Innovation and Opportunities in the CBD Therapeutics Market

- April 12th, 2018

Kalytera Therapeutics CEO Bob Farrell shares his insight into the growing market for cannabinoid-based pharma products in this interview.

Cannabidiol, or CBD, has the potential to be a broad-spectrum pharmaceutical, meaning it can be used to treat a wide variety of diseases.

Bob Farrell, president and CEO of Kalytera Therapeutics (TSXV:KALY,OTCQB:KALTF), has more than 25 years of experience in the pharmaceutical, biotechnology and medical device sectors.

He has held executive-level positions with publicly listed companies in these industries, as well as with the Institute for OneWorld Health, an affiliate of the Bill and Melinda Gates Foundation. Farrell shares his knowledge of the market for CBD as a broad-spectrum therapeutic and his company’s ongoing programs in the sector.

Investing News Network: Please explain what it is about the biological mechanism of action in cannabinoids that makes these compounds effective at treating a wide range of diseases?

Kalytera Therapeutics CEO Bob Farrell: There are over 100 compounds in the marijuana plant. The two most prevalent compounds are tetrahydrocannabinol (THC) — which is psychoactive and gets people high — and CBD, which is not psychoactive. Humans have a number of CBD receptors throughout the body. In fact, they are ubiquitous. These receptors are found on immune cells and a number of other cells. Because CBD can bind with receptors, it has the potential to have a biological effect on a number of organ systems, including the skin, the GI tract and immune cells. This receptor system is already inherent in the human body and made for binding with CBD, which gives the compound significant potential to be a broad-spectrum therapeutic in a wide range of organ systems.

INN: Can you give an example of how CBD might work in the body to treat a specific indication?

BF: We have recently announced the initiation of a new program to develop a cannabinoid-based product for the treatment of pain. This product will target the alpha 3 glycine receptors in the spinal cord. When a cannabinoid compound binds with these receptors, it can create a pathway to the brain that will alleviate pain. We have taken a cannabinoid from the marijuana plant and conjugated it on the molecular level with another compound called naproxen, which is a generic pain reliever. We think the two compounds will act synergistically to relieve pain.

In essence, we are developing a product with targeted delivery of a cannabinoid combined with a generic pain reliever to a specific receptor site within the body — the alpha 3 glycine receptors in the spine — to relieve pain. The linkage of these two compounds has great significance for patients and investors. First of all, we have a very strong scientific rationale for why the two compounds will work synergistically — in that the cannabinoid will bind with the pain receptor in the spine to relieve pain and the naproxen compound will prevent the production of a protein called prostaglandin, which would normally interfere with the ability of the cannabinoid to relieve pain at the alpha 3 glycine receptor.

From an investor’s perspective, these two compounds have never been linked before, so we’re able to patent this product as a novel or new chemical entity and we have applied for patent coverage. Secondly, there is a huge commercial opportunity in the treatment of pain — representing an $83-billion market annually. This market includes pain relievers such as opioids with known safety issues, including respiratory suppression, overdose and addiction.

One of the key advantages of CBD and other cannabinoids is that they are known to have a very good safety profile, which is another reason why they have great potential to be developed as therapeutic products for a number of diseases. If we can move our product forward and demonstrate that it is safe and effective in the treatment of pain, especially compared to opioids, we would have a very attractive product that we could then license or sell to a major pharmaceutical company within a few short years.

INN: What unmet medical needs do CBD-based pharmaceuticals have the potential to address?

BF: There are many unmet medical needs and human diseases for which there are not adequate or safe, side effect-free treatments. And as I’ve mentioned, because it’s effective in many organ systems within the body we can target its delivery to receptors within a specific target area and know that we can affect what’s going on at that site in a safe manner. What’s important for investors is that Kalytera is working with various patentable CBD analogues that we are able to target for delivery to specific disease sites within the body.

Our program for the treatment of pain is in the very early stages of development; however, our lead program in Graft vs. Host Disease is already in Phase 2 clinical testing. We are developing CBD for both the prevention and the treatment of GvHD, an orphan disease with a much smaller number of patients, typically located at centers of excellence where they have received bone marrow transplants. In prevention of GvHD we are currently in Phase 2 clinical testing. Later in 2018, we will initiate a companion Phase 2 study in treatment of GVHD. By the end of 2019, we will have both of those programs in Phase 3 status, and if all goes well we can submit all of our data for approval probably in 2020 or 2021.

INN: Can you explain to investors the significance of a biotech company moving a program from Phase 2 to Phase 3 clinical studies, and how it can represent an inflection point in share price?

BF: Certainly. Pharmaceutical product development companies like ours must advance products through the regulatory process, beginning with preclinical work with animals to establish that the drug is safe before applying to conduct human clinical studies. Those studies typically advance through Phase 1, Phase 2 and Phase 3, where you obtain sufficient data to submit to the regulatory body, such as the FDA in the US, for approval.

As you advance your product through each of these steps, the product becomes de-risked in the eyes of investors. For example, when you complete preclinical studies, you have demonstrated that the product is safe enough in animals that it can now be tested in humans. Typically, you see a small bump up in share price at that time. But you see a more substantial inflection point as you complete human clinical testing, moving from Phase 1 to Phase 2 and finally to Phase 3. These are considered significant inflection points, or value-driving events, by investors because you have completed work that has de-risked the product by showing that it is safe and potentially effective. As you move toward the final goal of approval, it’s like moving up a staircase with each step representing the potential for a higher valuation and ultimately a higher share price. In the case of Kalytera, we currently have our lead program in GvHD in Phase 2 clinical testing, and I think moving into Phase 3 by next year will be a significant value-driving event for us.

Our strategy for our pain product, and this would be very important for investors to understand, does not involve taking the product all the way through Phase 3 because it would be very expensive to conduct large clinical trials in the treatment of pain. Instead we would take this product through Phase 1 and Phase 2 clinical testing, and if the product performs well — in other words synergistically and effectively relieving pain without the safety concerns seen with opioids — at that point we will potentially have a very valuable program that we can then license or sell to a major pharmaceutical partner.

Now, unlike the pain indication, the GvHD program is one where we will probably take our compound all the way through Phase 3, seek approval from regulatory authorities and market it ourselves in some jurisdictions. For example, in the US market there may be no more than 25 or 30 centers of excellence where the majority of patients would be in hospital and it would be easy for us to put together our own marketing/sales group to address that market and commercialize this product ourselves.

INN: Poor oral bioavailability is one of the limitations that has held back CBD in the pharma space. How is this limitation being addressed in your product development?

BF: Poor oral bioavailability in CBD means that when you take a dose of CBD by mouth it goes into the stomach and then to the liver where there is a phenomenon that occurs called first-pass metabolism. The majority of CBD is broken down into what are called metabolites, and little of the CBD actually makes it into the bloodstream. This has been one of the difficulties in developing oral CBD formulations.

There are a number of ways to address that challenge. For example, in our GvHD program we have approached that problem in the simplest of ways. We have mixed our CBD in a liquid solution with olive oil, which encapsulates the CBD and protects it as it goes through the stomach and liver so that a much higher percentage of the CBD can enter the bloodstream. The initial clinical studies that were completed on CBD in the treatment of GvHD were performed in Israel. The inventor mixed 100-percent-pure CBD with olive oil and obtained extraordinarily good results in clinical testing. We examined the process and concluded that the olive oil, as simple as it is, provides great protection for the CBD molecule as it goes through first-pass metabolism.

In contrast, with our pain product we are working on various routes of administration to bypass the liver entirely, avoiding the challenge of first-pass metabolism. We have not yet disclosed the route of administration for the pain program, but there are a number of ways to bypass metabolism in the liver; for example, by administering a drug intravenously or topically.

INN: Please give our investor audience your outlook for the CBD therapeutics market and the opportunity for investors.

BF: I’m very optimistic about the potential for the CBD therapeutics space. The outlook for this sector is very good, not only in the short term but in the long term as well. This is a market landscape where some jurisdictions such as Canada have already legalized medical marijuana, and other jurisdictions, such as the US, have yet to follow suit.

However, I think as time goes by and more CBD products become approved, the FDA and other regulatory bodies around the world will become much easier to work with. Currently, no CBD product has yet been approved in the US, but GW Pharmaceuticals (NASDAQ:GWPH) is developing a CBD product for the treatment of juvenile epilepsy and they may be the first company to get a CBD product approved in the US market. I wouldn’t be surprised if we follow close behind them with our CBD product targeting GvHD.

Once the FDA approves its first CBD product I think there will be a lot of risk removed from the equation and investors will be much more sanguine about the profit potential for CBD. And as we discussed at the outset of this conversation, because CBD binds with receptors that are ubiquitous throughout the body, it has the potential to address a lot of diseases, and safely, too.

In terms of Kalytera’s goals in this market, we are expanding our focus beyond GvHD into much larger commercial opportunities such as pain. We hope in the future to have alliances with Canada-based medical marijuana producers and jointly develop products across a broad range of disease indications. As we move forward with establishing those alliances and expanding the number of programs in our portfolio, we will have more shots on goal.

This article was written according to INN editorial standards to educate investors.

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