Medical marijuana company Phytotech is running an IPO and hopes to list on the Australian Stock Exchange before Christmas.
Company co-founder Ross Smith told Business Insider he wants to be the “George Clooney of medical cannabis”. He said he came up with the idea of developing new ways of taking cannabis after suffering a severe back injury on a mine site a few years ago.
He said he was on a hunting and fishing expedition in New Zealand with a friend who grew his own marijuana when he tried it for the first time since his mid-20s.
“[It was] after spending a day white water rafting and doing all the fun stuff, but after a few days [smoking cannabis] I noticed that I was waking up feeling good. I didn’t have any pain or stiffness,” he said, adding he stopped taking pain medication he had been prescribed for his back injury.
“I never felt better. I was able to carry a heavy rifle, walk the mountain, carry a deer or a pig over my shoulders without any sort of pain whatsoever.
“I came back to Australia and started researching medical cannabis and went to the States – had a look what was going on over there – talked to people, tried different bits of cannabis. Went to Amsterdam in July, did the same thing over there and then my research led me to Israel where there’s more than a decade of legalised medical cannabis.”
Smith visited growers and researchers in Israel and discovered he could use cannabis with a vaporiser instead of smoking it.
The company was incorporated in August last year and hasn’t published its financial information, but has raised just under $1 million in seed funding to date.
Using the ASX’s minimum issue price of $0.20 a share with 25 million shares on offer, Phytotech is hoping to raise up to $5 million in its IPO which it is expected to close this week.
“The ASX allows startup companies to raise risk money,” Smith said.
The company’s prospectus reads more like a list of reasons not to invest, outlining a bunch of market risks from reputation damage from the very nature of marketing cannabis to clinical trials not going as planned. In one instance it says “clinical trials for our product candidates are expensive, time consuming, uncertain and susceptible to change, delay or termination”.
It then goes on to detail 15 risks to getting the product in the market.
“It’s a bit annoying really, the ASX has got so anal that it’s almost they’re telling people not to invest,” Smith said. “There’s not a problem with what we’re doing – we’re a biotech company operating in medical cannabis.
“We all know it’s a risk…It’s priced for risk.”
But this isn’t your hippy-grown dope found in some back garden – this is pharmaceutical-grade medicine, Smith said.
Phytotech has developed new cannabis delivery systems including a patch and a disposable vaporiser. It is also considering the acquisition of or investment in US dispensaries, other producers and retailers.
The company said just over 50% of the funds will be used to further develop the tech with the remainder being allocated to administrative costs and working capital.
While it waits for legislation change in Australia, Phytotech said it will focus on targeting international markets. It plans to build two high-tech indoor/outdoor medical cannabis growing facilities in California and Uruguay. Smith is also about to move to the Israel where he has a master grower cultivating a number of strains of medical-grade marijuana.
“The company will initially focus on the commercialisation of medical cannabis delivery systems in the markets of USA, Canada, Israel and Europe that have regulated medical cannabis laws, with the longer term aim to target the Australian, New Zealand and other markets that may be regulated at a future point in time,” Phytotech said in its prospectus.
Smith said the uncontrolled state of marijuana in Australia is a concern.
“What we have in this country, as far as I’m concerned, it’s just bush weed, they don’t know how to grow it they don’t know how to cure it,” he said, adding: “It’s all grown illegally, it’s not stablised.”
“When Australia grows up and decides to use medical cannabis we’re prepared to help out.”
Smith sees an entire industry evolving around medicinal cannabis in Australia.
“Cannabis can be grown on a massive scale and exported,” he said. “We have the climate for it, we have the land.”
In Australia, the plight of those suffering chronic disease and terminal illness and the relief they have experienced from using medicinal marijuana has resulted in both state and federal members of parliament calling for legislation change to be considered. One of the most vocal campaigners has been 24-year-old Daniel Haslam who’s story started a national debate on the benefits of medicinal marijuana this year. There’s more on that here.
“I don’t want to see them smoking cannabis, they’ll be far more comfortable using conventional methods,” he said.
“There is medical grade cannabis that will f*ck you up.
“That’s for extreme cases where patients need that…They start to relax, smile and they can eat.
“To get my medical cannabis, I had to do something illegal to get it – that’s ridiculous – we’re not talking about recreational use, we’re talking about medicine.”
It’s a controversial topic, something the company recognises saying getting regulatory approval could “generate public controversy”.
“Political and social pressures and adverse publicity could lead to delays in approval of, and increased expenses for, our products,” the company said.
“Adverse publicity from cannabis misuse or adverse side effects from cannabis or other cannabinoid products may adversely affect the commercial success or market penetration achievable by our products.
“The nature of our business attracts a high level of public and media interest, and in the event of any resultant adverse publicity, our reputation may be harmed.”
The pharmaceutical industry is a competitive one with deep pockets something Phytotech will have to contend with as it and the market matures.
“If we are unable to compete successfully, we may be unable to generate, grow and sustain our revenue,” the company says it its prospectus.
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