FY22 Interim results
Oxford Cannabinoid Technologies (OCT) is a UK-based pharmaceutical company developing next-generation, non-addictive pain medications to replace opioids. Management estimated that the market will grow to £42.5bln by 2027 and OCT aims to gain an aggressive share of this market. OCT's candidates target the body's endocannabinoid system. OCT has a cost-effective development plan using blue-chip partners that could enable its products to receive regulatory approvals from 2027 onwards.
The lead programme is a new chemical entity (NCE), OCT461201, that selectively activates CB2 receptors. These receptors are mostly located outside the brain and have no psychoactive activity. OCT461201 is aimed at the relief of neuropathic and visceral pain. A 30-patient phase I study is scheduled for Q1 2023 with phase II planned to start in Q2 2023. Development is contracted to Evotec, a well respected pharmaceutical services company.
A second product, OCT130401, is planned to enter phase I in Q4 2022. This is aimed at the relief of trigeminal neuralgia, a sporadic, sudden facial pain. The product uses a rapid-delivery, inhaled formulation of an undisclosed phytocannabinoid mixture. Charles Rivers (a leading US company) is doing the technical development work. Purisys, a US company, supplies the active agents, and Oz UK, a small respiratory consultancy, developed the formulation and inhaler combination.
Earlier stage discovery projects utilise a library of 335 cannabinoid compounds licensed from Canopy Growth which are being screened by Dalriada and Stemtech. OCT aims to designate two candidates for development by late 2022.
Financially, cash is well controlled. R&D costs in H1FY22 were £935k, of which 65% was invested into OCT461201. Costs will rise as clinical development is initiated, now Q4FY23. The total Evotec contract value is £2.6mln. Admin was £1.2mln of which £0.2mln was non-cash. An R&D tax credit of £0.3mln was claimed. Overall, cash outflow in H1FY22 was £2.6mln.
Pharmaceuticals derived from cannabinoids
OCT raised £14.8mln in net proceeds at 5p/share from its May 2021 IPO. The 30 November 2021 cash balance was £12mln. Management estimates that this is sufficient to fund operations until March 2023. Hence, on current timelines, further funding, probably by late 2022 in our view, will be needed to initiate the phase II clinical trials of OCT461201 and OCT130401.
OCT’s development portfolio addresses a multi-billion dollar global market for pain relief. Pain control is a common reason for the use of medicinal cannabis products. OCT461201 as a pharmaceutical, if approved, will gain regulatory protection and might have patent cover beyond 2030. OCT130401 appears to be a formulation of generic molecules but might gain orphan exclusivity and data protection for trigeminal neuralgia.
As yet, we cannot assess the two further anticipated research stage projects.
The current market capitalisation of under £20mln is down significantly since the May 2021 IPO, reflecting a general move by investors away from earlier-stage biotechnology stocks. The shares were admitted to the US OTC QB on 1 December 2021 under ticker "OCTHF".
Investment conclusion
Oxford Cannabinoid Technologies (OCT) is a biopharmaceutical focussed on pain management drugs targeting the endocannabinoid pathway. Exhibit 1 shows the major market opportunity in pain management. Exhibit 2 shows the current pipeline with Phase 2 trials starting in Q2 2023. Exhibit 3 shows H1FY22 financial highlights. Note the year-end has been changed to 30 April from 31 May
Investment summary
Exhibit 1 - Targetting major pain markets form 2027
Source: OCT
Exhibit 2 - Portfolio of preclinical projects
Source: OCT
Exhibit 3 - Financial position
Source: OCT