Creso Pharma set to be the first ASX listed entrant in new market

Creso Pharma Limited (ASX:CPH, FRA:1X8) has signed an agreement to acquire Halucenex Life Sciences Inc. (Halucenex), an established psychedelics company focused on developing treatments for Treatment Resistant Depression in individuals suffering from PTSD, and other mental health illnesses.

Based in Nova Scotia, Canada, Halucenex is a life sciences development company focused on researching, developing and licencing novel psychedelic molecules for the global pharmaceutical and nutraceutical markets.

Halucenex is currently focused on progressing clinical trials to research the efficacy of psilocybin to treat and alleviate Treatment Resistant Depression in individuals suffering from PTSD and other mental illnesses.

The proposed acquisition provides Creso Pharma with a first mover advantage into the psychedelic medicines sector and marks the first 100%-owned psychedelic medicines company listed on the ASX.

The acquisition of Halucenex is transformational for Creso Pharma as the company will emerge as a best-in-class provider of cannabis, cannabinoids and psychedelics alternative medicines to meet the large unmet need for treatments to improve mental health and wellbeing.

Industry background underlines safety and clinical success

While non-academics have for many years spent more time joking about what they believed were psychedelic drugs such as magic mushrooms, during this period substantial research was being undertaken on what was very much the real deal.

To understand the market that Creso Pharma is entering it is important to appreciate the great strides that have been taken in the industry, as well as the hiatus that occurred in essence has provided a unique opportunity some 70 years after research was first undertaken.

Psychedelic-assisted psychotherapy with microdoses refers to therapeutic practices that involve the ingestion of small doses (microdoses) of a psychedelic drug.

The aim of a microdose is to dose a small enough quantity to trigger the drug’s therapeutic benefits without the potentially disruptive effects seen with higher doses (macrodoses), such as hallucinations.

Research into the effects of psychedelics on mental health grew between 1950 and 1960, however, for largely political reasons research was limited from the 1970s.

Growing evidence demonstrating that psychedelic medicines are safe and non-addictive when used in medical settings has sparked renewed interest in Psychedelic-Assisted Psychotherapy (PAP).

In a number of clinical trials completed in recent years, psychedelic-assisted psychotherapy has produced some significant, long-lasting clinical outcomes for individuals suffering from conditions such as addiction, depression, end-of-life distress and PTSD.

Due to the growing prevalence of mental illness, especially during the COVID-19 pandemic, combined with inadequate treatment options, the market for psychedelic medicines to treat mental illness is growing rapidly, with estimates valuing it at up to US$100 billion.

Mental illness also presents a significant economic burden, with researchers projecting that without innovation in treatments such as PAP, the global economic burden is estimated to reach US$16 trillion by 2030.

Consequently, Creso Pharma’s decision to enter this lucrative industry appears very timely.

Management points to strengthen the presence in Canada

Commenting on this aspect of the Halucenex acquisition, as well as its implications for the broader Creso Pharma business, non-executive chairman Adam Blumenthal said, “This is a major milestone for Creso Pharma and marks our evolution into a broader based pharmaceutical business.

"Creso will now sell its trusted cannabis products and progress the commercialisation of a range of psychedelic-assisted psychotherapy treatments.

"Our entry into this market provides the company with another lucrative vertical and an additional near term revenue stream.

"Mental health and PTSD are becoming detrimental to our society and this has been highlighted in the last 12 months.

"These conditions have been exacerbated by COVID-19 and the available treatments are shown to have limited effectiveness and many side effects.

"Psychedelic-assisted therapy is a new alternative treatment route, which has considerable promise.

"The acquisition of Halucenex will strengthen our presence in Canada, as well as provide a number of opportunities in drug development which will inevitably lead to further new market entries and commercialisation opportunities."

Halucenex brings vital research and associated infrastructure

Halucenex is focused on delivering and developing evidence-based products for the treatment of Treatment Resistant Depression and other detrimental mental illnesses, with a specific focus on psychedelic-derived medicines.

The company operates at 6,000 sq. ft. medical treatment facility in Nova Scotia, Canada, located next to the Hants Emergency Hospital, with a Controlled Substances laboratory, and 18 treatment rooms dedicated to providing psychedelic-assisted psychotherapy.

On receipt of its Controlled Drugs and Substances Dealer’s License which is currently pending, Halucenex will apply to commence a phase 2 clinical trial.

The Dealer’s Licence will allow Halucenex to possess and conduct research and development and clinical studies on psychedelic substances including psilocybin.

Halucenex’s phase 2 clinical trial is expected to commence in the September quarter of 2021.

Halucenex will also seek an amendment to the Dealer’s Licence to produce, package/assemble, sell, transport, import and export psychedelic substances.

Given the growing interest in psychedelic inspired medicines there is a bottleneck in the supply chain of pharmaceutical grade psilocybin that is expected to expand as more companies enter the research domain with clinical trial submissions testing psilocybin for a multitude of mental illnesses.

Health Canada insists on use of synthetic psilocybin for clinical trials

Synthetic psilocybin is preferred over naturally sourced psilocybin in clinical settings, as naturally sourced psilocybin is known to have greater inconsistency of potency and therefore dosage.

Health Canada therefore approves clinical trials only if companies have access to synthetic psilocybin to ensure consistency of dosage and purity in formulations.

In anticipation of a worsening supply shortage, Halucenex has signed a supply agreement with one of Canada’s only pharmaceutical grade psychedelics manufacturers, Psygen Industries Inc, securing supply of 11.6g (11,600mg) of synthetic psilocybin for immediate use in Phase 2 and Phase 3 clinical trials.

The group is currently one of only approximately 11 companies to secure supply from Psygen, significantly de-risking the clinical trial timeline.

Halucenex also has an affiliation with Veterans Affairs Canada via its Strategic Adviser David Fraser, which will provide a fast track to revenue through sales into a market with significant demand and government backing.

The prevalence of PTSD among veterans is considerably higher than the general population.

Veterans Affairs Canada is a government department responsible for pensions, benefits and service to war veterans.

The Canadian government has budgeted over C$25 million over the next decade to support research on veteran health and spends over C$1.1 billion annually on disability pensions.

Halucenex’s short-term focus is on progressing clinical trials to assess the safety and efficacy of PAP using psilocybin to treat mental illness, with the aim of becoming a clinical drug pipeline provider, while also progressing two complementary business strategies.

Preliminary trial results expected by 2022

Halucenex will conduct research and development to produce novel proprietary formulations of synthetic psilocybin in order to de-risk supply, increase yields for future micro and macro dosing formulations, and to open the manufacturing vertical operation.

Alongside partners Acadia University and non-profit research organisation Mitacs, Halucenex will research methods of synthesising psilocybin in scalable quantities, with the aim of developing formulations for use in pre-clinical and clinical experiments.

Halucenex will also conduct research and development into the interactions between natural and synthetic psilocybin derivates [I reckon this should probably be derivatives, but not sure - could be some other tech talk] to accumulate intellectual property on the entourage effects of naturally sourced psilocybin.

In partnership with Acadia University and Mitacs, Halucenex is progressing the project to gather information on organic and synthetic psychoactive molecules derived from psychedelic psilocybin mushrooms, and preliminary results from the project are expected by the June quarter of 2022.

Synergies to assist in combined group achieving early revenues

The proposed acquisition of Halucenex provides Creso Pharma with direct entry into the emerging psychedelic medicines market, creating a diversified natural medicines company to improve mental health and wellness.

The combined group will allow Halucenex to benefit from a number of significant synergies, ultimately fast tracking the company to early revenues.

Key benefits include the establishment of a global distribution network with partners in the broader pharmaceutical space and access to a cutting-edge cannabis cultivation facility fitted with infrastructure which can readily be adapted for the cultivation of natural psychedelic psilocybin mushrooms.

The combined group will be led by an executive and management team with an excellent track record of bringing pharmaceutical products to market, and a deep understanding of pharmaceutical product development in heavily regulated environments, allowing Halucenex to progress its clinical trials and successfully commercialise its products.

Together, Creso Pharma and Halucenex are positioned at the forefront of innovation in the psychedelic medicines sector, headed by an accomplished operational team underpinned by experienced researchers, academics, clinicians and thought leaders in the cannabis and psychedelic medicines space.