Interim results, moving into clinical
Oxford Cannabinoid Technologies (OCT) develops non-opioid, non-addictive pain pharmaceuticals. The lead product, OCT461201 (“201”), is an oral product to relieve peripheral nerve pain caused by cancer chemotherapy (CIPN). OCT estimates that the CIPN market is worth £1.7bln with 6.4% CAGR forecast. The 201 launch could occur from early 2027 onwards. The 201 molecule might have further indications in management of irritable bowel syndrome (IBS, a £2.1bln current market) and potentially in neuropathic pain. OCT aims to develop a range of pain relief products aimed at a global market estimated by a third party at £59.9bln.
OCT has submitted an application to the UK regulator, the Medicines and Healthcare products Regulatory Agency (MHRA), to gain approval for clinical studies, a Clinical Trial Authorisation (CTA). OCT's management expects this to complete during January. The lead contractor will deliver formulated oral 201 for clinical use around mid Q1. The Phase 1 volunteer study, run by a CRO, might then start by late March 2023. The Phase 1 should be fast to run and initial data might be available from mid-2023. A Phase 2 patient programme could then be run from Q4 2023, if funds allow, to evaluate efficacy.
The second project, OCT130401 (“401”), a fast relief inhaled therapy for sudden onset, facial-pain condition (trigeminal neuralgia), will be suspended to save cash once the current preclinical work is completed in Q1 2023.
Two research stage projects (Projects 3 and 4) might respectively enter preclinical testing and lead identification in Q2 2023. This indicates possible clinical stages from 2024 and 2025.
Pharmaceuticals derived from cannabinoids
The H1 FY23 cash balance (31 October 2022) was £4.9mln, down from £9.2mln on 30 April 2022. A large part of this was the preclinical work for 201 and this will have continued into H2FY23; the year-end is 30 April. OCT expects a further tax credit cash payment of about £750k in H2FY23. The next major cost will be the Phase 1 study. OCT has stated that it has cash till Q1 2024. However, we anticipate that further funding will be needed in H2 2023 to enable the Phase 2 to proceed as planned. OCT is now a virtual company with no offices or labs.
The market capitalisation of about £10mln reflects the current market for earlier-stage biotechnology stocks and the need for further funding. The share price has improved by about 50% since Christmas 2022.
In our view, OCT remains an interesting opportunity since the major lead project, 201, is poised to enter the clinic by March 2023. The indication, CIPN, has no effective current treatment. With clinical data, this novel product aiming for an underserved and accessible market could be an attractive partnering opportunity.
OCT has seen recent management changes with Clarissa Sowemimo-Coker stepping up in December from COO to become interim CEO and a new CFO in Paul Smalley from October.
Investment conclusion
Year end Apr 30 · 2020 · 2021
Operating profit (£,000s) · (3,346) · (5,503)
Net Cash · 14,630.0 · 9,266.0
Exhibit 1 shows the pain pipeline with 201 entering the clinical phase from January 2023. The Phase 1 will assess the safety and behaviour of 201 in the body at different doses. The 401 project will be put on hold as a clinic-ready project from Q1 2023.
Lead project now 201
Exhibit 1 - OCT Products and markets
Source: OCT
201 was originally developed by Pfizer and licensed by OCT from AskAt. It activates the Cannabinoid Receptor 2 (CB2). CB2 is mainly found outside the brain. 201 has no psychoactive effects. Independent literature evidence (Lin et al 2022) indicates that CB2 activation can overcome the peripheral nerve sensitisation and lower pain toxic effects of chemotherapy.
Exhibit 2 shows rat data and indicates a possible human dose of 3mg/kg according to OCT. The baseline is the untreated rat. The vehicle means the rats had paclitaxel chemotherapy, so had a fast pain response.
Exhibit 2 - 201 preclinical
Source: OCT
Pregabalin (Lyrica) is an anti-epileptic drug also indicated for peripheral and central neuropathic pain. In this experiment it is given at a very high dose.
This is a mix of synthetic cannabis molecules: THC (psychoactive) and CBD (non-psychoactive) in a 1:1 ratio. 401 will be delivered to the deep lung by an off-the-shelf, metered-dose, pressurised inhaler to give fast absorption. This aims to give fast pain relief from the sudden onset, stabbing pain of TN. The project will be put on hold once the current preclinical work concludes in early 2023. Current TN therapy is 60-80% effective but requires chronic dosing of carbamazepine, an old epilepsy drug with side effects.
Exhibit 3 - 401
Source: OCT
Timelines
Timelines to potential approvals are shown in Exhibit 4.
Exhibit 4 - Clinical Timeline Jan 2023
Source: OCT, Dates ProActive
The main project running is 201 with an application to start a Phase 1 study (titled: First-in-human, randomised, double-blind, placebo-controlled, single ascending oral dose safety, tolerability and pharmacokinetics study of OCT461201 in Healthy Volunteers) in progress. This is a standard development route for mainstream pharmaceuticals and as expected since 201 is a synthetic novel molecule based on an understanding of the Cannabinoid Receptor 2 structure and function. There should be no reason for this not to gain sign-off by the regulator and the ethics body given the professional pre-clinical work up by the Evotech subsidiary. The trial will be run by a Welsh-based CRO.
Although no protocol has been released as yet, the Phase 1 uses a single ascending dose (SAD) format. The design is for 4 cohorts of 8 volunteers to assess dose and safety. The initial dose is very low. The next cohort, if no safety issues, gets a higher dose. Dosing usually rises in log scale increments (1, 3, 10) up to the highest equivalent dose tested in preclinical toxicology (not yet disclosed). The data recorded is safety and any minor side effects plus important blood measurements of the drug blood level over time and its metabolite levels. These are crucial to determine the doses and frequency for Phase 2. As this is a healthy volunteer study, there will be no efficacy data. OCT plans to release some interim data, probably in our view, in later Q2 2023.
Phase 2 could start in H2 2023 after the full data set from Phase 1 is available, probably in our view from early autumn onwards. This will depend on funding as Phase 2 studies test efficacy in patients and are inherently more costly. Typically, a Phase 2 will be a blinded, placebo-controlled study. This trial could lead to a partnering deal to fund the longer and larger set of Phase 3 studies needed for approval and reimbursement. At least one of these will need to be in the US for marketing reasons and so would be expensive. CIPN is a common side effect of chemotherapy and not currently well managed, Exhibit 5
Exhibit 5 - CIPN - nerve damage due to cancer chemotherapy
Source: OCT
The other projects are either in the research phase (the in-licensed compound library from Canopy Growth) so not expensive or will be taken (401) to Phase 1/2 ready status. As a mixture of two well-known cannabinoids, 401 should not need a volunteer Phase 1 study but the dose level may need to be explored in dose-ranging patient study.
Interim financials and future cash need
Cash on 30 October 2022 was £4.9mln after a H1FY23 cash burn of £4.4mln. This was offset by a cash R&D tax credit of £170k. OCT expects a further cash R&D tax credit payment in H2FY23 of about £750k; the 31 October balance sheet shows Tax Credits receivable of £1.6mln including a £840k tax credit gained in H1FY23 and payable in the FY24 financial year. We do not make a specific forecast but expect low cash levels from mid-2023 implying the need for further funding; OCT has noted that it has cash till Q1 calendar 2024. However, we anticipate that further funding will be needed to enable the Phase 2 to proceed as planned.