Zelira Therapeutics Ltd (ASX:ZLD, OTCQB:ZLDAF), a leading biopharmaceutical company, has signed a deal with Health House International Limited to acquire the international pharmaceutical distributor, which specialises in the distribution of medicinal cannabis across Australasia, the UK and Europe.
The company hopes the merger will create a global organisation with strong medicinal cannabis product and distribution capabilities.
This deal is set to proceed, pending the outcome of Zelira’s due diligence checks on Health House. Once these requirements are cleared the parties will enter into a formal scheme implementation deed.
Under the scheme, Zelira will issue shares to Health House shareholders, giving Health House parties a 19.45% interest in the expanded capital of Zelira.
Zelira has agreed to provide a $1.5 million loan facility to Health House to assist with its working capital requirements prior to implementation of the scheme.
Why merge?
Health House founder and chairman David Wheeler said: “The proposed merger is a strategic vertical opportunity to increase margins and save costs.”
He went on to list reasons why the merger will be beneficial to both companies, including that it will bring manufacturing in house to improve margins for the total product output and to provide stronger control of the product life cycle.
There is a natural synergy with the product pipeline – Health House currently distributes Zelira’s Rx formulations in Australia and has an agreement in place to distribute the SprinjeneCBD toothpaste in the United Kingdom.
In addition, Zelira’s research team and Health House’s European-based Kalapa Clinic will provide an opportunity to materially improve the speed at which these products can obtain clinical validation, while improving the cost of clinical trials.
"Control of direct access"
Zelira Therapeutics founder & chairman Osagie Imasogie said: “The proposed acquisition of Health House will provide Zelira with control of direct access to highly regulated European and other markets for its products.
"In addition, the successful conclusion of this transaction will improve the margin to Zelira from products that will be directly sold in the markets in which Health House is currently active.
"This transaction will also provide Zelira with direct access to GMP manufacturing facilities in Europe that will further improve margins for our products and provide stronger control of our product life cycle.
"In addition, this transaction will provide Zelira with control of direct access to high quality international standard clinical trial capabilities for our proprietary cannabinoid-based products.
"This will materially improve the speed at which these products can obtain clinical validation, while improving the cost of such clinical trials.
"We look forward to welcoming Health House shareholders as important members of our mutually enhanced Zelira."
Short-term loan facility
To assist Health House with its short-term working capital requirements, Zelira has agreed to provide a $1.5 million short-term loan facility.
A debt-to-equity swap deal will also provide support and reduce the working capital requirements of the combined group.
Under this deal, Health House will seek shareholder approval for the issue of shares as repayment of approximately $1.5 million owing to CanPharma lenders – debt consideration shares – which will constitute shares under the scheme.
Zelira Therapeutics global managing director & CEO Oludare Odumosu said: “The proposed acquisition of Health House will maximise Zelira’s unique capability to develop new clinically validated products that can be marketed and distributed on a global basis.
"Post-merger it is anticipated, Zelira’s revenue profile will be accelerated, margins will increase from the sale of Zelira’s products in markets that Health House is currently active, and cashflow breakeven will be brought forward.”
About Zelira
Zelira owns a portfolio of proprietary revenue-generating products and a pipeline of candidates undergoing clinical development and has positioned itself to access the world’s largest and fastest-growing markets.
The company is focused on developing and clinically validating branded cannabinoid-based medicines for the treatment of a variety of medical conditions in its Rx business, including insomnia, autism and chronic non-cancer pain, as well as offering over-the-counter products.
It is also generating revenue in Australia and Germany from its proprietary and patented Zenivol® – a leading cannabinoid-based medicine for the treatment of chronic insomnia.