OXFORD Cannabinoid Technologies (OCT) is gearing up to raise its second major round of funding since it listed on the London Stock Exchange (LSE) last May.
The shape of the company’s future, including whether its current programmes will need to be ‘delayed, if not terminated’, will be determined by how much the company is able to raise.
With its cash reserves due to be depleted by March/April 2023, the company is now pulling out all the stops to assure investors of its inherent value, hammering home the imminent commencement of in-human phase 1 clinical trials for its two lead compounds, which it hopes will be an ‘inflection point’ able to turn around its market fortunes.
However, following a tumultuous first year on the LSE which has seen its share price drop 85%, alongside a market which has been ‘turned upside down’, OCT says it is ‘looking at all options’ to stay afloat.
OCT is now preparing to launch its next round of fundraising by the end of Q1 2023, which will see it issue a further 5% of ordinary shares without needing to seek additional shareholder consent, ‘market permitting’.
At its current run rate, its cash reserves will enable the company to ‘complete the phase one clinical trials for the first two programmes’.
OCT’s CEO Dr John Lucas told BusinessCann: “At that point, we will have to do the raise, but we do have the capital necessary to get the first two programmes through.”
“We do expect to see a rise. We expect to see value inflections, as any biotech would, when we achieve the milestone of passing through phase one clinical trials, and then being ready for phase two.”
Relying on a share price hike in a market that has, so far, not been kind to the company is a gamble it can ill afford to take, a fact the board appear to be acutely aware of.
According to Dr Lucas, the company has been examining its possible options and contingency plans for the ‘last six months’, many of which have been laid out in detail within the company’s full year report as part of its drive to ‘strengthen engagement with shareholders and potential future investors.’.
Should OCT be unable to raise funds at ‘appropriate rates’, one option suggested would be the ‘reallocation of resources to focus purely on the highest value-adding programme’, which the company anticipates will allow it to operate for a further three months.
“Let’s say that the market conditions stay dismal, and we don’t see a value inflection, then we would raise enough to take our lead candidate forward, until such market conditions change, and then we would do another raise… to pick up the other ones”.
He explained that the company will decide whether or not to push ahead with the raise, and which programmes it is going to pursue ‘as we move into this fall and Q4’.
“I think it’s more of a case of not diluting the shareholder value any more than necessary, but at the same time increasing the valuation of the company by advancing our programmes. So that’s kind of the balance that we have.”
A raft of other mitigating measures have been laid out in the release in the event the company is either unable to boost its share price enough to raise the money it needs, or it runs out of cash before it is able to raise, leaving it ‘unable to meet its liabilities as they fall due’.
These include ‘alternative short and medium-term financing’, accessing funds from US investors via its secondary listing on the OTC QB, and potential ‘business combinations with entities that will ultimately increase shareholder value.’
Asked whether the company would consider a takeover bid, Dr Lucas said the board was looking at ‘all the options’.
“We’re looking at these right now, we’re not waiting until the fall or Q4 to begin to pick this up. We’ve been doing this for the last six months. So yes, we’re looking at all options including potential mergers, acquisitions, all of that is on the table.
“But just to let the shareholder know, we are looking at everything. And we are confident that one way or another, we’re going to be able to raise the capital necessary to take at least one of our programmes forward.
“The ongoing message to investors is we’re doing what we said we would do, you know, we are accomplishing our milestones in spite of the dramas, in spite of the markets turning upside down, we’re still going full steam ahead and did exactly what we said we would do, we’re going to achieve these milestones, we’re going to increase the valuation of the company.”
Full Year Results
Yesterday, OCT published its results for the eleven month period ended April 30 2022, its first full-year set of results as a public company.
During the period, the company says £5.4m of its initial £14.6m capital raise was absorbed by operations, leaving it with debt-free cash reserves of around £9.2m as of April 30. This equates to a basic diluted loss per share of 0.49p.
Research costs increased from £445k to £2.9m in line with budget over the period, with £1.5m of this spent on preclinical activity for its leading compound targeting neuropathic pain, OCT461201, in preparation for phase 1 clinical trials, set to begin in Q1 2023 with a full report on the safety and tolerability of its compound due for Q2 2023.
A further £473k was spent on its second programme OCT130401, which is also due to commence phase 1 clinical trials in Q4 2022.
Spending on its third programme, which could be upgraded to the lead compound stage by the end of the year, exceeded this figure, seeing OCT spend £783k over the period.
This was largely due to costs associated with the acquisition of a library of 335 cannabinoid derivatives from Canopy Growth in September 2021, and subsequent screening of this database.
Its final programme, understood to be in the same stage of development as programme 3, cost the company £56k over the period.
Aside from its increased research costs, which fall largely in line with expectations, operational costs, including costs related to salaries, increased from £1.5m to £2.3m.
Some £817.6k of this was attributed to wages and salaries, nearly double the £444.6k from the previous period, though the company points out that no bonuses have been paid to the executive team over the year, while remuneration for all directors was frozen to prior year rates.