Creso’s acquisition target Halucenex to extend clinical trials beyond veterans

4 minute read

By Trevor Hoey. Published at Jun 8, 2021, in ASX Biotechs

Creso Pharma Limited’s (ASX:CPH; FRA: 1X8) targeted acquisition company Halucenex Life Sciences has made the strategic decision to expand the recruitment of its phase II clinical trial to include participants that have not served in the military or undertaken roles as first responders who are suffering from Treatment-Resistant Post Traumatic Stress Disorder (PTSD).

The decision to expand the trial scope was made following the overwhelming amount of inbound enquiries that the company has received from individuals that suffer from debilitating mental health conditions and are seeking alternative treatment methods.

However, it could be argued that the real takeaway from this development in terms of building shareholder confidence is management’s business acumen and industry foresight in securing an additional 10 grams of synthetic psilocybin just last month.

This effectively doubled the company’s inventory to 22.3 grams, providing it with the capacity to significantly expand its trials.

It is worth noting that Halucenex is now one of the largest holders of single batch GMP grade psilocybin in Canada.

Halucenex ‘resource’ should attract a premium valuation

To put this in perspective, psilocybin is a psychoactive substance that is currently an illegal drug in Canada, resulting in sourcing large quantities of high-quality product being extremely difficult.

Resultantly, a reliable supply can be one of the most significant barriers to advancing clinical trials and demonstrating product efficacy.

The massive industry bottleneck has constrained many industry peers, and having a confirmed supply is a big de-risking event for Halucenex and CPH going forward, a factor that should be taken into account when attributing a valuation to the group.

As a means of comparison, when a valuation is attributed to a mining company that produces a high quality niche commodity, and has the added benefit of a sizeable resource, this is normally reflected in a premium share price.

Examining competition in psychedelics-related niche market, Compass Pathways plc (NASDAQ: CMPS) which has a market capitalisation of about US$1.4 billion used 10g for Phase I trials, and needs another 32 g for Phase II clinical trials.

Non-veteran trials could exponentially increase end market

Halucenex anticipates that the addition of non-veterans to the clinical trial will allow it to collate an additional data set, providing ‘real world’ examples of the efficacy of psilocybin when used as an alternative treatment route.

Interestingly, this strategic decision comes at a time when Reuters just a fortnight ago published an article on Mike Tyson who attributed his transition from being on the brink of suicide to jumping back into the boxing ring at the age of 55 to psilocybin mushrooms.

Imagine expanding the potential user base from purely veterans to anyone involved in heavy contact sports, car accidents and the like.

Discussing the significance of including non-veterans in upcoming trials, effectively broadening the scope of clinical trials, Creso non-executive chairman Adam Blumenthal said, “Halucenex’s management continue to make steps towards creating psychedelic compounds and therapeutics that can be used for veterans and first responders, as well as everyday individuals.

"To broaden the clinical trial participant scope, is a very promising development and will lay a very strong foundation for the company as it pushes towards becoming a best-in-class provider of cannabis, cannabinoids and psychedelic alternative medicines, to meet the growing need for treatments to improve wellbeing.”

PTSD market valued at US$10.5 billion by 2025

Harking back to the clinical trials, management will utilise this data to progress discussions with potential partners including drug developers and large pharmaceutical companies, as well as insurance providers and regulatory bodies to further cement its position as a first-mover in the emerging psychedelics medicines space.

Halucenex expects to commence its phase II clinical trial following the receipt of a Controlled Drugs and Substances Dealer’s Licence (Dealer’s Licence) from Health Canada.

Upon receipt of the Dealer’s Licence, Halucenex intends to apply for Clinical Trial Authorisation and commence the clinical trial.

Discussions with Health Canada are well progressed and the company anticipates that it will secure its Dealer’s Licence shortly.

While the prevalence of PTSD is higher among veterans than the general population, the market for PTSD therapeutics is expected to grow to US$10.5 billion by 2025, but this could increase substantially if the user base extended beyond veterans.

Mental illness in Canada more broadly has an economic burden of C$51 billion per annum, highlighting the large market opportunity for Halucenex and Creso Pharma.

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