Botanix plays the long game with cannabis skin care

Botanix plays the long game with cannabis skin care

"We're seeing the whole market move away from simply growing plants to creating products that patients and consumers can use, and I think we're at the forefront of that movement," says Botanix Pharmaceuticals CEO Matthew Callahan.

Both opportunities and risks abound in the international cannabis market as countries loosen their regulations to allow at least medicinal marijuana, if not recreational.

For companies like Perth-based Botanix Pharmaceuticals (ASX: BOT) however, changes in legislation from the UK to Canada to South Africa don't matter so much.

That's not to say these developments are immaterial, but the cannabinoid-based skin care treatment developer has made a long-term bet that hinges not on legalisation but an eventual thumbs up from the US Food and Drug Administration (FDA).

"The focus of Botanix is in creating medicines that are prescribed by doctors to treat diseases, and in our case that's skin disease, starting with acne but moving into dermatitis or eczema as well as psoriasis," says CEO Matthew Callahan.

"We're going down an approval pathway with the FDA where at the end of the day after doing some clinical studies the FDA will be convinced that the drug treats the specific disease, and doctors will be able to prescribe that while patients will be able to use their insurance to effectively gain access to those medicines."

Once the FDA approves a drug, other regulators around the world tend to follow suit. 

"Once we get a product approved to treat acne for example, the FDA gives us five years of regulatory exclusivity which basically means they will not approve another product containing CBD [cannabinoids] within that five-year period [for that treatment]," says Callahan.

"Secondly we also have patents which cover CBD at the doses used to treat acne, and those patents run for 20 years from a couple of years ago so they also provide a barrier for other people trying to enter the market."

The executive clarifies any patient trials underway must be posted to the US government website, and at the moment there are no other patient studies listed that are investigating the effects of CBD in skin diseases.

Chasing the right to make scientifically-backed health claims

He adds another key benefit of an FDA approval is the ability to make health claims. 

"Unless you do those clinical studies the FDA will not allow you to claim that the drug is useful to treat disease," he says.

"Unless you get that claim, the doctors are not allowed to prescribe the product and the insurance companies that essentially pay for our medicines are not allowed to reimburse patients for the cost of those medicines.

"There's good reason to do it because prescription drugs generate significantly more revenue than what that you buy at the chemist over the counter or on the internet - the price difference can be 500 or 600 per cent different between the two."

Callahan can draw inspiration from a company that has reaped rewards from its hard yards of clinical trials - GW Pharma, whose CBD-based epilepsy treatment product Epidiolex that was approved in late 2018.

"Because that's FDA approved they can sell that anywhere in the US without state restriction," he says.

So even if there was a backlash against medicinal marijuana in a given state, a green light from the FDA would mean Botanix is unaffected?

"That's correct. That's the benefit of putting in the effort and going through the FDA pathway," he replies.

It's a strategy that requires a lot of patience though, as well as capital. Last quarter Botanix spent $4.2 million on research and development, which certainly puts the $8 million raised last June into perspective. 

With a phase 1 study for psoriasis completed and phase 2 studies underway for acne and eczema, Callahan is aiming for commercialisation in 2021. Aside from treatment efficacy, Botanix is also studying the anti-inflammatory, anti-microbial and immunity effects of CBD.

"If you look at the scale of our organisation and what we've been able to achieve within 36 months of our existence, we've got two products almost through phase II studies and we've done it with less than 10 people. Most pharmaceutical companies have 50 to 100 people doing the same thing we're doing," he says.

"We've been efficient but it's meant we've had to work pretty hard and do some pretty long hours to get to where we are."

And what is the sales potential of these products? Callahan believes they will prove valuable from both financial and unmet needs perspectives.

"For patients there have been no types of drugs approved to treat acne in more than 20 years which is really surprising given the amount of science and knowledge about chemistry and biology that we have," he says.

"No one has come up with a new and effective way of treating a disease that most teenagers in the world will give at some stage in their life."

Roaccutane is a prime example of an existing drug on the market. It mostly achieves its desired outcome in treating acne, but has a long list of negative side effects.

"That drug  is close to 35 years old and unfortunately we haven't been able to discover anything that approaches its efficacy despite its side effect profile, and nor have we come up with things that are good enough but have really safe side effect profiles either.

"That's just one example across the skin disease spectrum it's the same with eczema and it's the same with psoriasis; there are very few drugs in development and very few options for patients. That's what we're trying to solve."

"With the exploding interest in cannabinoids we're now getting the recognition we potentially deserve because we have one of the most advanced development pipelines with cannabinoids amongst any company - we know a lot about the drug and we're moving quickly."

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