Creso Pharma (ASX: CPH) is looking to tap into the emerging psychedelics medicine market with the proposed acquisition of Canadian company Halucenex worth more than $7 million.
If successful, the deal would give Creso a foothold in the growing global medical market for psychedelics like LSD, psilocybin and MDMA estimated to be worth up to US$100 billion.
Creso would also become the first ASX-listed company to wholly own a psychedelic medicine company, building on its history as a cannabis-based medicine developer.
Based in Nova Scotia, Canada, Halucenex is a life sciences company focused on researching, developing and licencing novel psychedelic molecules for the global pharmaceutical and nutraceutical markets.
The Canadian company is currently focussed on progressing clinical trials to research the efficacy of psilocybin to treat and alleviate depression in individuals suffering from post-traumatic stress disorder (PTSD) and other mental illnesses.
Halucenex operates a 6,000-square-foot treatment facility in Nova Scotia, comprising a laboratory and 18 treatment rooms dedicated to providing psychedelic-assisted psychotherapy.
The psychedelics company is awaiting receipt of a Controlled Drugs and Substances Dealer's License from the Canadian government, which will give Halucenex the ability to conduct a phase 2 trial into LSD, psilocybin and MDMA.
"This is a major milestone for Creso Pharma and markets our evolution into a broader based pharmaceutical business," Creso non-executive chairman Adam Blumenthal said.
"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."
Halucenex hopes to be an industry leader in psilocybin research in Canada, thanks to its access to the drug.
With high barriers to entry, and a bottleneck in the supply chain of pharmaceutical grade psilocybin, Halucenex's access to one of the largest supplies of the drug gives it a leg up.
The company has an agreement with psychedelic medicine manufacturer Psygen Industries, guaranteeing Halucenex supply of 11.6 grams of synthetic psilocybin an amount sufficient to take the company to the conclusion of a Phase 3 trial.
The company says synthetic psilocybin is preferred over naturally sourced psilocybin in a clinical setting, as the naturally sourced drug from mushrooms is known to have a greater inconsistency of potency and therefore dosage.
Further, Health Canada only approves trials if companies have access to the synthetic version of the psychedelic and Halucenex is one of only 11 companies in Canada with access via Psygen.
"Halucenex has an early advantage in that it has applied for the Controlled Substance License, it has a laboratory for research on psychedelic compounds and a medical clinic to conduct micro and macro dose trials," Halucenex founder and CEO Bill Fleming said.
"Our ability to design a clinical protocol and fast track a phase 2 Treatment Resistant Depression clinical trial will allow us to be one of the first companies to demonstrate the efficacy of psilocybin in Canada."
Under the deal, CPH will pay $500,000 in cash plus, 29,251,795 Creso shares to acquire Halucenex, which at today's share price values the acquisition at more than $7 million.
CPH will also hand over more than 17 million performance shares that will fully convert into fully paid ordinary shares if the Dealer's Licence Amendment goes through within 12 months of settlement of the acquisition.
The deal still requires the completion of due diligence, and shareholder and regulatory approval for it to be completed.
Creso intends to seek shareholder approval for the acquisition at the company's upcoming annual general meeting expected to be held in April 2021.
Shares in CPH are up 0.95 per cent to $0.21 per share at 11.12am AEDT.Never miss a news update, subscribe here. Follow us on LinkedIn, Instagram and Twitter.
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