Canada’s cannabis industry could experience a dramatic windfall with the legalization of recreational cannabis in October, but many cannabis companies are looking beyond the borders for opportunities. In particular, the most progressive cannabis companies are building up both their medical and recreational cannabis footprints, while expanding their production capacity to meet growing global demand over time.
FSD Pharma Inc. (CSE: HUGE) (OTCQB: FSDDF) (FRA: 0K9) recently announced a binding letter of intent to acquire Therapix Biosciences Ltd. (NASDAQ: TRPX). The move bolsters its high-margin pharmaceutical business at the same time as it ramps up its production footprint.
FSD Pharma’s flagship Cobourg facility is the former Kraft Heinz plant with a potential grow space of 3.8 million square feet, strategically located on 72 acres of land near Toronto. In July, the company provided an update on the progress of its joint venture with Auxly Cannabis Group Inc. (TSX-V: XLY), announcing the approval of Auxly’s financing of $55 million towards the development and construction of 220,000 sq. ft. of cultivation, R&D, genetics, and extraction capabilities. The two companies expect the first phase to be completed by January 2019 with the first harvest planted at that time.
In September, the company signed a definitive agreement with Canntab Therapeutics Ltd. (CSE: PILL), whereby it will provide up to 10,000 sq. ft. of space at its Cobourg facility to Canntab to develop its suite of novel cannabis oral delivery platforms. Canntab will grant FSD Pharma 50 percent of the profits that it receives from retail sales through FSD Pharma’s channels, as well as a 3.5% royalty on all products produced on-premise.
The next phase of the expansion will encompass 820,000 sq. ft. with the potential to reach 3,896,000 sq. ft. when fully developed. At full capacity, FSD Pharma believes that the indoor hydroponic facility is capable of producing 400 million grams of dried cannabis per year. These production levels would make it one of the largest licensed producers of cannabis in the world and a key supplier to the global markets.
In addition to this facility, the company has made several strategic investments, including its interests in Canarra, High Tide Ventures, and its alliance with SciCann Therapeutics. These arrangements should help dramatically expand its geographic reach, while advancing a line of cannabis-based pharmaceutical products.
FSD Pharma’s acquisition of Therapix Biosciences represents an expansion into the high-value medical cannabis market. In addition to the direct-to-consumer sales made possible via its Cobourg facility, the company intends to develop a new class of novel cannabinoid-based treatments for several central nervous system disorders, including chronic pain, fibromyalgia, irritable bowel syndrome, and other disease areas.
Therapix has become a leader in cannabinoid research and development with several clinical programs underway, including its Phase IIa study targeting Tourette Syndrome at the Yale Medical Center in the United States. The company plans subsequent Phase IIb studies at the Hannover and Munich University Medical Schools in Germany for Tourette syndrome and is collaborating with Assuta Medical Centers in Israel to target sleep disorders.
The Chairman of Therapix’s Scientific Advisory Board is the world-renowned professor Raphael Mechoulam, who’s often referred to as the Godfather of Medical Cannabis for co-discovering the “entourage effect” of the endocannabinoid system. The company’s primary focus has been advancing the scientific work of Professor Mechoulam to treat CNS disorders, sleep disorders, pain, mild cognitive impairment, traumatic brain injury, and infectious disease.
In addition to acquiring the proprietary intellectual property, technology, and assets related to Therapix’s clinical programs, FSD Pharma’s acquisition also opens the door to new international capital markets. The company plans to continue with its listing on the Canadian Securities Exchange and Frankfurt Stock Exchange, while pursuing a listing on the NASDAQ, pending regulatory approvals.
FSD Pharma Inc. (CSE: HUGE) (OTCQB: FSDDF) (FRA: 0K9) represents a compelling investment opportunity within the cannabis industry. In addition to its tremendous indoor cultivation footprint, the company’s move to acquire Therapix Biosciences could help it become a leading cannabinoid-based pharmaceutical company. Investors may want to keep an eye on the company following these developments.