The Green Organic Dutchman: The Cannabis IPO Everyone is Talking About is Here


To get a brief understanding of the growth projections for the burgeoning cannabis industry, you can take your pick of analysts and their forecasts for the exploding space.  Growing from about $8 billion in 2017, Grand View Research is calling for the global market to reach $55.8 billionby 2025.  The Brightfield Group predicts $31.4 billionby 2021.  Arcview Market Research and its partner BDS Analytics think spending on cannabis worldwide will reach $57 billionby 2027, with $47.3 billion of that generated in North America.

That type of growth is underpinned by the public shift towards supporting legalization of marijuana in the United States and the pledge of Canadian Prime Minister Justin Trudeau to make adult-use of marijuana legal, which is expected in the second half of the year.  This has set the stage for perhaps the most anticipated initial public offering in the industry, as The Green Organic Dutchman (TGOD)joins the Toronto markets next week.

When Canada becomes only the second country in the world to legalize recreational cannabis, the market is expected to surge and rival the country’s beer industry.  According to Deloitte, the retail Canadian cannabis market will reach $8.7 billionwhen full legalization takes effect, putting it nearly on par with the $9.2 billionCanadians spent on beer in the 12 months ended March 31, 2017.

The IPO also comes as Canada’s Bill C-45 is being reviewed and the celebrated cannabis culture day of 4-20 is upon us.

TGOD has reportedly already topped it targeted range of raising C$75 million – C$100 million in an oversubscribed raise, indicating investors are keen on getting a piece of the cannabis grower.  In fact, TGOD has raised more than $160 million and now has over 4,000 shareholders and it’s not even public yet.  As it built its name as a private entity, TGOD structured itself with leadership seasoned in cannabis and the capital markets and a clear business model that attracted one of the biggest names in the business as an investor.

There’s More to a Name

“Green” and “Organic” are not just part of TGOD’s name, they’re part of the company’s culture.  TGOD, a licensed cultivator under Canada’s Access to Cannabis for Medical Purposes Regulations (ACMPR), prides itself on producing high quality, pharma-grade, organic cannabis with sustainable, all natural principles.

Organic means TGOD will grow all its cannabis in soil without using pesticides, herbicides or synthetic fertilizers.  The marijuana will be grown at TGOD’s two hybrid facilities, one in Hamilton, Ontario and the other, much larger facility in Valleyfield, Quebec.  Once construction of the fully funded facilities is complete, TGOD will have 970,000 square feet under roof with a capacity of 116,000 kilograms (255,736 pounds) of high-grade cannabis per annum, easily making it the biggest in producer of organic cannabis in North America.

The facilities have other “green” qualities with respect to building standards, primarily being LEED certified, which typically costs more but delivers benefits on the back end, including energy savings, environmental sustainability, superior building products and fewer emissions.  Aurora Larssen Projects, a unit of industry giant Aurora Cannabis (TSX: ACB) and world-renown greenhouse engineering and design firm, and Ledcor Group, a multi-faceted construction firm with over $3 billion in annual revenue, are handling oversight and construction of the facilities.

This is all great, but this isn’t philanthropy.  Investors will be glad to know that cannabis consumers are open to paying higher prices for an organic product. Page 4 of TGOD’s March corporate presentationshows premium organic cannabis to demand a 26% premium over non-organic at C$11.40 per gram.

That’s particularly relevant when considering that at 116,000 kilograms capacity the 26% premium works out to C$1.3 billion in sales.

Aurora Larssen is also overseeing the construction of Aurora Cannabis’ vaunted 800,000 square-foot grow facility at the Edmonton International Airport.  The project is heralded as the most advanced cannabis facility on the planet and surely will provide some experience for TGOD to lean on in the future, as it only makes sense that TGOD and Aurora will continue to work together (more on that relationship in a bit).

High-Grade, Low-Cost Cannabis

The location of the facilities isn’t haphazard.  Cumulatively, Ontario (13.4 million) and Quebec (8.1 million) are home to over 60 percent of the 36 million people in Canada.  Ontario, the home province for Mississauga-based TGOD, is the most populated province in Canada.  Growers have flocked to Ontario to have access to the dense population, but will face a common challenge in the high cost of electricity.

TGOD has overcome this obstacle at its 150,000 square-foot Ontario plant by partnering with Eaton Corp., a $34 billion NYSE-listed power management company.  Through Eaton and an agreement with Hamilton Utility Corp., a 6 megawatt combined heat and power, or co-generation, system will be used to capture and recycle carbon dioxide.  The partnership and CHP system drove TGOD’s cost of electricity down by more than half, from about 13 cents per kilowatt hour to around 5 cents per kWh, paralleling some of the cheapest electricity in the country.

The Ontario facility, which received its cultivation license in August 2016 and sales license in August 2017, sits on 100 acres and is currently undergoing a 143,000 square-foot expansion to build upon a 7,000 square-foot beta test.  When construction is completed in the fourth quarter, capacity will be set at 14,000 kilograms.

The monstrous 820,000 square-foot facility built on 72 acres outside of Montreal has a completion target for the second quarter of 2019.  Quebec is one of the lowest power rates in Canada, also coming in around 5 cents per kWh for TGOD thanks to an economic development rate with Hydro Quebec.

The energy consumption of the locations go hand-in-hand with reduce costs and a logistical advantage, not to mention an improved customer experience with same-day or next-day delivery. Nothing is coincidental; it is years of experience from the leadership team at TGOD to meticulously develop a high-quality, low-cost cannabis producer.

To wit, infrastructure has already been, or is being, built or acquired for TGOD to expand from exclusively a plant grower into other high-growth markets, such as oil extraction (in Ontario) and genetics and breeding (in Quebec).  These initiatives further embody the company’s mantra of “organic in + organic processes = organic output” and their desire to be the go-to brand for not simply the plant, but oils, pharmaceuticals, edibles, beverages, a robust patent estate for licensing and other high-margin revenue channels.

The Aurora Connection

Aurora Cannabis’ unit working on the design of the cutting-edge TGOD facilities is only a sampling of the relationship between TGOD and ACB.  Aurora, a $5 billion company by market cap, made a $55 million investment in TGOD in January, taking its 17.6% ownership of TGOD via the purchase of 33.33 million shares at a price of $1.65 each.  Aurora didn’t participate in earlier TGOD private placements, instead waiting to pay a higher price once the company was more developed, an interesting decision that lends a great deal of validation towards the direction and management of the company.

A company like Aurora is moving with a purpose when it makes the type of investment like it did in TGOD. For starters, the deal is structured so TGOD received a purchase order from Aurora for 20 percent of future sales. With Canada expected to face a supply shortfall initially with adult-use legalization (production will eventually catch up), Aurora is making sure it locks down a high-grade cannabis supply chain.    This works both ways as TGOD has a well-heeled customer helping fund opex and potential access to important distribution and sales channels.  The investment agreement also makes consideration for Aurora in other important facets, including giving Aurora the right to participate in future financings to maintain its percentage ownership and options to acquire more of TGOD at a 10 percent discount to market upon meeting certain milestones and potentially even take a board seat.

Add it Up and IPO was Never a Prettier Acronym

There will certainly be comparisons made to TGOD and the initial public offering of MedReleaf Corp (TSX: LEAF), which previously was the biggest marijuana IPO in history when it came public last June.  Shares of LEAF stumbled initially, causing some to ridicule the industry and its valuations, but have recovered to more than double from the $9.50 IPO price since and a $2.0 billion valuation.

TGOD has done everything right when it comes to preparing for the IPO.  Every round of financing has come at higher valuations and every share sold has a six-month restriction upon it.  The only free trading stock will be the shares issued for the IPO with a $3.65 cost basis.  This is a blue chip type strategy that means there’s no threat of early investors dumping stock on IPO day or for 180 days after it for that matter.  TGOD will have at least six months to build its public identity, which happens to dovetail perfectly with the value-adds of meeting construction targets for it facilities.

As heavily anticipated as the LEAF IPO was, the going public of TGOD has investors talking even louder about the potential of the company.  Perhaps it’s the regulatory landscape and timing with legalization sweeping across North America.  Maybe it’s the incredible retail shareholder support already.  It could also be the facilities under construction, or the management or even the large investment by Aurora Cannabis.

More than likely, it’s the combination of all of these things that have led to The Green Organic Dutchman capturing the attention of investors of all sizes that are living and investing in the dissolving of prohibition, an opportunity that will never come around again.













Article written by Ben Rabizadeh


MoviePass has four attractive attributes which serves to nullify most bear arguments.

MoviePass will be worth $10B if they reach 20M subscribers and if given a $500/subscriber valuation.
Bears who only consider the math of the business model as it stands today, either don’t understand what makes a good investment or have ulterior motives.

The most legitimate risk which deserves discussion is that MoviePass trades through a proxy, Helios and Matheson Analytics (HMNY), rather than on it’s own.

There has been much written about MoviePass and it’s launch of it’s $9.95unlimited subscription plan since August 15th, particularly in regards to it’s business and pricing model. The bear thesis has been debated here, here, and most recently here with the discussion surrounding the economics of a $9.95 unlimited plan.

In this article I will present you with four key MoviePass attributes which all-but guarantees it’s success and which renders all debate about pricing and business models completely moot. But before I do that, let’s be clear about why it’s a great folly to try and calculate the profitability of the current business model:

  1. We don’t have the required data: No matter how much research we do, we will never be privy to the numbers required to make an accurate determination of how the economics of the business are doing today. There are just far too many variables involved and in most cases, bears are making assumptions which cannot be relied upon. This deserves a whole separate article on it’s own.
  2. Business models change over time: It’s naïve to believe that today’s business model will not change. As the company achieves critical mass and scale, business and pricing models can rapidly change; often without additional significant capital investment. Can you even think of any tech company that isn’t entirely different today than it was at inception? In short, when we invest in MoviePass, we are not betting on today’s business model. In a moment, I’ll tell you what we are betting on.
I have a confession to make. I am a business-owner of a successful dating site, but I never would have gotten involved if I knew the precise math of the business model going into it. Diving too deep into the numbers is what I call “getting lost in the weeds”. Instead, I made an investment decision to purchase this dating site based on:
  1. The Brand
  2. The Problem Being Solved (and market size)
  3. The Management
  4. The Moat
Over the years, there have been offers made to purchase my company from two different types of investors. Firstly, you have those who appreciate the value of the above four attributes and have a vision for growing the business. These types of potential buyers understand the true value of the company and offer fair prices. Then you have potential buyers who make an offer based on today’s economics alone. They look at your current pricing, revenue and expenses, and try to justify a low-ball offer. These types of investors are just trying to take advantage of you because they want to get a good low price; but they know full well the true value of the company lies in the four attributes listed above. What can we learn from this? Wall street is full of sharks and analysts who will issue bullish and bearish targets based on math alone. But this is just for show and perhaps often involve ulterior motives. Behind the scenes, any serious wall street investor is making their decision based on the four above attributes – particularly the strength and experience of management.
Now, let’s break down how MoviePass does in these four areas.

The Brand: MoviePass

MoviePass is already a national brand as evidenced by the constant non-stop stream of articles, interviews, and other media coverage it garners. It has a cult-following evidenced by the dozens of YouTube testimonials and growing social media footprint; and we can all agree MoviePass is a concise descriptive word with simple yet powerful branding elements which make it suitable for continued scaling. One can discuss other potential competitive brands such as Cinemark’s Movie Club; but such brands can never compete with MoviePass because their services are for their theaters only, so national branding campaigns will be cost-prohibitive for such brands as their product is not available in every geographical part of the country.
The Problem Being Solved: Declining Movie Ticket Sales Some bears will say declining movie sales is a negative. Oh but it’s not. This is what makes MoviePass the perfect business at the right time. There is no better market condition than declining sales for MoviePass. Why? Because once MoviePass reverses sales trends at the big chains, like AMC (AMC), Cinemark (CNK), and Regal (RGC), they will have no choice but to cooperate with MoviePass. Infact, I am quite sure their shareholders will demand it.

Management: Mitch Lowe from Netflix (NFLX) and Redbox

Can it get any better? If we didn’t have CEO, Mitch Lowe, I would have never invested a single penny in this company. Savvy investors know that the #1 criteria in an investment decision is management. Mitch has relevant experience as an executive at Netflix and has proven himself at Redbox. Both of these businesses had pricing models which perplexed bears for years as the companies kept on growing larger and more profitable. In short, Mitch Lowe is an expert in pricing products for the movie consumption industry.

The Moat: A $1B Behemoth

I’ll discuss this more below, but I estimate MoviePass will need to invest $1B to reach 20M subscribers as projected by Credit Suisse. This large investment is actually a good thing. It’s a moat – and a big one at that. What other company will be willing to invest $1B to compete with MoviePass?
So now we have the fundamentals for a great long-term investment. MoviePass has the brand, they are solving the right problem at the right time, they have the right management, and they are building one insurmountable moat. Now let me explain why these attributes trump any bear argument:
“AMC won’t share they said so!” –> refer to “The Problem Being Solved”
“Look, more competition from the theaters themselves!” –> refer to “The Brand” and “The Moat”
“But the math doesn’t add up!” –> so you think with a national brand with 20M subscribers, with shareholders of large chains demanding they cooperate with MoviepPass, with experience and proven management, and with a large moat, that this company cannot figure out how to change the math in their favor? And that’s the crux of the matter. When a company has these four attributes, they can and will change the math in their favor! A manipulator or one not knowledgeable of how true investments are made, will only tell you about today’s math; but they won’t tell you about these big four attributes which is the basis for which big investment bets are made by Wall Street sharks.
Don’t believe me? Let me just give you a quick example of how they can make the math work:
  • They can adjust policies (such as no more double-watching movies)
  • They can create additional revenue streams (Mitch Lowe just recently announced in this interview $2/ticket revenue from 4 movie studios) such as non-movie related in-app advertising, merchandise sales, restaurant revenue share deals, and they can pit Lyft against Uber for additional incremental revenue.
  • They can raise prices at some point if needed
  • They can offer other subscription plans for IMAX, 3-D, etc or even a $4.99 one-movie-a-month plan which targets SELDOM movie-goers (this also deserves it’s own article)
It’s important we understand that all of these business model changes and many things which we cannot possibly imagine yet are possible because of the four strong attributes I’ve listed above. Did anyone think Netflix would be a streaming company a few short years after they launched their DVD mailing business? It is therefore a great folly to make a long-term investment decision based on today’s math.

Now a few loose ends we need to cover

Yes, MoviePass may need to raise $1B before reaching profitability, but this isn’t a bad thing! Why? Because they have a strong chance of reaching profitability after this so what that $1B will then represent is the moat, the barrier to entry. No one will want to invest this amount of money to compete with them. So what bears see as dilution, I see as investment. Bring it on. Why $1B? KISS. Keep it simple stupid. MoviePass has indicated the acquisition cost is about the cost of 3 movies before a subscriber will settle into 1 movie a month. To be conservative, we’ll round up the $8.60 national ticket sale to $10, multiply by 3 and add another $10 for overhead and cost of initial debit card. That’s a cost of $40 per subscriber before he breaks even or become profitable. Multiple that by 20 million and we get $800M. To be safe throw in another $200M to round up due to cost of overhead which we surely could be under-estimating. That’s an nice round $1B moat. This is a conservative number. If the rapid flow of deal-making continues, there is a possibility this number may come in much lower.
But didn’t Ted Farnsworth say in this interview, that the company will be break-even in 60 days? Well, yes and no. One needs to realize this 60 day comment was not made in a press release or in an SEC filing; it was made in conversation. That means to properly understand it, we need to understand the context of the comment. Here’s what I saw:
  1. Ted was insisting on making a point that the company will be “self-sufficient” in 60 days
  2. The interviewer kept pushing him in a corner and he finally agreed with the interviewer that this meant cash-flow neutral
  3. Q1 are the “dump months” in the movie industry, AKA slow season
  4. The company recently collected significant revenue from upfront gift-card sales and annual sales
In short, I believe Ted was trying to say that the company will be “self-sufficient” meaning not requiring outside financing during slow season. They will have cash in the bank from upfront sales, and reduced expenses during slow season in order to be cash-flow neutral. We can see the market absolutely agrees with this assessment because otherwise, the stock would have instantly shot up above $20 and kept it gains. This particular interview was a turning point for the stock in recent days as it was filled with additional juicy nuggets. Infact if you haven’t seen this interview, you should. But make no mistake, the company will need additional financing after slow season is over – or perhaps even before as their rate of growth is accelerating. Also, regarding a cash-flow neutral situation, do not expect to see this in EBITDA because upfront revenue from annual sales are pro-rated and listed under ‘deferred revenue’.

How much will MoviePass be worth?

At 20M subscribers, MoviePass will have enough leverage and enough flexibility to change their business model as they see fit to achieve profitability. Further, they can enter streaming or other business models which have higher margins. Netflix is valued at ~$800/subscriber. At just $500/subscriber, MoviePass will be worth $10B.

But there is just one catch!

We’ve talked about MoviePass but we haven’t talked about Helios and Matheson Analytics, Inc (NASDAQ:HMNY). There are some risks with this namely:
  1. We are investing through a proxy
  2. HMNY has it’s own overhead burning cash on RedZoneMap and other activities
  3. CEO Ted Farnsworth has some unusually high share bonuses based on the success of MoviePass
It would be cleaner and better for investors if we can invest only in MoviePass. This may happen via an IPO or through a reverse merger (in which case I’d like to see the remnants of HMNY operations closed, spun-off, or sold which I actually believe is a distinct possibility as I’m sure Ted is not blind. He knows where the money is and it’s not in RedZone Map). But alas, we can only invest in HMNY for now. That being said, you can do the math on a $10B valuation. Even with a total of $1B worth of dilution, this stock can ultimately head over $100 (or maybe just $12 if we get very bad terms on future financings).
There is much more to come which can’t be covered in this one article but I can tell you something else. Over the last few months, I’ve developed a method based on publicly available information which accurately projects the MoviePass subscriber count before the company makes their milestones public. Those who follow me on Stocktwits know that with a seemingly uncanny ability, I was able to forecast almost to the day when the company hit 600K, 1M, and 1.5M subscribers. It’s a simple matter to make this prediction yourself. All it requires is an excel sheet, a careful look at SEC filings, and a careful look at other public data. Things change daily, but based on the popularity of their product as of today, they are on track to reach 2M subscribers by the first week of February. This is not an official forecast and the date will change as we get closer but stay tuned. Infact, these data also show a possibility of reaching 5M subscribers by August and 10M subscribers by the end of the year. It’s too early to know for sure but the data is leaning in that direction.
So in summary, it’s a folly to calculate the economics of the MoviePass business model as it stands today. People who tell you this just do not understand what makes a good long-term investment or perhaps they have an ulterior motive. Long investors should have peace of mind that with four strong attributes in our back pocket, the only metric we need to worry about now is subscriber growth. With subscriber growth comes leverage, and a whole wealth of opportunities for monetization.
Credit: Joshua Kim and Ben Rabizadeh

Investment Conclusion

The online lending industry has been red hot this bull market in terms of origination growth. Companies started coming public in 2015. The big names are Lending Club (LC) and OnDeck (ONDK). However, the post-IPO performance has been train wreck for a number of one-off reasons, pushing the valuations for these two online lending pioneers to mind-boggling lows. Now is the time for savy value investors to come in and swoop up these “next-gen” business models that will be paving the way forward in the industry for decades to come. We expect shares of ONDK to double to $10+ equal to a reasonable 3x current book value. LC’s revenue is set to double to over $1 billion by 2020, which we expect to also cause the share price to double to $12+ equal to only 2.5x revenue.

Online Lending Industry Overview

Lending Club and OnDeck Capital debuted their IPOs in 2015 presenting growth investors with an attractive opportunity in online lending. One company is a pioneering marketplace lender serving consumers, while the other is a balance sheet lender transforming into a licensing technology serving small businesses. These two companies (and others) got their start during “perfect storm” conditions for entrepreneurs targeting financial services. Now, public and private market investors increasingly have their choice of lending businesses that are rapidly disrupting the vast credit landscape. Combine these ingredients – a favorable backdrop and a large addressable market – and you get a long runway of opportunity ahead as users increasingly turn to alternative channels in both consumer and commercial lending. The lending market is undergoing one of the most significant transformations in its history.

Here are eight key themes to focus on:

• The consumer lending landscape continues to expand, with more product offerings and broader participation from prime and near-prime consumers.

• It is not just about the consumer segment anymore, as online small business lending takes its place on center stage. • Social signals and other unstructured data sets are transforming conventional credit analytics for both balance sheet lenders and marketplace platforms.

• Institutional investors are now the dominant source of lending capital, replacing the “peer” in marketplace models and de-risking on-balance sheet models.

• The fluid and evolving regulatory environment remains an ever-present backdrop for investing in the lending sector.

• Three dominant business models are emerging – marketplace and balance sheet lending; both are viable and compelling, but there is also the opportunity to license technology.

• Public market investors now have a choice to make in terms of allocating their capital to “next-gen” online lenders versus “old guard” incumbents.

• Capital flows in the private markets have been brisk, with pre-IPO lenders garnering the attention of well-heeled, cross-over investors.

We see the ingredients of a “perfect storm”. The financial crisis and the Great Recession prompted contractions in both consumer and business credit, leaving scores of individuals and small businesses with no place to turn for loans. At the same time, the ensuing and prolonged low interest rate environment has fixed income investors clamoring for new opportunities to generate returns. In tandem with these structural changes, the rise of social signals and advances in technology have led to incremental, non-traditional signals that the next generation of financial services companies can use to better evaluate lending decisions.

Is $12 trillion large enough? The credit markets are substantial, and the current crop of next-generation online lenders is just beginning to scratch the surface. We believe there is significant opportunity for multiple lenders across several verticals to deliver continued strong growth for the foreseeable future.

Consumer lending has gone mainstream. Online-based lending has moved well beyond the subprime consumer segment and high APR, short-duration loans. New players, such as Lending Club, are addressing prime and near-prime customers with more reasonably priced, longer-dated installment loans.

Small business lending takes its place on center stage. The SBA is a resource for small companies seeking credit, but not for the owners of “mom and pop”, asset-light businesses. OnDeck estimates there are ~28 million businesses in the U.S. that do not qualify for an SBA loan and have been abandoned by community banks and credit unions (e.g., the local pizza shop or dry cleaner).

Lending Club – 2Q 2017 Earnings Recap

After what can best and only be described as a rough run for the last year or so for the team at Lending Club, things appear to have picked up some as of the marketplace lender’s latest quarterly earnings report. The firm logged the second-highest quarterly revenue in its history, a situation that had the firm’s long-concerned investors sending the stock up 8% in after hours trading. Lending Club reported a net loss of $25.5 million, or -$0.06 per share, compared with a loss of $81.4 million, or -$0.21 per share, a year earlier.

By the numbers, the performance was also in line with what investors wanted to see — revenue was up 35% to $139.6 million during Q2, a solid beat on the analysts’ consensus estimate of $136.4 million. Originations returned to growth in the second quarter, up 10% to $2.15 billion. Meanwhile, operating expenses fell by 12.5% to $165.1 million in the quarter. Revenue for the year — on the strength of that big performance — got an upward revision to the range of $585 million to $600 million, a reasonable pick-up on the previous forecast of $575 million to $595 million.

Chief Executive Scott Sanborn said on the conference call that the company was “back on its front foot.” Lending Club has spent much of the time since May 2016 on its back foot following an internal investigation that revealed a series of concerning issues about how loans were handled and packaged for investors. The firm was forced to acknowledge it had altered documentation when selling $22 million in loans to investment bank Jefferies Group to make the quality of the loans within the package seem higher than they were. The loans were later repurchased by Lending Club. The loan malpractices led to the ouster of then-Chief Executive and founder Renaud Laplanche. It also led to mass desertions of investors from the platform — which, in turn, caused originations to crater. Under Sanborn’s leadership since June of last year, Lending Club has been working double time to win back the trust of investors, bank lenders and other partners who had taken a step back from doing business with the company. We are now seeing great progress in the right direction!

OnDeck Capital – 2Q 2017 Earnings Recap

OnDeck reported 2Q Adjusted EPS of $0.02, which excluded a $3.2 million severance charge and represented the first positive figure since its IPO. Nice! Huge!!

The company made significant strides toward achieving the aggressive cost reduction plan first outlined on the 4Q16 call and raised further on the 1Q17 call. Credit displayed signs of stabilization as late-stage delinquencies rolled into charge-offs, and reserves on newer originations reflected tighter underwriting. The company anticipates accelerating volumes off the 2Q trough and is still guiding to a reduction in quarterly operating expenses to ~$40 million in 2H’17, leading to modest year-end GAAP profitability. Great!

The implementation of cost rationalization appears on track. Consistent with management’s stated objective to reduce operating expenses to a $40 million per quarter run rate by the end of the year, total operating expense of $44.6 million in the quarter marked a 6.3% Y/Y decrease, lowering the total efficiency ratio to 51.4% vs. 55% in 2Q16. Excluding the related $3.2 million severance charge incurred during the quarter, the Y/Y reduction of 13% brings the company within striking distance of the targeted $40 million quarter run rate. We note, however, that while sales & marketing expenses have remained muted in recent quarters given the pullback in growth initiatives, incremental expenses could conceivably trend upward again if the origination growth trajectory picks up in early 2018 as expected.

Credit appears to be stabilizing, which is fantastic. While the 18.5% headline NCO% translates to the sixth sequential quarterly increase, we note that the downward pressure exerted by a shrinking portfolio has been pronounced, particularly when considering the ~40-45% (excl. rollovers) historical quarterly paydown rate. Further, the strategic pullback in longer-maturity (15 months), higher balance (up to $500K) term loans by management since 3Q16 has more than likely compounded the reverse denominator effect, which, in our view, will run its course in the next 2-3 quarters, consistent with the downward trending weighted average term of new originations since the pullback.

Growth in originations is expected to return to double-digit Y/Y growth in 2018. Commentary regarding origination and UPB growth amounted to the most meaningful incremental outlook, in our view. Specifically, instead of an expected lower UPB balance at the end of this year, management has now guided to a sequential increase in the UPB balance for Q4, which we believe is yet another sign (assuming the absence of a material increase in origination volumes) that the implementation of more stringent underwriting since 2H16 and recent vintage performance is providing support to portfolio attrition in the form of lower charge-offs.

Lending Club Consensus Estimates

OnDeck Consensus Estimates

  Own The Top 2 Players Leading The Future Of Online Lending!





Robin McCallum manages all aspects of CMC Operations for TapImmune’s cancer vaccine programs.


Thank you, Robin, for taking part in this Q&A.

First off, what are “CMC operations”, and how do they impact clinical trials and the drug development process?

RM: CMC stands for Chemistry Manufacturing and Controls.  CMC operations come into play when drugs emerge from the drug discovery and lead optimization phases of drug development and enter the IND-enabling, preclinical phase.  An IND is an Investigational New Drug.  CMC is maintained as a drug goes through the clinical phase (Phase I, II, and III) of drug development and throughout the life cycle of the drug as it is approved by a regulatory agency (e.g., FDA, EMEA) and marketed.

CMC encompasses the nature of the drug, its manufacturing process, and the manner in which the manufacturing process is shown to be in control.  Some of the critical elements of CMC include:

  • how and where a drug is manufactured
  • what control procedures are in place to ensure reproducibility in the manufacturing process
  • what control procedures are there to maintain drug quality and consistency
  • what critical quality attributes (CQA) have been identified and characterized for the drug
  • are the CQAs appropriate for the drug and its phase of development
  • how stable is the drug
  • is the drug manufactured in an appropriate dosage form

Appropriate CMCs are essential to ensuring that drugs supplied to support human clinical trials are safe and tolerable, and will become more rigorous as a drug goes through early-stage clinical trials (Phase I and II) into late-stage clinical trials (Phase III).

What prior biotech and drug development experience do you bring to TapImmune?

RM: I bring more than 12 years of experience in biotechnology and pharmaceutical development to TapImmune.  This include broad experience in most areas of drug development and manufacturing, including research & development, process development, scale-up, GMP manufacturing, analytical method development, qualification, and validation, quality control testing, and quality assurance.  My particular expertise is in pharmaceutical and biopharmaceutical process development, GMP manufacturing, and analytical methods.

I also work closely with a technical consultant who has more than 25 years of experience and expertise in process development, analytical methods, formulation and dosage form design; technology transfer to GMP operations, GMP manufacturing, regulatory submissions and quality assurance with a broad range of drug types including  small organic molecules, peptides and proteins, biologics, and combination products.

Does the FDA require documentation of a company’s CMC operations as part of the drug development process?

RM: Absolutely!  Submission of an IND for first-in-human clinical trials (Phase I) requires submission of a CMC section as part of that IND to the FDA.  The agency is chiefly concerned that a drug administered to humans has been manufactured and characterized in an appropriate and consistent manner, and meets quality standards.  CMC along with preclinical and toxicology studies in animals ensures that any drug advanced to Phase I clinical trials is as safe as possible.

How do CMC operations change as drug development goes from phase I, into phase II, and beyond?

RM: CMC is one of the links connecting early non-clinical or toxicology batches (Engineering runs) to clinical batches and eventually commercial batches if the drug is deemed safe and efficacious, and is approved by the FDA or other regulatory agency.  The requirements for CMC expand and become more rigorous as the drug moves along the clinical development pathway toward commercialization.

At the Phase I stage, safety is the primary concern.  Typically, the drug lot that supplies this early stage trial will meet basic quality requirements; however, the manufacturing process is usually not yet optimized for yield, purity, efficiency, scalability, etc.  Further, the formulation is adequate for the dosage form and route of administration, but is not the optimal or final formulation.  Typically only one non-GMP lot (Engineering lot) and one GMP lot (clinical lot) has been manufactured; therefore, there is not adequate, statistically significant data on lot to lot variability and consistency.  Moreover, analytical methods if not performed as per compendia, have been minimally developed and qualified (method-dependent) to meet Phase I requirements, but have not been optimized and validated.  Broad, tentative specifications for CQAs are established and some tests simply have “report results”.  Also, although overall product purity and impurity has been quantified, individual specific impurities and related substances have not been identified and characterized.  Lastly, only about 1-3 months of stability data from the clinical lot will be available by the time the drug is dosed in the first patient for the first-in-man trial.  This is all acceptable from a regulatory standpoint for a Phase I drug lot.

At the Phase II stage where both drug safety and efficacy are concerns, the manufacturing and formulation process will typically be refined and improved although not optimized to the final process.  There is also usually a scale-up of the manufacturing process at this stage though not yet close to commercial scale.  The CQAs for the product will be better defined and characterized.  More stability data has been generated (12 months+) using stability-indicating methods, at multiple temperatures.  Many firms elect to finalize and validate analytical methods at this stage.

At the Phase III stage (drug safety, efficacy, and consistency), the manufacturing process is optimized to be robust, reproducible, and scalable to commercial scale with fully established in-process controls. This will be the commercial process by and large.  Using fully tested raw materials, at least three consistency batches are manufactured as part of process validation.  These batches are often used for NDA or BLA filings to regulatory agencies.  Analytical and microbiological methods are completed validated, CQAs are fully defined and characterized, and final specifications are set.  The physical, chemical, and biological properties of the drug are fully characterized. Process impurities are fully identified, defined, and quantified.  Stability data from multiple clinical or GMP lots is available and stress testing has been completed.  Also, container closure integrity testing is completed for sterile products.

I’ve read that in order to gain a competitive clinical edge, some companies may look to do the minimum amount of CMC work required while still maintaining an acceptable level of control, as required by the industry. How do CMC operations managers like yourself balance the need to keep costs down while maintaining a high level of quality required by the industry?

RM: In the competitive industry of pharmaceuticals, companies will always seek to accelerate drug development, with first-in-man trials being a critical milestone.  Whether large or small, any pharmaceutical company will have to balance three important and inter-related factors:  time, cost, and quality.  Fortunately, the FDA has defined certain basic CMC requirements for drug that supply first-in-man studies with safety being the main concern.  In some ways, the need to meet those basic requirement for safety in Phase I trials (derived in part from quality in CMC) will predefine the minimum amount of time any CMC operations manager will need to spend on the development, GMP manufacturing, and characterization of the first clinical lot.  Therefore, that mitigates some of the corporate pressures for accelerating what will be an already aggressive timeline and reducing an already streamlined budget for drug development.  TapImmune is committed to product quality and patient safety first, and we will not compromise that in favor of a faster timeline or lower cost.  Those who sacrifice quality often end up losing quite a bit more money and time in the long run.

How long does the process take of manufacturing TapImmune vaccines?

RM: The process to manufacture TapImmune’s vaccine can be broken up into two main parts:  I) manufacturing of the peptide Drug Substances or Active Pharmaceutical Ingredients (APIs) and II) manufacturing of the Drug Product or vaccine.  Part I consists of the synthesis, cleavage, and purification of the individual peptide Drug Substances (5 peptides) and this process typically takes 2-3 months depending on the peptide.  Part II consists of the formulation, filtration, vialing, and lyophilization of the Drug Product, and typically takes 1 week for manufacturing operations.  Pre-manufacturing activities such as batch record prep, etc. and post-manufacturing activities such as quality control testing will add around 1 month each.  Overall, it takes around 4 months to manufacture and fully release TapImmune’s vaccines for clinical use.

Once the vaccines are created, where are they sent to? Do you have any clinical sites in the country? If so, where?

RM: Once the vaccines are manufactured, tested, and released, they are stored at our manufacturing vendor for clinical distribution via clinical drug couriers.  At this time, all of TapImmune’s clinical sites are located in the USA in a number of states across the northeast, southeast, south, and midwest:  Florida, Kansas, Michigan, New Jersey, New York, Maryland, Missouri, Ohio, Tennessee, and Texas.

For more information on TapImune see:

Video: A Vaccine That Could Prevent Certain Breast, Ovarian, and Lung Cancers

TapImmune Investor Fact Sheet

TapImmune Reaches 50% Patient Enrollment Benchmark in Phase 2 Study of Novel T-Cell Vaccine Targeting Triple-Negative Breast Cancer

TapImmune Press Releases

U.S. Department of Defense Funds Phase II Trial of TapImmune Breast Cancer Vaccine  source: Breast Cancer News

Doctor Developing Vaccine That Would Prevent Breast, Ovarian, and Certain Lung Cancers source: WOKV News

TapImmune Improves T-cell Vaccine Ahead of Phase II Trials source: BioPharma Reporter


CannaRoyalty Marc Lustig

CannaRoyalty is a fully integrated, active investor and operator in the legal cannabis sector. Our focus is building and supporting a diversified portfolio of growth-ready assets in high-value segments of the cannabis sector, including research, consumer brands, devices and intellectual property. Our management team combines a hands-on understanding of the cannabis industry with seasoned financial know-how, assembling a platform of holdings via royalty agreements, equity interests, secured convertible debt, licensing agreements and its own branded portfolio.

Mr. Lustig holds MSc and MBA degrees from McGill University. He began his professional career in the pharmaceutical industry at Merck & Co. In 2000, he started his capital markets career in institutional equity research in the Life Sciences sector at Orion Securities. For the next 14 years, Mr. Lustig worked as a senior producer at GMP Securities L.P. and as Head of Capital Markets at Dundee Capital Markets before becoming Principal at KES 7 Capital. Mr. Lustig founded Cannabis Royalties & Holdings Corp. in early 2015.



Cautionary Note on Forward-Looking Statements

Certain statements contained in this interview may be “forward-looking statements” within the meaning of the Securities Litigation Reform Act of 1995 and applicable Canadian securities laws. They are generally identified by words such as “believes,” “may,” “expects,” “anticipates,” “should” and similar expressions. Readers should not place undue reliance on such forward-looking statements, which are based upon the Company’s beliefs and assumptions. The Company’s actual results could differ materially due to risk factors and other items described in more detail in the “Risk Factors” section of the Company’s Annual Reports and MD&A filed with the United States Securities and Exchange Commission and applicable Canadian securities regulators (copies of which may be obtained at or ). Subsequent events and developments may cause these forward-looking statements to change. The Company specifically disclaims any obligation or intention to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Thank you Marc, for taking time to participate in this Q&A. 

MR: There’s a myriad of cannabis stocks for investors to choose from, many of which are focused solely on growing and selling cannabis. How is CannaRoyalty’s business model different, and why have you chosen this model?

ML: I don’t care what anyone says, growing cannabis is an agricultural commodity. And while everyone claims to have a “proprietary process” and be the “greatest grower” its still a commodity which means lowest cost per unit at a good standard wins. This is not a game CannaRoyalty is interested in playing. Our model is to build assets which enhance the value of the cultivated product whether its through extraction processes for oil derivatives or through development of formulations and brands or investment into the next cannabis based therapy for medical treatment. So instead of an investor buying into a one-dimensional grower (licensed producer) we are giving investors a broadly diverse platform of assets to invest in which they would probably never have got the opportunity to invest in themselves.

MR: While it’s early in the Company’s history, are there “wins” that validate CannaRoyalty’s business model?

ML: Lets put it this way: Im not aware of any of our assets which haven’t already either created value for shareholders or are not on the cusp of generating revenue growth and synergistic effects with other assets in our portfolio. From early ownership in assets like Anandia (leading Canandian cannabis analytics and genetics), WagnerDimas (pre-rolled joint manufacturing IP), Bodhi Research (medical research into cannabis treatments for concussion), Resolve Digital (medical device innovator of what I think is a revolutionary vaporizer) to all of our other investments and royalties across Canada, the US and Puerto Rico I feel great about how things are starting to come together. I could go on for a long time on my view of our wins that validate our model but my guess is we’re still only scratching the service when I consider our pipeline of opportunities.

MR: What attributes or characteristics do you look for in cannabis-related companies that make you say yes, this is a company we want to make a strategic investment in?

ML: Character, business acumen and cannabis passion in the partner or management team of an investee company combined with strategic assets which when “plugged in” to the CannaRoyalty model or into CR Brands leads to appreciable and sustainable value for shareholders.

MR: In April, the Canadian government announced legislation to legalize marijuana for recreational use by June 1 of next yearwhich, (if passed), will greatly expand demand in Canada. Meanwhile, the U.S. has a patchwork of differing state and local laws for medical and recreational use, and there is zero support atthe federal level for recreational legalization. Given where the two countries are right now in the legalization pathway, why are the majority of CannaRoyalty’s assets are based in the United States and not Canada?

ML: Firstly, as mentioned earlier in our interview, we seeing growing cannabis as an agricultural commodity. The over-concentration of fully-valued cultivation assets compared to exceptional value opportunities in the US in more advanced, dynamic makes this equation much more attractive from our perspective. Some will be quick to point out the obvious difference in federal legislation between Canada and the US – with cannabis still a Schedule 1 narcotic in the US. However we believe that because of how careful we are about structuring our deals strictly and categorically in compliance with legal US markets we minimize this federal vs state risk. And all of this at a time in the cycle that the public support – because of the general benefits of cannabis compared to alcohol, tobacco and marginal pharmaceutical products or because of the job growth and the economic impact of this sector – continues to grow beyond the point of recision.

Secondly and a bit surprisingly I don’t think people comprehend how strong our asset base is in Canada. Our significant ownership in Anandia, Resolve Digital, Bodhi Research together with our strategic royalty relationship with Aphria one of the leading Canadian licensed producers make for a remarkable suite of assets in Canada. Whats more is we expect to grow the Canadian asset base going forward as asset values become more realistic for us to acquire or invest – all at a time that the Canadian recreational market opens up.

MR: One of the most crucial elements of success for any company is the strength of the management team. How would you describe the team you’ve assembled at CannaRoyalty and is the team complete, or do you anticipate expanding it to meet current or future needs?

ML: I’m very lucky. We are building a dynamic company in a high growth exciting sector which has attracted top tier talent and created a very cool culture where people are proud of what were doing and are obsessed with achieving our goals. Today we are 26 direct employees of CannaRoyalty across management, legal, finance, marketing/social media, sales and operations. Is the team complete? Not even close. The way were growing and the opportunities we have in front of us I have no idea how big we’ll get. All I know is we continue to attract phenomenal talent which makes me look a lot smarter than I am proving my belief in the “8s hire 10s” philosophy….

MR: What investments has CannaRoyalty made that you believe will have the greatest impact on revenue growth during the remainder of 2017?

ML: In no particular order our REIT-like investment in state of Washington, our partnership with Rich Extracts in Oregon, our strategic relationship with leading cannabis distribution company River in California, product revenues in key markets by our brand company CR Brands, sales of our cartridge hardware by our wholly-owned Dreamcatcher Labs company and the new deals that we expect to add throughout 2017 will drive the largest impact on revenues this year.

MR: CannaRoyalty finished Q1 with cash and cash equivalents of $11,946,417 and closed a bought deal financing for aggregate gross proceeds of $15 millionIn the Q1 press release, you stated that CannaRoyalty is “well positioned to continue to deploy capital and build on initiatives that will enhance shareholder value.” What verticals are you looking at deploying this capital in and why?

ML: We have built a strongly synergistic base of assets in key markets like California. Our pipeline of prospective deals in Canada and growth markets in attractive cannabis markets like Nevada, Arizona, Maryland and Massachusetts continues to grow. In terms of verticals, our product arm CR Brands will continue to develop or acquire licenses for innovative leading cannabis brands. In parallel our focus will be on the compliant, highest efficiency manufacturing processes and impactful distribution assets in focus markets.

MR: What do you see as key drivers for shareholder value in the coming 6-12 months?

ML: Current assets combining with new assets in new key markets combining synergistically to grow revenues and earnings.

See Also:

CannaRoyalty Q1 Financial Report

CannaRoyalty (CRZ.C) grows multi-million-dollar asset base over 800% in nine months (Equity.Guru)

Spotlight on CSE:CRZ – Upside from recent deal opportunities remain nascent (Viride Research Partners)

CannaRoyalty June 2017 Investor Presentation

CannaRoyalty News/Press Releases

CannaRoyalty Marc Lustig

tapimmune-logoTapImmune (TPIV) is developing immunotherapies for a variety of cancers designed to target both tumors and metastatic disease. The company’s next-generation technology has been engineered to overcome the deficiencies of earlier cancer vaccine approaches and has the potential to be a powerful standalone therapy or part of a leading combination regimen by complementing other approved or development-stage immunotherapeutics (i.e. checkpoint inhibitors). The company’s off-the-shelf vaccines boost patients’ immune systems to comprehensively stimulate both killer T-cells and helper T-cells to destroy cancer cells.

TapImmune is advancing two clinical stage T-cell vaccine candidates in multiple Phase II and Phase Ib/IIa clinical trials for treating ovarian and breast cancers, including programs in ovarian cancer that will benefit from FDA Fast Track and Orphan Disease Designation. The company is working in collaboration with industry and clinical leaders including Mayo Clinic, Memorial Sloan Kettering Cancer Center, and AstraZeneca.

On May 1st, TapImmune announced Richard Kenney, MD, FACP, was joining TapImmune to lead the Clinical Development Program. Dr. Kenney will manage TapImmune’s ongoing and planned clinical programs for its next-generation T-cell vaccine candidates, which currently include multiple Phase 2 trials in advanced breast and ovarian cancer.

Richard Kenney

Prior to joining TapImmune, Dr. Kenney served as Principal Medical Advisor and Chief Medical Officer of Immune Design Corp, where he established and led the clinical development, pharmacovigilance and regulatory affairs groups to advance the development and commercialization of the company’s cancer prime-boost immunotherapeutic and vaccines.  Previously, Dr. Kenney served as Chief Medical Officer of Crucell Holland, BV, where he directed clinical development of a broad platform of vaccines. He also served as Senior Vice President, Clinical Development for Vical Incorporated, where he led the clinical development of DNA vaccines for cancer immunotherapy and infectious diseases. Dr. Kenney held key positions in vaccine development at GSK Biologicals from 2005 to 2009, most recently as Senior Director of Global Clinical R&D, Vaccines for Viral Diseases. He earned his M.D. degree at Harvard Medical School, completed his residency in Internal Medicine at Duke University Medical Center, and a fellowship in Infectious Diseases at the National Institute of Allergy and Infectious Diseases.


MR: Congratulations on your new position as Medical Director for TapImmune.
What are your responsibilities in this role?

RK: I am responsible for the clinical development of our products. Once a compound is shown to be promising in the research lab, it needs to be tested in human trials that show its safety and effectiveness. Few patients are exposed at first, when the risks are not fully known. When it is clear that more patients can be tested, larger populations are used to show whether a benefit can be expected from that product in various indications. I manage the design of future trials and help with the operational aspects of ongoing trial oversight.

MR: What prior experience do you have with clinical development programs in immunotherapy that will expedite TapImmune’s T-cell vaccine candidates as they progress through clinical trials?

RK: My career has been focused on the induction of immunity in human populations, using vaccines for infectious diseases as well as for different tumors. I have experience in both the clinical and regulatory aspects of moving a product through development in small and large projects. Much of my work has focused on the use of adjuvants, which can enhance the immune response, particularly when used in a prime-boost approach.

MR: I’m sure you could choose from any number of attractive T-cell immunotherapy companies to work with. What attracted you to TapImmune?

RK: It’s a combination of the people and the products. TapImmune is led by and employs a good group of hard-working people who are experienced in their various roles. The vaccines being developed have been shown to be safe and immunogenic and now need further work to demonstrate efficacy. We have an opportunity to use the latest scientific hypotheses to study novel combinations and are working with some of the nations’ best clinical investigators to generate robust approaches.

MR: In what way(s) is T-cell immunotherapy superior to other cancer therapies?

RK: Traditional chemotherapy is designed to kill cells directly and usually causes rapid shrinkage of the tumor. Unfortunately, that comes at a great cost in terms of the side effects on normal tissues and the cancer often becomes resistant and returns. Your immune system has been working to protect you from cancers since before you were born. Tapping into that protection by generating a targeted immune response where that system has broken down may be a better way to fight the growth of tumors and is usually much less toxic.

MR: TapImmune has multiple clinical trials underway primarily focused on aggressive breast and ovarian cancers. Would you provide an overview of these trials- where they are currently, what collaborative partnerships are involved, and the benefits of the FDA Fast Track designation where it has been granted?

RK: TapImmune has two main products in clinical trials. TPIV200, the folate receptor-alpha peptide vaccine, is in several Phase 2 trials looking at safety and immunogenicity in breast cancer and at efficacy in ovarian cancer. While the peptide vaccine itself is adjuvanted with GM-CSF, we are using the product alone, in combination with low-dose cyclophosphamide as an immunostimulant, or in combination with durvalumab, a checkpoint inhibitor of PD-L1, in collaboration with Memorial Sloan Kettering Cancer Center. Fast track is a process designed to facilitate the development and expedite the review of drugs to treat serious conditions and fill an unmet medical need. Fast Track designation has been granted for TPIV200 for maintenance therapy in subjects with platinum-sensitive advanced ovarian cancer, so we have more opportunity to work closely with FDA to resolve issues along the way.

The other vaccine, which has been called TPIV100, has 4 peptides directed against HER2/neu. We recently updated that product by adding a fifth peptide to enhance the immune response and now call the vaccine TPIV110. One of the clinical studies using TPIV100 will evaluate an early stage of breast cancer called DCIS before surgery. The other will study more advanced patients with triple-negative breast cancer (TNBC) starting later this year. Both studies are being done in collaboration with the Mayo Clinic and the Department of Defense.

MR: In addition to the T-cell vaccine development, TapImmune is working on PolyStart™, a DNA vector technology. Would you explain what “DNA vector technology” means and what the potential applications are for PolyStart™?

RK: DNA vectors have been used to generate immune responses against infectious diseases and cancers in humans for many years. Basically, we can use the gene to let the body make the protein that is required to generate an effective immune response. DNA vaccines engage different parts of the immune system that can complement the way tumors are being attacked. PolyStart is a technology that greatly augments the amount of protein that can be generated inside the cell, which should induce a more robust immune response. We can use this approach by itself or in combination with the peptide vaccines to boost the overall immune response and thereby enhance efficacy. Thus, PolyStart can be used to target any number of infectious diseases or can be studied along with our vaccines for breast and ovarian cancer.

MR: What clinical development milestones can investors in TapImmune look forward to over the next 6-12 months?

RK: We should see the data from the Phase 1 trial of the TPIV200 folate receptor-alpha vaccine published within the next few months and the ongoing Phase 1b/2 trial at MSKCC has a decision point for continuation that will be available late this summer. The Phase 2 trial in TNBC has an interim look at safety and immunogenicity by the end of the year and it should be fully enrolled by the end of the year. The preliminary efficacy trial in ovarian cancer is just starting to enroll – those results will take more time to mature as it is a larger trial, although an interim analysis is planned for late 2018. In addition, we expect to see the Mayo trials of the TPIV100 HER2/neu vaccine starting later this year. Finally, we will be amending that IND later this year for our own sponsored study in Her2neu breast cancer using TPIV110. This is an active period for TapImmune and our collaborators that will lead to multiple readouts over the next two years.

More About TapImmune:

Video: A Vaccine That Could Prevent Certain Breast, Ovarian, and Lung Cancers

TapImmune Investor Fact Sheet

TapImmune Press Releases

U.S. Department of Defense Funds Phase II Trial of TapImmune Breast Cancer Vaccine  source: Breast Cancer News

Doctor Developing Vaccine That Would Prevent Breast, Ovarian, and Certain Lung Cancers source: WOKV News

TapImmune Improves T-cell Vaccine Ahead of Phase II Trials source: BioPharma Reporter

richard kenney



Terms of use, disclosure, disclaimer

TapImmune (TPIV) is advancing two Phase II studies that are funded by ~$17 million in non-dilutive grants from the U.S. Department of Defense.

In total, the company has 4 different Phase II studies underway and is planning to submit an Investigational New Drug (IND) Application with the FDA for another breast cancer vaccine this year.

Due to the unmet medical needs targeted by TapImmune’s T-cell vaccines as well as promising Phase I results, the FDA has granted Fast Track designation in two of the studies, providing an expedited review to facilitate development of the vaccines.

Additionally, TapImmune recently added Richard Kenney, MD, FACP, as Medical Director for the Company to lead the clinical development program. Dr. Kenney brings deep clinical development and FDA process experience to the Company as it continues to develop T-cell cancer vaccines that aggressively target breast and ovarian tumors.

Shares outstanding: 8.4 million
Closing Price 5/8/2017: $3.69
Market cap: $31 million
Total Cash (mrq) $8 million
Cash/Share (mrq) $0.93
Debt (mrq) 5k
Current Ratio (mrq) 4.6


tapimmune-logoTapImmune (TPIV) is developing immunotherapies for a variety of cancers that are designed to target both tumors and metastatic disease. The company’s next-generation technology is designed to overcome the deficiencies of earlier cancer vaccine approaches and has the potential to be a powerful standalone therapy or part of a leading combination regimen by complementing other approved or development-stage immunotherapeutics (i.e. checkpoint inhibitors). The company’s off-the-shelf vaccines boost patients’ immune systems to comprehensively stimulate both killer T-cells and helper T-cells to destroy cancer cells.


TapImmune web site

Full Funding for Phase II of TapImmune’s HER21-targeted T-cell vaccine

The U.S. Department of Defense (DoD) awarded Mayo Clinic researchers $3.7 million to conduct a Phase II trial of TapImmune’s HER21-targeted T-cell vaccine in women with the breast cancer known as ductal carcinoma in situ (DCIS). Her2neu is overexpressed in about 30% of all breast cancer patients, amounting to approximately 220,00 patients per year.

See press release: TapImmune Announces Fully Funded Phase 2 Clinical Study of HER2-Targeted Vaccine in Early Breast Cancer.

The 40 to 45 women who will be enrolled in the study will receive the TPIV 110 vaccine six weeks before surgery to remove the tumor.

This is TapImmune’s second T-cell vaccine candidate to be tested in a DoD-funded Phase II study at Mayo Clinic, and it marks TapImmune’s expansion into a second breast cancer indication. In addition to ongoing and planned Phase 2 studies of TapImmune’s lead TPIV 200 vaccine for treating triple-negative breast cancer, this new study of HER2neu vaccine in DCIS has the potential to validate the Company’s novel approach to establishing lasting immunity against breast cancer and precancerous lesions.

TapImmune’s new T-cell vaccine targeting HER2 consists of five carefully selected HER2 antigens that do the best job of activating HER2-directed T-cells. The mix is expected to cover a significantly larger patient population than the HER2-targeted therapy Herceptin (trastuzumab). TPIV 110 is expected to cover 90 percent of HER2-positive cancers, versus Herceptin’s 15-20 percent. TPIV 110 is also expected to remain effective for longer periods.

To date, the U.S. department of Defense has awarded approximately $17 million towards research using TapImmune’s targeted T-cell vaccines.

Additionally, investors should note that TapImmune has world-class sponsors and collaborators including AstraZeneca (AZN), Memorial Sloan Kettering Cancer Center, and Mayo Clinic. The caliber of these sponsors and partners speaks volumes about the potential for breakthrough research in the cancer immunotherapy space by TapImmune.

Dr. Richard Kenney Taking Clinical Development to the Next Stage

The addition of Dr. Kenney to the team as Medical Director at TapImmune validates the Company’s technology and recent progress, and is a milestone for the Company. Dr. Kenney is superbly qualified to lead the clinical development programs TapImmune is advancing.

  • M.D. from Harvard Medical School
  • Residency at Duke University Medical Center
  • Fellowship at the National Institute of Allergy and Infectious Diseases
  • Served as Principal Medical Advisor and Chief Medical Officer of Immune Design Corp, (Nasdaq: IMDZ), where he established and led the clinical development, pharmacovigilance and regulatory affairs groups to advance the development and commercialization of the company’s cancer prime-boost immunotherapeutic and vaccines
  • Served as Chief Medical Officer of Crucell Holland, BV, (a division of Johnson & Johnson), where he directed clinical development of a broad platform of vaccines
  • Served as Senior Vice President, Clinical Development for Vical Incorporated, (Nasdaq: VICL), where he led the clinical development of DNA vaccines for cancer immunotherapy and infectious diseases
  • Held key positions in vaccine development at GSK Biologicals most recently as Senior Director of Global Clinical R&D, Vaccines for Viral Diseases

Regarding his new position at TapImmune, Dr. Kenney stated:

“I am delighted to assist TapImmune during this exciting time of growth as the company advances two of its T-cell vaccine candidates though multiple Phase 1b/2 and Phase 2 clinical trials.  Each of these novel vaccines are designed to address significant unmet needs for women with ovarian and breast cancer, where recurrence is high and prognosis can be very poor.  Having led the development of multiple vaccine programs and immunotherapies for cancer and infectious disease, I am eager to utilize my experience to drive successful clinical programs for TapImmune in collaboration with the Company’s top-tier clinical partners.” 

Attracting someone of Dr. Kenney’s caliber to TapImmune speaks volumes about the current and future potential of the Company’s T-cell immunotherapy programs. 

Beyond Treatment, to Actual Breast Cancer Prevention

TapImmune believes that if the trials of HER21-targeted T-cell vaccine go well, the vaccine could replace a combination of chemotherapy and surgery as a breast cancer treatment, and could also be used as a preventive vaccine to keep healthy women from developing breast cancer.

Video: “Vaccine could prevent breast, ovarian, lung cancer”




Video: A Vaccine That Could Prevent Certain Breast, Ovarian, and Lung Cancers


Four Phase II Immuno-Oncology Trials Underway with Top Tier Partners

TapImmune has four clinical trials now in phase II for treatment of ovarian and triple-negative breast cancers.


TapImmune Pipeline

  • Phase II Trial of TPIV 200 for Triple-Negative Breast Cancer with Fast Track designation from the FDA

About 15-20% of all breast cancers are found to be triple-negative (meaning the breast cancer cells tested negative for estrogen receptors, progesterone receptors, and HER2). This form of breast cancer does not respond to hormonal therapy (such as tamoxifen or aromatase inhibitors), or therapies that target HER2 receptors, such as Herceptin (chemical name: trastuzumab). Triple-negative breast cancer tends to be more aggressive with higher mortality rates than other breast cancers.

The open-label, 80 patient clinical trial by TapImmune is designed to evaluate dosing regimens, adjuvants, efficacy, and immune responses in women with triple-negative breast cancer. Key data from the trial is expected to be included in a future New Drug Application submission to the FDA for marketing clearance.

TapImmune announced a key clinical milestone in February, passing a planned safety review that was performed when enrollment had reached 25 percent benchmark (20/80 patients).

In the prior Phase I study of TPIV 200 at Mayo Clinic, 100% of patients demonstrated a T-Cell response lasting over 6 months and the drug was found to be safe and effective in treatment of both ovarian and breast cancers.  

This study has Fast Track designation from the FDA which provides an expedited review to facilitate development of the drug.  This designation is granted in studies that treat serious or life-threatening conditions and fill an unmet medical need.

  • Phase II Mayo Clinic Trial of TPIV 200 in Triple-Negative Breast Cancer Fully Funded by U.S. Department of Defense

This is a separate Phase II study of TPIV 200 for the treatment of triple-negative breast cancer, conducted by the Mayo Clinic and sponsored by the U.S. Department of Defense (DOD). The 280 patient study is being led by Dr. Keith Knutson of the Mayo Clinic in Jacksonville, Florida. Dr. Knutson is the inventor of the technology and an advisor to TapImmune.

$13.3 million worth of non-dilutive capital for trial.

While TapImmune is supplying doses of TPIV 200 for the trial, the remaining costs associated with conducting this study will be funded by a $13.3 million grant made by the DOD. This grant is a direct result of the very positive findings of the Phase I trial of TPIV 200 and validates TapImmune’s technology.

  • Phase II Trial at Memorial Sloan Kettering of TPIV 200 in Platinum-Resistant Ovarian Cancer in Collaboration with AstraZeneca on FDA Fast Track

Approximately 22,000 women were diagnosed with ovarian cancer in 2016 and an estimated 14,180 will die from the disease according to the American Cancer Society. Because ovarian cancer tends to be detected at a later stage of the disease, the five-year survival rate for ovarian cancer is 45%. Current treatment options are surgery, radiation and chemotherapy.

There is currently no FDA approved cancer vaccine available for ovarian cancer.

This is a Phase II study of TPIV 200 in ovarian cancer patients who are not responsive to platinum, (a commonly used chemotherapy for ovarian cancer), sponsored by Memorial Sloan Kettering Cancer Center in collaboration with AstraZeneca. The open-label study is designed to evaluate a combination therapy which includes TapImmune’s TPIV 200 T-cell vaccine and AstraZeneca’s checkpoint inhibitor, durvalumab.

Because these patients are unresponsive to platinum-based therapy and have failed chemotherapy, there are unfortunately, no real options left at the present time. If the combination therapy proves effective, it would address a critical unmet need.

TapImmune received the FDA’s Fast Track designation to develop TPIV 200 as a maintenance therapy in platinum-resistant ovarian cancer.


  • Phase II Trial in Platinum-Sensitive Ovarian Cancer 

TapImmune’s fourth Phase II trial utilizes TPIV 200 in ovarian cancer that is platinum-sensitive, and is being funded by the company. This study is an 80-patient double-blind placebo controlled study designed to examine the potential benefits of using the company’s lead product candidate TPIV 200 in combination with standard of care chemotherapy.

The study has Fast Track designation from the FDA and TPIV 200 has orphan drug status for ovarian cancer.

In the January press release announcing the launch of this Phase II trial, Dr. John Bonfiglio, President and COO of TapImmune explained:

“The opening of this study represents the fulfillment of a major 2016 milestone. We now have three clinical studies utilizing TPIV 200 with approvals to enroll patients. A fourth study in triple-negative breast cancer sponsored by the Mayo clinic with a $13.3M grant from the Department of Defense is scheduled to begin shortly. We believe the depth of these clinical programs will give us an excellent understanding of how this exciting T-cell therapy can potentially be used in the treatment of both triple-negative breast and ovarian cancers.”

Preclinical Development of  PolyStart™ Next Generation T-Cell Vaccine

PolyStart is a unique antigen expression system that ‘elevates’ the expression, and consequently the processing and presentation of desired antigenic peptide(s) for the stimulation of T-killer and/or T-helper cells to recognize and kill target cells. This novel vaccine technology platform creates a four-fold or greater increase in presentation of any antigen, giving it unlimited application in oncology and infectious diseases. This allows TapImmune to not only leverage the technology for its own vaccine candidates, but also generates additional value for the platform via licensing to third parties.

In February of this year, TapImmune expanded its patent on the PolyStart Platform for use in next-generation T-cell vaccines. Glynn Wilson, Chairman and CEO of TapImmune stated that:

“This patent significantly enhances our IP position for our PolyStart platform, further positioning TapImmune as a leader in the development of next-generation vaccines for cancer. The allowed claims cover enhanced expression of class I and class II HER2 antigens, enabling us to create future vaccines that should elicit robust and long-lasting T-cell immune responses against HER2/neu+ cancers with enhanced potency. While we focus on advancing our multiple Phase 2 clinical programs in ovarian and breast cancer, we expect to continue developing PolyStart to be used synergistically with our peptide-based vaccines as well as potentially monetized through licensing or partnership with other vaccine developers in oncology and infectious disease applications.”

PolyStart creates a 4 (FOUR) fold or more increase in antigen presentation.  The increased cell surface presentation increases activated Helper and/or long-lived Killer T-cell populations that then effectively seek out and work to destroy a patient’s cancer cells.

PolyStart enhances immune responses in patients not only for cancer drugs but for infectious disease and other products. TapImmune believes PolyStart has unlimited application in oncology and infectious diseases not only in the Company’s own platforms, but that it can be applied to many others via licensing.

The Bottom Line

TapImmune has multiple phase II trials underway in the development of novel vaccines for the aggressive treatment of refractory breast and ovarian cancers. The Company’s technology is validated by research grants awarded by the U.S. Department of Defense totaling some $17 million, and by top research partnerships and collaborations with Mayo Clinic, AstraZeneca, and Memorial Sloan Kettering Cancer Center.

TapImmune has added a world-class Medical Director in Dr. Richard Kenney to lead clinical development programs. His extensive experience in both clinical trials and the commercialization of oncology drugs is a huge asset for the Company.

TapImmune’s current market capitalization of just $31 million is a gross understatement of the value of this innovative, exciting, and potentially game-changing company. I’ll be providing updates on TapImmune in the weeks ahead.

See also: TapImmune Fact Sheet

Drug Trials Heating Up In The Breast and Ovarian Cancer Treatment Space

TapImmune in biotech and other media





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dariohealth-logoIn news this morning, DarioHealth (DRIO)  announced the launch of a direct-to-consumer channel in the United Kingdom. Following the success of the direct-to-consumer channels in the U.S. and Australia, DarioHealth will leverage its knowledge to provide new opportunities for the greater U.K. diabetes community to analyze and personalize their treatment.

Until today, DarioHealth was only available through pharmacies and diabetes educators in the U.K. Now, consumers will have the opportunity to receive personalized diabetes care via an online shopping experience, and be enabled to monitor their health in a more convenient way.

Erez Raphael, Chairman and CEO of DarioHealth, commented on the announcement, “DarioHealth has been operating in the U.K. market for several years now and today’s announcement strengthens DarioHealth’s commitment to the diabetes community within the U.K. Our U.K. partner, Advanced Therapeutics, has the flexibility to offer customers quick, reliable, and friendly service, which will greatly benefit our customers. Furthermore, they have over 11 years of experience in the diabetes industry which is very important to us, as this demonstrates their true understanding of our customers’ needs.”

About DarioHealth Corp.

DarioHealth Corp. is a leading global digital health company serving tens of thousands of users with dynamic mobile health solutions. We believe people deserve the best tools to manage their treatment, and harnessing big data, we have developed a unique way for our users to analyze and personalize their diabetes management. With our smart diabetes solution, users have direct access to track and monitor all facets of diabetes, without having the disease slow them down. The acclaimed Dario™ Blood Glucose Monitoring System all-in-one blood glucose meter and native smartphone app gives users an unrivaled method for self-diabetes management. DarioHealth is headquartered in Caesarea, Israel with a regional office in Burlington, Massachusetts.
For more information, visit

See also:

DarioHealth February 2017 Investor Presentation

Rodman and Renshaw Report: DarioHealth BUY $12 PT

Joseph Gunnar & Co. Report: DarioHealth BUY $8 PT

See Terms of Use/Disclosure


  • CannaRoyalty Corp. (CNNRF) and (CSE:CRZ), has a unique business model in the cannabis space that minimizes risk and maximizes reward
  • Has 22 strategic, diverse cannabis assets throughout North America
  • Just one $850,000 investment in one cannabis asset now valued at $7.1M
  • Exceptionally strong management team and board of directors positioning company to capitalize on high-growth cannabis market

This article will provide an overview of CannaRoyalty’s intriguing business model and distinguished management team, and identify the company’s diversified cannabis assets. A future article will take closer look at the CannaRoyalty assets and determine a valuation range for the company.

CannaRoyalty Corp. at a glance:

Tickers: (OTC:CNNRF), (CSE:CRZ)
Shares outstanding: 42.5 million
Recent Price 4/17/17: $1.82 USD
Market cap: $78.6 million
Float: 31.4 million
Insider ownership: 20%
Web site


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CannaRoyalty Corp. is a fully integrated, active investor and operator in the legal cannabis sector. The Company’s focus is to build and support a diversified portfolio of growth-ready assets in key segments of the cannabis sector, including research, consumer brands, devices and intellectual property. CannaRoyalty’s management team combines a hands-on understanding of the cannabis industry with seasoned financial know-how, assembling a platform of holdings via royalty agreements, equity interests, secured convertible debt and licensing agreements.

CannaRoyalty was formed in late 2014 and began trading publicly on December 8th of 2016.

CannaRoyalty’s $850,000 Investment in Resolve Digital Health Grows to $7.1M Asset

CannaRoyalty’s December 2015 $850,000 investment in Resolve Digital Health is a perfect example of an early win for CannaRoyalty and the company’s business model.

Resolve Digital is launching the world’s first smart inhaler for medical cannabis to help patients suffering from cancer, arthritis, migraine headaches, chronic pain and other diseases. The company’s Breeze Smart Inhaler connects with the user’s smart phone to deliver rich information and integrated care. CannaRoyalty Smart Breeze Inhaler


The system uses color-coded, modular Smart Pods with preloaded extracts or dried herb tuned to users’ specific health condition. Together, the Breeze Smart Inhaler and Smart Pods create a complete system that patients and health care professionals can rely on to assure well-monitored, well-informed and holistic cannabis treatments.


CannaRoyalty Smart Pods from Resolve Digital Health

In late March, Resolve Digital Health announced the completion of a $5M Series A financing that values the company at just over $25.6 million CAD. See also “Resolve Digital Health Lands $5M to Launch First Smart Inhaler for Medical Cannabis.”

As a result, CannaRoyalty’s $850,000 investment in Resolve Digital Health back in December of 2015 now has an implied value of $7.1M, with CannaRoyalty owning 27.2% of existing shares. 

Marc Lustig, CEO of CannaRoyalty stated:

“We are thrilled about participating in the closing of this financing. It provides third party validation of our initial investment in Resolve at a significantly higher valuation. It is an example of the success of our business model that includes identifying high-value cannabis assets, partnering through investment and assisting in the growth and commercialization of brands, products and devices – while increasing value for our shareholders.”

Resolve Digital is launching the Smart Breeze medical device this spring at exclusive dispensary partners in California before expanding into additional key markets across the U.S. and Canada throughout 2017 and into 2018.

The North American Cannabis Market: High Growth with High Risk

The North American cannabis market is expected to achieve a whopping compound annual growth rate of 25% thru 2021 when the market will top $20 billion, according to a January 2017 article in Business Insider.  This growth estimate is bolstered by recent news that the Canadian government is beginning work on legislation that will legalize recreational marijuana by July 1, 2018, if not sooner. Meanwhile, in the U.S., recent additions of populous states like Florida, New York, Illinois, Pennsylvania, and Ohio, mean almost 200 million Americans live where they may qualify to use cannabis as medicine. That’s well over 60 percent of the US population, with multiple states still expected to either begin or expand medicinal and/or recreational marijuana legalization this year.

I believe this is a space any risk-tolerant investor should be involved in, however, pitfalls abound. Not only do companies in the cannabis space face the same risks as companies in other industries (competition, financial, market forces, product/service efficacy, etc.) but cannabis companies must deal with varying legal and compliance risks across state and national borders. Moreover, due to the flood of licensed producers, wholesale marijuana prices declined from $2,500 to $1,000 per pound last year, with some dispensaries offering recreational ounces as low as $65 according to Forbes. With margins squeezed thin, non-pharmaceutical grade marijuana is rapidly becoming another commodity, like corn or wheat.

Beyond the risks associated with legitimate cannabis companies, publicly-traded frauds have been launched by crooks and scam artists who will do anything to separate investors from their money. Most recently, the SEC charged a California-based marijuana consulting company formally called Medbox, as a complete fraud. The Medbox stock price ranged from a low of $2.50 to an all-time high of $205 between August 2012 and December 2014…those shares are now at 0.0003. Ouch!

Unfortunately, Medbox wasn’t the first pot stock scam and they certainly won’t be the last.

CannaRoyalty’s Unique Business Model Mitigates Risk, Maximizes Reward

There are many dozens of cannabis stocks trading in the U.S. and Canada, but only CannaRoyalty features a combination of diversified investments in the cannabis space in both countries that minimizes investment risk while maximizing reward.

With over 20 cannabis assets in the areas of research, devices and intellectual property, early stage strategic investments, and consumer brands, investors in CannaRoyalty have reduced risk exposure to any one company.

Furthermore, the potential for outsized gains originating from multiple assets is very real. The future valuation of Resolve Digital Health as a publicly-traded company is just one potential home run for CannaRoyalty. Of course every asset in CannaRoyalty’s portfolio won’t be a home run, but if just a handful of the company’s holdings (outlined below) are successful, investors in the company should reasonably expect to see strong returns on their investment over time.

Management to Successfully Execute Business Model

Having a great business model is meaningless if you don’t have the right people in place to carry it out and drive results. CannaRoyalty’s management team and board of directors possess deep and successful management experience in the areas of finance and capital markets, pharmaceutical development, health care, corporate strategy, marketing, brand development, and more.

This is a group that can not only identify winning assets in the cannabis space, they can provide the necessary support and expertise in key areas of genetics, cultivation, extraction, post-processing and branding for the assets to maximize their potential.

CannaRoyalty’s Investments

CannaRoyalty is a stakeholder in 22 different diverse, cannabis-related properties in four broad areas:

  • Research (3 properties)
  • Devices and intellectual property (3 properties)
  • Early stage strategic investments (4 properties)
  • Consumer brands (12 properties)

CannaRoyalty’s investments in RESEARCH

Research investments target health and wellness applications including:


CannaRoyalty / Anandia Labs logo
Vancouver, Canada

CannaRoyalty has a 20% equity stake in Anandia.

Anandia Labs is a leader in cannabis testing, extraction and genetics, using genomics and modern plant breeding approaches to develop innovative products and next generation varieties. The company holds key intellectual property positions including cannabinoid pathway patents and is the only independent Canadian testing facility specializing exclusively in cannabis. With its Health Canada dealer’s license in hand, Anandia Labs has the seal of approval to undertake research and development, and to develop products beyond those currently permitted for licensed producers under Health Canada’s Access to Cannabis for Medical Purposes Regulations (ACMPR).

Anandia Lab’s expertise in cannabis testing is essential to ensuring that patients are receiving safe and effective products in the Canadian cannabis sector. In combination with the company’s ability to leverage its dealers license to develop its expertise in developing and producing cannabis extracts, Anandia Labs has positioned itself as a leader in the Canadian cannabis industry.

CannaRoyalty bas-research
CannaRoyalty has a secured convertible loan outstanding with BAS and has concluded a strategic partnership agreement with BAS, assuring the ability to tailor product to CannaRoyalty’s specific needs.
BAS Research is a science-based company of senior PhD-level researchers and chemists, positioned to leverage its first-mover advantage. BAS is developing pharmaceutical-grade cannabis medications, and advancing quality and safety through its Purity Certified™ testing services. Their unique strengths lie in advanced tissue culture and genetics, as well as ailment specific research and product development. BAS produces high-purity extractions plus innovative post processing.

CannaRoyalty bodhi-research
Toronto, Canada
CannaRoyalty has made a strategic seed capital investment in return for an equity position in Bodhi Research with an option to increase its equity stake.

CannaRoyalty wagner-dimas-logos
Through processing, packaging, and targeted brands, Wagner Dimas is adding significant value to producers and a premium user experience for customers.



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Cautionary Note on Forward-Looking Statements

Certain statements contained in this interview may be “forward-looking statements” within the meaning of the Securities Litigation Reform Act of 1995 and applicable Canadian securities laws. They are generally identified by words such as “believes,” “may,” “expects,” “anticipates,” “should” and similar expressions. Readers should not place undue reliance on such forward-looking statements, which are based upon the Company’s beliefs and assumptions. The Company’s actual results could differ materially due to risk factors and other items described in more detail in the “Risk Factors” section of the Company’s Annual Reports and MD&A filed with the United States Securities and Exchange Commission and applicable Canadian securities regulators (copies of which may be obtained at or ). Subsequent events and developments may cause these forward-looking statements to change. The Company specifically disclaims any obligation or intention to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Emblem Corp logo

Emblem Corp. is licensed under the Access to Cannabis for Medical Purposes Regulations (the “ACMPR”) to cultivate and sell medical marijuana. Emblem carries out its principal activities producing marijuana from its facilities in Paris, Ontario pursuant to the provisions of the ACMPR and the Controlled Drugs and Substances Act (Canada) and its regulations.


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See also: Emblem April, 2017 Investor Presentation


MicrocapResearch: Congratulations on the successful public launch of Emblem Corp (TSX-V: EMC.V) and (U.S. OTC: EMMBF). Can you give investors an overview of your past experience with Purdue Pharma, and how it has prepared you to function as the President of Emblem’s pharmaceutical division?

John Stewart: I was President & CEO of Purdue US from 2007 – 2013, President & CEO of Purdue Canada from 1991 – 2009 and Regional Director for Purdue for Canada, Australia and New Zealand from 2000 to 2009. Among other things, these positions provided me with an in- depth understanding of inter-country differences in healthcare systems, drug regulatory agencies and pharmaceutical reimbursement paradigms – as well as public perceptions of the value of the pharmaceutical industry. These companies were of significantly different sizes in terms of employee numbers, annual revenues and mandates – which certainly impacts daily activities and leadership style. I was fortunate to be able to lead each through period of multiple new product introductions and significant growth.

Prior to becoming President to Purdue Canada, I served as VP R&D, in which I was responsible for formulation R&D, pre-clinical & clinical development of new drugs and regulatory affairs. It was in this position that I saw first-hand the significant importance of pharmaceutical dosage forms in terms of improving healthcare outcomes. I could provide numerous examples, but none is more telling than Purdue’s development of MS Contin (controlled-release morphine sulphate) – the first long-acting opioid which was approved for marketing by Health Canada in late 1985. Within two years MS Contin was recognized as one of the most important new analgesics agents for treatment of chronic moderate to severe pain.

It was also during my time as VP of R&D for Purdue that I first became aware of the therapeutic potential of cannabinoids. One of my UK Colleagues headed clinical drug development activities, and he encouraged the company to initiate a cannabinoid research program targeted toward management of pain and movement disorders.

Purdue did not pursue the opportunity, and that colleague subsequently started what has become a very successful company in the field.

MicrocapResearch: With dozens of other cannabis companies to choose from, what drew you to Emblem?

John Stewart: The executives at Emblem were familiar with the healthcare industry and already invested in healthcare-related businesses. They agreed with me that the therapeutic benefits of cannabinoids are real, but that they would not be fully achieved if the only way the product could be administered (taken) was by smoking or vaporization. They were immediately supportive of the company establishing a “pharma” division, to research the medical benefits of cannabinoids – and help identify which strains have the greatest evidence for benefit in particular conditions. An equally important component of the Division’s activity is the formulation and development of pharmaceutical dosage forms (e.g capsules, inhalers, modified-release tablets)  containing specific cannabinoids – which for a variety of reasons will be both more acceptable and effective than currently available dosage forms.

 MicrocapResearch: Emblem Corp is divided into three distinct operating divisions: Emblem Cannabis (the production division), the division you head at Emblem Pharmaceutical, and GrowWise Health (marijuana education for patients and physicians). How will the three divisions complement and build on each other’s strengths operationally?

John Stewart: The Production Group is in a sense the lead in importance, since their responsibility is to continually and consistently cultivate at the highest quality the cannabis strains we identify as being of the greatest therapeutic impact.  They need to ensure that our core strains have the same cannabinoid profile, irrespective of the time of year they are cultivated. Only via this consistency will the pharma division be able to produce advanced formulations that reach pharmaceutical industry levels of potency and purity.

Cultivating cannabis may be seen as simple and straightforward, but in reality it is far, far from that. One of my CEO Colleagues made this clear when he said, “This my be a simple process, but it is not at all easy”. One need only look at the recalls of cannabis due to excessive microbial levels or the presence of pesticides, to realize that this is a complex process that requires detailed attention and responsible oversight.

The GrowWise Group is comprised primarily of healthcare practitioners, whose activities directly support prescribers and patients achieve optimal therapeutic benefits from cannabis. They conduct research and support the research efforts of others, and greatly assist patients in the initial process of selecting and registering with one of the Licensed Producers.  In the years ahead, they will have much more in the way of important information to share.

MicrocapResearch: What indications are cannabinoids currently used for, and where do you think we might see expansion in the near future, say 12-24 months?

John Stewart: I have seen survey results indicating that the most common reason cannabinoids are used is for the treatment of pain, which is not surprising since pain is among the most common of reasons why individuals visit physicians. In addition, although there have been meaningful advances in analgesic therapy – there remains substantial room for improvement. The Canadian Pain Society was among the first of the professional organizations to formally recognize the efficacy of cannabis in pain management. Back in 2014 they published a Consensus Statement on the Management of Neuropathic Pain – which recommended the addition of cannabis therapy to patients who were experiencing inadequate pain relief from a combination of gabapentinoids and opioid analgesics.

Much more recently, the US National Academy of Sciences published an extensive report on the health effects of cannabinoids and concluded that there is substantial evidence of efficacy in chronic pain, as an anti-nauseant and for improving spasticity symptoms in patients with MS. They noted that there is moderate evidence for efficacy for improving sleep outcomes in patients with sleep disorders and more limited evidence for efficacy for improving symptoms of anxiety and increasing appetite/weight gain.

MicrocapResearch: Medical marijuana is typically taken by inhalation by the end user, either through smoking or vaping. Is this the best delivery method, and is Emblem Pharmaceutical developing other drug delivery options?

John Stewart: From the perspective of reliable and consistent efficacy, it is difficult to imagine a less appropriate method of administration than smoking or vapourization of dried cannabis.  With smoking, a person is inhaling combustion byproducts along with the cannabinoids – certainly undesirable and likely in some ways harmful. With vaporization, there is less in the way of combustion byproducts – but dose to dose consistency remains extremely difficult. The amount of cannabinoids that reach the body depends on the depth of the inhalation, how long one hold the inhalation before exhaling – combined with the crop to crop variability in the cannabinoid content of dried cannabis.

Like pharmaceutical products, our formulations will contain a known amount of cannabinoids (e.g. THC, CBD) measured in mg and this amount will be consistent from batch-to-batch, and supported by stability data. In addition we will have bioavailability and pharmacokinetic data to hep prescribers select the optimal dose for each of their patients.

We plan on bringing to market numerous dosage form, designed to optimize performance depending on the intended use. For example, we will have rapid onset formulations for use by patients seeking an immediate effect as well as long-acting formulations designed to provide for once-daily or twice-daily dosing for patients with chronic condition looking for continuous effects.

MicrocapResearch: What are the variables and key drivers for cannabinoid growth in Canada going forward?

John Stewart: The use of cannabinoids for medical purposes has shown exceptional growth since the Licensed Producer regimen was brought forward under the direction of Health Canada, but the number of individuals being treated is very, very low when compared to the number of patients being treated with existing prescription drugs. I believe that the advanced pharmaceutical formulations we are bringing forward will significantly improve patient and healthcare professional acceptance of cannabinoid therapy, and also help maximize their therapeutic benefits.

Another significant factor will be the willingness of provincial healthcare benefit plans to cover the cost of cannabinoid therapy. I have seen clinical trial data demonstrating equal, and in some cases improved, efficacy from cannabinoid therapy than traditional pharmaceuticals. However, no province currently pays for medical cannabis – leaving patients and their physicians with somewhat of a dilemma. Hopefully this will change, and the provincial healthcare ministries will come to recognize the overall cost-effectiveness of cannabinoids.

MicrocapResearch: What is the current size of the Canadian medical marijuana market, and how big do you believe it will be in 5 years?

John Stewart: Accurate information on the size of the overall MMJ market is not readily available, but on the basis of their being some 130,000 patients registered under the current ACMPR Program, i would estimate that 2016 sales were in the range of $200 million.

Looking at the prescription pharmaceutical market for therapies used for the conditions in which cannabinoids are now recognized as being effective, it is entirely reasonable to see the medical marijuana market being between $1 billion and $2 billion in 5 years time – and note that this does not include sales in the forthcoming Recreational Use Market.

MicrocapResearch: What developments specifically at Emblem Corp. can investors look forward to over the next 12-24 months?

John Stewart:Too many to cover in the short time of this interview. At a high level we will see a very significant expansion of cultivation capacity and advances in cultivation techniques, dedication of a completely new extraction and formulation development laboratory and impressive additions to the nature of information and services available from the GrowWise Operation.

MicrocapResearch: Thank you John, for taking time to update investors on the Canadian marijuana market and Emblem Corp.

John Stewart:

You are welcome, and thanks for the opportunity to connect with your important audience.

Emblem Corp.