The MedLab stock (ASX:MDC) is an ASX-listed cannabis biotech company with a focus on providing therapeutic pathways for chronic diseases.
Medlab Clinical operates primarily out of Australia—with organic chemistry set up in Southern California and additional offices in Malta and London—and has a market capitalisation of approximately $100 million at the time of writing.
They have multiple Office of Drug Control (ODC)-issued licenses, including the right to import and export, and licenses for cannabis research, sale and supply.
MedLab is currently involved in the development of numerous medicinal products targeting everything from antibiotics to insulin, as well as therapies aimed at treating conditions such as obesity and depression.
NanaBis is the lead asset, currently in Phase 2 clinical trials for the treatment of chronic cancer pain. It is on the pathway to drug registration and, potentially, global market access.
MedLab believes that ongoing cancer-related pain is one of the market's most significant unmet needs and that many patients have already been self-medicating with illegally obtained cannabis for years. The accumulative data to date demonstrates opioid reduction, improved quality of life, superb safety profile, and eery fast-acting through the patented nano delivery mechanism.
MedLab stock's fundamental difference is their science-centric strategy. Everything they do is driven by science, clinical trials and data. They operate their own OGTR-approved laboratory, meaning they own 100% of the IP developed, and with 7 granted patents, 8 under examination and 19 that have been filed, this could result in very significant commercial value.
The company takes a research-driven approach to the market and has a diversified product offering which already includes several cannabinoid products such as NanaBis and NanaBidial, and now – nanoCBD.
The Total Addressable Market
Short term (or acute) pain is brief and acts as a warning for the body to seek help. Chronic pain is defined as pain that continues, usually, for more than three months, post any injury or operation. Chronic pain can result in sleep deprivation, depression, irritability and fatigue, and may affect a person's personal and social relationships.
Chronic pain is defined as pain that continues, usually, for more than three months, post any injury or operation.
When you combine the fact that chronic pains are one of the biggest markets in the word, and overlay that with the opioid crisis and the fact there is mounting evidence that medicinal cannabis could well be the 'exit drug" (patients way of moving off opioid and onto medicinal cannabis, then you gave the perfect storm for the development and market released of a global blockbuster drug.
Occupying the grey area between food and pharmaceuticals, a nutraceutical product is a food or supplementary product that not only can be a part of one's diet but can also assist in treating or preventing disease and illness. The nutraceutical umbrella covers personal care, diet, fitness and medicine.
Thanks to the passing of the Farm Bill of 2018, and farmers ability to cultivate hemp, Forbes estimates that the market for CBD-infused products will reach $22 billion by 2022.
This is a key market for MedLab for two key reasons:
- Dr Sean Hall has been there and done it, having sold Bioceuticals to Blackmores in 2012
- The MedLab range is perfectly positioned to ride the massive CBD-derived product wave and has already secured significant distribution deals with Australia's leading pharmaceutical chains
In addition, and potentially even more important, it puts significant revenue on the board, and with solid margins, enables MeldLab to occupy a very unique position in the cannabis industry. A company generating significant revenue AND margin.
The Cannabis Assets
Medlab is fortunate enough to have two pathways to the commercialisation of its medical cannabis product range. The primary pathway (and focus) is the path to full registration. The registered drug pathway is a long, tedious and expensive one, but with hyperbolic returns on a successful outcome.
In the short-term, the company aims to maximise on the opportunity to gain market share and revenue through the Special Access Scheme (SAS) opportunity for compassionate use. Global opportunities exist through partnerships and distribution agreements that can accelerate market penetration.
NanaBis is MedLab Clinical's flagship cannabis-based pain management product and is made from a proprietary 1:1 blend of highly purified cannabidiol (CBD) and tetrahydrocannabinol (THC) molecules.
This formulation is then delivered to patients using the company's patented sub-micron delivery platform, NanoCelle, in the form of a buccal spray that is applied to the inner cheek.
NanaBis was developed as a pain management alternative to traditional opioids—particularly for patients suffering from advanced cancer—and is currently undergoing clinical trials with the Oncology Department of the Royal North Shore Hospital, Sydney, led by Professor Stephen Clarke.
The Phase 2 trials are well underway, with endpoint and outcome due in December 2-019, and the publication in prominent Medical Research Journals due in February 2020. Phase III trial design is currently underway which, when completed, adds value to the partnership potential, and does ultimately provide the option to run the Phase III heavy-lifting internally.
NanaBis is the number one asset for the company, given its potential TAM and the fact that it tackles chronic pain in the rapidly expanding ageing population. It is also currently in an Observational Study, completely self-funded, which will track how NanaBis is used by doctors, analyse patient feedback and gather valuable data intended to support the effort to navigate global regulatory pathways.
NanaBidial is a medicinal cannabis product that has been indicated for the treatment of seizures, cancer-induced nausea and vomiting (CINV), and mild anxiety.
It contains 20mg/mL of Cannabidiol (CBD) and 1mg/mL of delta-9-tetrahydrocannabinol (THC) in an 18:1 formulation and is delivered to patient's buccal membrane using the company's patented NanoCelle sub-micron spray.
Like NanaBis, the drug is also available to Australian patients under the government's SAS program, and in August 2019 the company announced the successful completion of phase 1 trials conducted at Scientia Clinical Research.
Data taken from the study has proven highly promising, having already demonstrated the safety of NanaBidial, as well as its fast-acting qualities for absorption and metabolism in a healthy human cohort.
NanoCelle, is the company's patented sub-micron delivery system. This takes the form of a mouth spray that is applied to the buccal membrane—also known as the inner cheek—which has proven to be highly effective particle delivery method for cannabis-based medicines.
At the end of last year, the company published preliminary results from its research into the technology, which found that it delivered a consistent uniform pattern in nanoparticle form.
As a result, Medlab has already identified multiple potential alternate uses for the NanoCelle platform, including cosmetics, food additives, side effects reduction, and as a means of repurposing both generic and stronger, poorly absorbed drugs.
The pharmaceutical delivery platform market is also expected to continue expanding in the coming years, with estimates from the company predicting that its global value—which was pegged at $1.2 billion in 2018—will increase at a CAGR of 6.4%.
The Nutraceutical Range
Dr Sean Hall founded Bioceuticals which was sold to Blackmores in 2012. Bioceuticals, still to this day, command premium pricing and occupy strong efficacy-perception in market. And so early on, the company decided to target the increasingly lucrative Vitamins, Minerals and Supplements (VMS) Market.
MedLab now sells a product range of 34 premium nutraceutical formulations, many of which are offshoots of the generation of 28 patents the company is currently working with today. The nutraceutical range is both scientifically validated and professionally recommended for providing therapeutic support for a range of conditions.
Earlier this year the company also announced several distribution deals with the major wholesaler's Priceline API and the Symbian TerryWhite Chemmart Group.
The agreements will see MedLab self-branded nutraceutical products range—known as NRGBiotic and MultiBiotic—stocked in more than 4,500 pharmacies across Australia, giving it a considerable domestic footprint. This also resulted in a considerable increase in cash outflows, particularly in relation to the acquisition of inventory.
The latest news relating to the Medlab stock
Medlab launches its nutraceutical range in the USA – Medlab founder, Dr Sean Hall, has had massive experience and commercial success with Bioceuticals. Now, with his new product range, he aims to enter the lucrative American market.
Medlab's clinical study on the safety profile and absorption capacity of its NanaBidial delivers stellar results – this is Medlab's second key PK study of NanaBidiol
Medlab to enter Asia with NanoCBD – Medlab Clinical received an export order for the first shipment of its NanoCBD product to Hong Kong.
Medlab to bring nutraceutical range to the UK – Medlab Clinical has signed an exclusive distribution agreement with Cultech Ltd to distribute its nutraceutical products ORSBiotic™ and NanoCBD™ throughout the UK.
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Should I buy Medlab stock?
Medlab Clinical is built on a solid commercial approach
- OGTR-approved laboratory the source of a range of innovative products
- Nutraceuticals dual commercial approach of self-branded and white-labelled
- Pharmaceuticals short-term commercial strategy via compassionate programs with long-term value creation through the registered drug pathways
Medlab Clinical is already generating revenue from all it's product channels
- Nutraceuticals range now delivery nearly $3 million in revenue per quarter
- Medicinal cannabis products in the market with nearly 1000 prescriptions to date
- Huge revenue growth expected in the coming years as two monster markets are simultaneously targeted
Medlab is on the Registered Drug pathway for their blockbuster NanaBis drug
- NanaBis targets chronic pain which has an annual TAM in the hundreds of billions
- Phase II study trials offer the company the opportunity to partner (most likely) or run the gauntlet with the Phase III heavy lifting
- Unique delivery mechanism – Nanocelle – creates hyperbolic growth opportunity for NanaBis, given the effective delivery results to date
Dr Sean Hall – he has been there and done it. And has built a very impressive team to support the business opportunities
- Proven track record having exited Bioceuticals to Blackmores
- Already delivering on the next generation of nutraceuticals significantly diversifying the financial risk of the company
- Has recruited and assembled a very strong, experienced, management team.
The Catalysts that should move the Medlab stock price
- NanaBis Phase II clinical trial results due December 2019
- Note that the results may not be published until February, as the company is in talks with very well known, and industry recognised medical journals.
- NanoCBD HOA and distribution agreements
- Nutraceutical partnership and distribution announcements and updates from the Terry White and Priceline wholesale agreements
Disclaimer: Past performance is not an indicator of future performance.
Medlab Clinical's Financial Overview
Medlab took several huge strides forward this year, delivering stellar financial results for Q1 and Q2 2019. In this period, Medlab secured a Heads of Agreement with the Canadian Pharmaceutical company, Pharmascience, and Thai-listed Mega Lifesciences, for the distribution of NanaBis.
The company also recently launched a new medicinal cannabis product in the US, NanoCBD, which expected to be available in further global markets by the start of 2020.
NanoCBD is a hemp-based CBD product that is currently available for purchase in the US market. The drug is also expected to be available in further global markets by the start of 2020, having already successfully completed the research and development phase, along with securing HOA agreements.
While its reach is still currently limited, NanoCBD has the potential to become a huge revenue channel for the company, as the market for CBD—which was supercharged by the passing of the 2018 US Farm Bill—is expected to reach more than $20 billion in value by 2024.
Q2 also saw the rollout, placement, and commencement of marketing for its self-branded nutraceutical range products, NRGBiotic, into more than 4,500 Priceline and TerryWhite Chemmart pharmacies. This has resulted in a significant increase in revenue outflows, particularly in relation to the acquisition of inventory. And this leads us to the company's latest results for Q3 2019, for the period ending September 30th, 2019.
Receipts from customers fell during the quarter. However, when one takes a closer look, this is not down to a slowing of sales, but rather a timing issue with thew pharmacies themselves. Ultimately a lot of the revenue was front-loaded into the prior quarter, and with the reordering and inventory replacement cycles, Medlab finds itself being the victim a rolling 90 timing issue with the pharmacy chains.
With the previous quarter essentially operating as the pipeline fill for the Banner orders, the revenue growth was also compounded by compassionate pricing for patients taking part in the Phase 2 NanaBis observational study. This program is of prime importance to the company, with NanaBis being the primary asset. The company deliberately reduced the NanaBis pricing for the participants to lower any potential barrier to entry, and ultimately, to help people. Giver's gain!
I don't want to take our eyes off the prize. We're very particular, we know NanaBis is a significant portion of cannabinoids used in all pain. We know it's predominant with the doctors that matter in cancer pain, in neuropathic pain.Dr Sean Hall, Medlab CEO
Their cash used in operating activities was up again, however, this was primarily due to the payment for inventory, which at $2.2 million for the quarter, was an increase of 16% on the previous quarter. That combined with an 8% decline in top-line revenue contributed to the quarter's cash burn's bloating.
Medlab ended the quarter with $6.9 million in the bank, however, this excluded a $2.1 million R&D grant the company received in October. With the guidance of slightly higher sales for the coming quarter, we believe the company has enough cash in the bank to support another 2-3 quarters before they will have to make a decision on a capital raising.
However, with the Phase 2 results of their NanaBis study due early in Q1 2020, there is always the option of a licensing (partnership) deal which would bring short-term cash flow to Medlab in the form of milestone payments, and transfer the associated costs of a heavy-lifting Phase 3 trial to their licensee. Definitely an area for investors to keep an eye on.
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