribute or license them into different jurisdictions. And we can do that really rapidly. In the United States, which, as I mentioned, is the world's largest market, with four million registered patients today in medicinal cannabis, you can legally access medicinal cannabis in some 33 states across the US, but it's a highly fragmented market. It's still federally illegal, so it has its quirks. And you're unable to shift product across state boundaries.

So our approach to dealing with that problem is not to move product, per se, but to license our intellectual property, and tech know how about how to manufacture those products. We then support it with the data we've generated from patients and the clinical evidence, and we license that intellectual property to manufacturers and different states. That attracts an upfront payment, and a royalty stream in double digits, which, with virtually no capital expenditure, supports the revenue pipeline for the company.

We've already undertaken, or completed two licensing transactions, one in Pennsylvania for one of our product lines, and more recently in Q1, for that same product line, we've licensed into another producer in Louisiana. And there will be more deal-flow, we're going to announce, on a fairly consistent basis as we roll these products out across the United States over the course of the next 12 months or so.

So, how are we different as a company? Not just in terms of our commercialisation approach, but also in terms of our strategic focus on how to address key unmet needs in the medicinal cannabis sector. Well, the first is, I think, and it's really key, we've actually focused very much on why people use medicinal cannabis. And all the studies are fairly consistent. They show that, you look at the prescription profiles, most people are using medicinal cannabis for pain, for anxiety, and also to help sleep. And we simply mapped our product development and clinical development pipeline to those major areas of unmet need, which in turn means, whenever we generate products, these are focusing on the largest possible addressable markets for cannabis.

And just to highlight the uniqueness of our strategy. So, something we can do in Australia, you can't do it in the United States. But we can actually undertake clinical trials in a first-world environment here, to further add value, whereas they're precluded from doing so in the United States because of that federal prohibition. So, it provides us a further point of differentiation.

What I want to just highlight here is the outcome we've just announced last month of the world's first randomised, blinded clinical trial to assess the efficacy of a proprietary formulation for treating sleep disorders. In this case, chronic insomnia. And what's really fascinating to us is that, anyone that's ever heard of, or maybe even tried medicinal cannabis over the years, will tell you it has an impact on sleep, but no one has actually assessed the benefit of that from a clinical trial perspective. So, we're actually the world's first company to develop a product focused just on that particular indication.

What we were really excited about is that we actually got a terrifically successful outcome from the trial. We met all of our primary and secondary end points, which we were delighted by. We were able to show that with a 23-patient crossover randomised, blinded design, our patients found that the products were safe and tolerable. There were no serious adverse events reported, and no psychoactivity.

It was also found to be efficacious. So, it actually improved all the key metrics associated with chronic insomnia patients. They reported sleeping longer, getting to sleep faster. They awoke in the middle of the night, they got back to sleep faster. And, most important, they also reported, from a quality of life perspective, feeling a sense of wellbeing the next day, having slept much better. So, I think that's a key profile that consistently emerges with regards to medicinal cannabis. It somehow improves patient quality of life. And I think that explains in many cases what's driving its growth on a global basis.

Because we can now pitch that product to the unregistered medicinal cannabis space with a clinical trial outcome, we're actually set to launch our first-in-class medicinal cannabis product for insomnia in global markets in Q3 2020. We expect that to come through around August/September. So, literally within the next three or four months. That will be Australia first, and then ultimately into global markets.

This slide really sets out where we see the world going for medicinal cannabis. There's clearly a very significant market for these sorts of products today, but ultimately it's about taking on the established pharmaceutical industry with high-quality products which are clinically validated. What's really interesting is that the scale of that market is obviously substantial, but when you look across a lot of these major indications, we know there's evidence to support that medicinal cannabis has a benefit.

And the initial numbers are coming in now and suggesting that already, even though these are early days, that the bleed-through, or the substitution of conventional pharmaceuticals for medicinal cannabis, is worth about $5 billion a year in the United States. And that's still with a very early-stage industry. We're going to accelerate that process, we believe, with high-grade clinically validated pharmaceutical products, which will really start to disrupt this space. So, that's the long-term goal of the company. We think that's going to be very lucrative for investors if we get that right.

From a corporate perspective, I mentioned before that we've got a very rich pipeline of news-flow coming up over the next six months. This is focused primarily on the launch of a number of products into global markets. It's going to begin with our HOPE line of products, which is focused on addressing the needs of patients with autism. This has already established itself in Pennsylvania as one of the leading products within that state, which has been very exciting.

We're about to launch that product in Australia in Q3 2020. And that's going to be followed in Germany and the UK, which are also rapidly growing medicinal cannabis markets. At the same time, we're going to be also launching our insomnia product in parallel, again in the United States and other global markets. And that will be followed by a third product line this year, launched initially in the United States, focused on age disorders. It's very interesting to note that the fastest-growing demographic for the use of prescription medicinal cannabis medicines is for people aged over 50, and that really speaks to the quality-of-life improvements that medicinal cannabis brings.

And commencing next year, there will be additional product lines to come into market, so we're going to have multiple revenue streams coming into the company.

And that's really important from a valuation perspective, because when you look at our comparatives across the globe, it's really interesting that when you try and take a classic biotech approach to valuing these sorts of companies, it's often quite difficult, particularly for a retail environment like Australia. But the one thing that companies are always rewarded for, whether it's here, or in the United States, or on a global basis, is the ability to generate revenues, and the recognition of that in terms of your market cap.

So, we expect that once we start to grow those revenue streams, we're going to get a significant appreciation in our market cap, by virtue of the fact that the market will recognise the value that's being generated and unlocked.

In terms of the corporates and our share price, this shows you we've been up and down a little bit over the past 12 months, but we're starting to move back into, I think, an upswing. The sector itself has had some challenges, but we've managed to tough that out. I think we're really looking forward to transforming, transitioning, to come to a brand-new space, which I think will reflect in the value proposition.

We reported around $4 million in cash last quarter. We raised around 4.5 the end of January, just before the COVID threat. So our timing was superb. And in terms of our major shareholders, they're also our major directors. So, their interests are very much aligned to those of our investors.

Speaking of the board of directors, we have a really powerful portfolio of expertise that straddle anything from the pharmaceutical industry, to the cannabis sector, and to biotech. These people have had 20 or 30 years of track record in delivering returns to investors, and certainly give us a unique pharmaceutical focus in different markets. This straddles both the United States and also Australia.

So, I'll leave you with this. I think Zelira is really nicely positioned in a rapidly emerging global industry to offer significant value to investors. We've got a very rich pipeline of transformative news-flow coming out over the next 3 to 18 months as we bring those product lines to market. And that's going to be filled in with additional detail around some of our clinical programs, which are ongoing and further support that pipeline, or that pathway to revenues.

With that, I'll leave you there. And so thank you very much.