FOLLOWING its listing on the London Stock Exchange in May this year Oxford Cannabinoid Technologies (OCT) has seen more than £20m wiped off its market capitalisation.
With its stock price now sitting at 2.43p per share – less than half its listing price – Chief Executive Dr John Lucas says both he and his team have been left ‘shaking their heads’ at the market’s reaction.
The dismal stock performance is a mystery, says Dr Lucas: “No one’s more disappointed about the share performance than myself. Neil (Mahapatra) the Chairman and everybody in the company, we’re all just left shaking our heads because we’re doing everything exactly the same as we said we would do – or better.”
The pharmaceutical company is currently developing four cannabinoid-based compounds aimed at the massive US prescription medicine and pain relief market, worth an estimated $539bn in 2020.
Pharmaceutical Route To Market
By differentiating itself from other medical cannabis companies and strictly targeting the pharmaceutical market, and, by using synthesised compounds to bypass regulations, OCT aims to establish a foothold in the industry.
“We are producing or developing licensed pharmaceutical medicines, which is quite different from medicinal cannabis, which is unlicensed.
“We wanted to make drug products where we can have medical claims attached to, so we can say this is indicated for treating something, you can’t do that with medical cannabis. The long term value return on investment we think is far, far higher for pharmaceuticals,” said Dr Lucas.
However the ‘long term’ nature of OCT’s model may be what is working against its stock value. OCT is not due to bring any of its products to market until 2027, meaning it will not produce any revenues until that time.
Whilst OCT finished its most recent financial period with cash reserves of £14.63m, which it says will last mid-2023.
Dr Lucas continued: “So that will not take us to 2027, that will take us to the end of Q2 beginning of Q3 2023. And that’s when we said that it would take us to and we’re sticking by that; we’re on budget with all of our projects.”
In a previous interview with BusinessCann, OCT co-founder Gavin Sathianathan hailed the ‘global investor base of very patient capital’ it had managed to attract during its IPO.
Caught Up In Cannabis Hype
However, some investors appear to be not so patient. According to Dr Lucas, those who have now jumped ship may have gotten caught up in the ‘cannabis hype’.
“It depends on the investor,” He said. “The investors that I speak to, they all say ‘hey, I’m in it for the long run’. I’m not happy about the share price, and of course I can’t blame them. But, you know they bought into the programme.
“Initially, I think some of the early investors saw it as maybe the cannabis kind of hype that was ongoing for a while here in the UK, maybe they expected that, rather than really looking closely at the story and buying into that.”
In September, OCT signed a worldwide licensing agreement with Canopy Growth Corporation, giving it exclusive access to its library of 335 derivatives of cannabidiol (CBD), tetrahydrocannabinol (THC) and cannabigerol (CBG) alongside intellectual property rights to 14 patent families and associated product research.
Canopy Growth Agreement
This agreement will help accelerate the timeframe in which two of its compounds can be brought to clinical trials, leading some to speculate it was a reaction to its stock performance.
Dr Lucas denied this, stating that they had approached Canopy before the IPO, adding that while the development of compounds three and four will be accelerated, this does nothing to bring forward the 2027 revenue generation target.
However, according to Dr Lucas, who cited GW Pharmaceuticals as a key example, said pre-revenue biotech companies generate their value by ‘advancing through key milestones’, adding that it is ‘not a revenue-driven model’.
The next major milestone for OCT is due to happen next summer, around a year before its cash reserves are due to run dry, when the pre-clinical development of its two lead programmes are completed.
Share Price Out Of Our Control
By Q3 2022, OCT hopes to begin phase one clinical trials of its flagship products, allowing it to dose its first human patients.
Asked if he had a message to his investors, Dr Lucas said: “The message I want to shout out to them is we said what we were going to do, and we’re doing just that.
“The share price is out of our control,… but you know, what we can control and what we’re doing is what we said we would do, and that’s really important to us.
“We’re doing everything that we can to improve the share price, but when it comes down to it we can’t control the market.”
In its first financial results since going public, published earlier this month, OCT reported widening pre-tax losses of £3.2m in the financial year to May 31.
This marked an increase on the £2.12m loss it made a year earlier, representing a diluted loss per share of 0.504p. Its loss spike was largely due to £1.4m in exceptional costs relating to its IPO in May.
Throughout the period, OCTs research costs nearly halved from a year earlier, dropping from £812,591 to £445,400.
OCT completed a successful £16.5m pre-IPO fundraise in May this year and recently announced plans to dual list in the United States on the OTC QB Market – a mid-tier, over-the-counter US market, with admission expected within the next few weeks.
Main Picture: L-R: Neil Mahapatra, Dr John Lucas, Clarissa Sowemimo-Coker, Karen Lowe, Gavin Sathianathan, Dr Valentino Parravicini
