Oxford Cannabinoid Technologies (OCT) published its interim results this week reporting ‘good progress’ on all of its key development programmes, but its stock price was dragged down once again following fresh controversy among its board members.
The pre-revenue cannabis company, which counts Case Verde and tobacco giant Imperial Brands as backers, told investors this week that it remained ‘on track, on time and on budget’ as it prepared to enter a ‘transformational’ phase in its lifecycle.
It came just days after OCT’s Co-Founder Gavin Sathianathan, who left the company abruptly last November, called for the removal of six current directors in an apparent vote of no confidence.
While the move is expected to have little material impact on the company’s board, it has caused yet more instability to OCT’s already turbulent share price.
OCT’s Financial Position
In the six months to November 30 2021, OCT’s expenditure across all of its operations was £2.6m, up from £1.9m in the previous period.
From the initial £16.5m raised during its Initial Public Offering (IPO) on the London Stock Exchange in May 2021, OCT says it has around £12m left in reserves and is now debt free.
Over the reported period OCT spent just under £1m on the ‘research costs’ for its four leading drug candidates, with the remaining expenditure going towards ‘administrative expenses’.
Though the company is continuing to push for cost savings across its operations, including the closure of its London office which it expects to generate savings of £130k, OCT expects its cash reserves to be depleted within the next 12 months.
OCT’s CEO Dr John Lucas told BusinessCann: “We’re moving into this transformational stage where OCT is going to move from a preclinical stage to a clinical stage company.”
This next phase will see ‘expenditure on R&D rapidly increase’ over the next year, with its £12m in reserves forecast to be fully utilised by March 2023.
“We’ll be spending that 12 million over the next 12 months, mainly the bulk of it is allocated for the first two programmes and then around a third of it for programmes three and four.”
This will leave OCT requiring another raise in Q1 of next year with it looking to both the UK and US markets, where it recently launched on the OTC market, to raise capital.
While this has always been the plan, the company’s continued stock price issues could mean a significant raise is more difficult to achieve, leaving some investors to speculate that a takeover could be on the cards.
Dr Lucas added: “We’re looking at doing a raise. We’re also looking at potential for partnerships.”
When BusinessCann spoke to OCT back in November 2021, Dr Lucas said the board had been left ‘shaking their heads’ at the market’s reaction to its stock, which had dropped to less than half its listing price.
Weeks later its Co-Founder and Executive Chairman Neil Mahapatra stood down from the company, after a finance deal involving OCT’s stock and Mahapatra’s venture capital firm Kingsley Capital Partners was found to have breached market rules.
In December, OCT’s Non-Executive Director Mr Sathianathan also announced that he wished to ‘retire from the Board with immediate effect’.
The developments further impacted the company’s stock price performance, which fell to lows of 1.95p in late November.
Now Mr Sathianathan, who retains 78,146,151 ordinary shares in OCT representing 8.14% stake, has called for a general meeting to ‘propose the resolution to remove’ six standing members of the company’s board of directors.
This would include Mr Mahapatra, who remains on the board as Non-Executive Director, Dr Lucas, Non-Executive Chairman Julie Pomeroy, and Non-Executive Directors Cheryl Dhillon, Bishrut Mukherjee and Richard Hathaway.
Though the meeting is due to take place by mid-March, Mr Sathianathan’s proposed resolutions are understood to be unlikely to be approved by the rest of the company’s shareholders.
Mr Mahapatra is also understood to retain around 200,000,000 shares in the company, giving him a stake of roughly 20%.
“I’m not at all concerned about losing my job, I don’t focus on that. My focus is to drive this company forward and meet the milestones that we set for two perspectives is more dangerous,” Dr Lucas said.
“It’s business as usual. You know, we’re continuing to develop our programmes and move things forward. And in spite of it, we’re not going to let it stop what we’re doing.”
Message to Investors
Despite the ongoing turbulence in its board room, OCT has continued to deliver on all of the promises it has made to investors in terms of progress, and remains confident its value will increase as it moves on to the next stages of clinical trials.
“Within a year, we’re going to have two phase-two ready compounds. So we’ll be a well established clinical stage pharmaceutical company at this point next year, so we have a lot to be excited about.
“We’re in a good position, unlike a lot of biotech and cannabis companies with this downturn in the market, which we expect to improve in the spring.
“We have the capital reserves to take us through our milestones. So we’re in a very good position that way. And we are on track, on time and on budget. And that’s very important for a startup company to do the things that they said they were going to do.”