FSD Pharma (CSE:HUGE.CN) (OTC:FSDDF) is a cannabis-platform company focused on the cultivation, processing and distribution of pharmaceutical-grade cannabis as well as the development of pharmaceutical and synthetic cannabinoid-based treatments for a variety of clinical indications. Management has indicated that at least $260,000 has been generated from the sale of medical cannabis thus far during the fourth quarter. Management also announced that a Phase 1 clinical trial of PP-101 micro-PEA is expected to be initiated during 1Q 2020. Through strategic alliances, collaborative agreements and acquisitions, FSD is pursuing the development of FDA-approved medications for pain management, fibromyalgia, IBS and coronary artery disease.
Management continues to advance its strategic objective to transform FSD Pharma into a specialty, biotech pharmaceutical R&D company by focusing on the development of a pipeline of synthetic compounds that target the endocannabinoid system. A Phase 1 human safety and tolerability clinical trial for PP-101 micro-PEA is expected to be initiated during the first quarter of 2020.The worldwide rights (except for Italy and Spain) of this pre-clinical drug candidate was acquired by FSD Pharma through the acquisition of Prismic Pharmaceuticals in June 2019.
PEA is a naturally occurring anti-inflammatory agent that is be expected to be effective in many inflammatory ailments, including chronic pain, arthritis and fibromyalgia, among others. Micronization of PEA improves its oral bio-availability, and this micronization technique is protected by patents until 2030.
According to its December 2019 corporate presentation, the management of Canntab Therapeutics states that the company is prepared to manufacture THC oil-filled gel-capsules in Room 6 of FSD Pharma‘s Cobourg facility once an approval from Health Canada for the manufacture of the capsules is received. FSD Pharma entered into a definitive Collaboration and Profit-Sharing Agreement with Canntab Therapeutics (CSE: PILL) on September 17, 2018.
According to a November 18 press release, Health Canada has issued a research license to Solarvest BioEnergy for the Microalgae Cannabinoid Expression Program under its CBD proof of concept research project in partnership with FSD Pharma. The license allows Solarvest “to transfer its computer modeling work into the laboratory and use its algal expression system to express pharmaceutical-grade cannabinoids.” If the project is successful, algae could be used to produce pharmaceutical-grade cannabinoids in cGMP facilities with a growth cycle of days instead of months with cannabis plants. FSD Pharma and Solarvest BioEnergy Inc. signed a definitive Collaborative Research and Development Agreement, on May 7, 2019. Under the Agreement, Solarvest will use its algal expression technology to conduct research for the purpose of developing a proof of concept that will confirm that algae can express pharmaceutical-grade cannabinoids through biosynthesis. FSD Pharma owns 3,000,000 shares of SVS and 3,000,000 2-year warrant exercisable at $0.25. Also, FSD Pharma holds a 5-year, $2.4 million 3% Solarvest convertible debenture, which is convertible into 2,000,000 SVS shares.
Third Quarter Financial Results
On November 29, 2019, FSD Pharma reported financial and operational results for the third quarter ended September 30, 2019. Revenues, which only consisted of rental income from the Cobourg facility, decreased 7.4% to $12,805. Management indicated that at least $260,000 generated from the sale of medical cannabis, will be reported in the fourth quarter. Overall expenses increased 293% (or $8.87 million) to $11.9 million, primarily due to a $5.77 million increase in share-based payments, $1.42 million increase in depreciation and a $1.39 million increase in professional fees. In addition, there was a $1.70 million charge for a change in fair value of derivative liability and a $2.08 million charge due to changes in fair value of other investments. The company reported a net loss of $16.65 million (or $2.20 per diluted share) for the quarter. During the quarter, shares outstanding increased 7.9% sequentially to 7,564,004 Class B shares. Year-to-date, shares outstanding have increased 14.2%.
During the fourth quarter, on November 4, 2019, the first and second tranches of a private placement closed, resulting in the issuance of a total of 228,671 additional Class B shares. Gross proceeds from both the first and second tranches were CAD $4,596,285. Management anticipates a third tranche to close in December. The net proceeds will help fund the research and development of PP-101 micro-PEA, including the anticipated Phase 1 clinical trial scheduled to begin in the first quarter 2020, along with general corporate purposes.
FSD Pharma Presents at 12th Annual LD Micro Main Event Investor Conference
On December 11, 2019, Dr. Edward Brennan, MD, President of FSD Pharma’s Biosciences Division, presented an overview of the company at the 12th Annual LD Micro Main Event Investor conference at the Luxe Sunset Boulevard Hotel in Los Angeles. In addition, one-on-one meetings were hosted with investors throughout the day.
Management is developing a cannabis-platform company with a strategic objective creating a specialty, biotech pharmaceutical R&D company focused on pharmaceutical and synthetic cannabinoids for an array of medical applications in addition to cultivating, processing and distributing high quality pharmaceutical-grade cannabis. FSD Pharma is well positioned to benefit from the legalization of cannabis in Canada, Germany, the rest of the Eurozone and the United States.
DISCLOSURE: Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm, engaged by the issuer, for providing research coverage for a period of no less than one year. Research articles, as seen here, are part of the service Zacks provides and Zacks receives quarterly payments totaling a maximum fee of $30,000 annually for these services. Full Disclaimer HERE.