InnoCan Pharma Corporation is Undervalued
Last week, Wall Street stocks fell by the highest since February 2021 after a seemingly disappointing earnings report from Meta Platforms, Inc. (FB) dragged the Nasdaq lower with it. According to the Financial Times, the S&P 500 index dropped 2.4% and the Nasdaq Composite fell 3.7% as investors remained concerned about the negative impact of the reopening economy on tech companies.
During the pandemic, tech stocks skyrocketed, fueled by mobility restrictions leaving customers homebound, increased transition to the cloud, and introduction of new technologies specifically focused on sustainability and zero-emission goals. However, with the economy reopening and travel restrictions easing, investors believe this trend will begin to fade. The looming threat of rate hikes has not helped the outlook for tech stocks either. This pullback, on the other hand, is an excellent time to look for equities that are still undervalued.
InnoCan Pharma Corporation (INNPF) is a small-scale pharmaceutical company that focuses on the development of various drug delivery platforms combined with cannabidiol (CBD). With its expansion into veterinary medicine, InnoCan has the opportunity to commercialize its intellectual property (over 15 patents), and if this becomes successful, the company would deliver handsome returns to investors.
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InnoCan Pharma is a specialty pharmaceutical company based in Israel that is focused on developing products with cannabinoids. Cannabinoid medications, such as cannabis, are increasingly used to treat sickness and relieve symptoms in the western world, and the company creates products that combine the unique properties of cannabinoids with other pharmaceutical ingredients, as well as the creation and sale of CBD-based solutions delivered via smart delivery platforms to treat cell damage in the central nervous system (CNS), as well as muscle and rheumatic pain.
InnoCan operates through three distinct operating segments:
- The research and development of CBD-loaded exosomes (CLX);
- The research and development of the use of CBD loaded liposomes; and
- The commercialization and sale of branded CBD integrated pharmaceutical and topical treatment products.
The company is working on a novel, breakthrough exosome-based technology with Ramot at Tel Aviv University that targets both CNS indications and the COVID-19 virus using CBD. InnoCan also signed an exclusive worldwide license deal with Yissum, the commercial arm of The Hebrew University of Jerusalem, to develop a CBD drug delivery platform based on a unique-controlled-release liposome to be administered by injection.
InnoCan is focused on becoming the world’s leading developer and licensor of CBD-based pharmaceutical products. The company is investing in the research and development of CBD encapsulated in liposomes (the LPT platform) to achieve long-lasting large amounts of CBD in the body, which it claims would result in significantly more powerful and ongoing therapeutic benefits.
InnoCan conducted a series of animal trials with its CBD-loaded liposome technology (LPT) in 2021 and announced the results of its experimental study of its LPT platform on large animals on September 3, 2021. The findings demonstrated that the pharmacokinetic (PK), an indicator of drug efficacy, in animals were identical to those in a prior small animal study, indicating that InnoCan’s strategy to make CBD available to humans and animals over an extended period is possible. The findings suggest that the LPT platform might be used to develop a wide range of medicinal applications.
On January 20, 2022, the company released new information about its LPT project, revealing that CBD encapsulated in liposomes can be detected in sufficient amounts for up to 6 weeks after a single administration, whereas CBD is administered orally or parenterally degraded rapidly after only a few hours. On the other hand, while InnoCan’s research was primarily focused on the use of the LPT platform in humans, a new aspect of its applicability for veterinary medicine also seems possible. The company decided to follow a path of commercialization for the veterinary medicine market after seeing the first positive results in the treatment of various diseases in dogs. These investigations, according to InnoCan, will help speed up the development of human therapeutic products. Further, this medical application made achievable by the LPT platform for both animals and people would be a tremendous breakthrough.
To conduct research on its LPT platform, InnoCan Israel signed a Research and License Agreement with Yissum Research Development Company in 2020, the commercial arm of The Hebrew University of Jerusalem, for design, preparation, characterization, and assessment of CBD-loaded liposomes. On January 10, InnoCan announced a second amendment to its research and license agreement with Yissum, allowing the company to conduct studies testing the efficacy of its CBD-Loaded LPT in treating dogs. According to the new agreement, Yissum will undertake more studies on dogs using liposomal CBD for a cost of $100,000.
The company also extended a Research and License Agreement with Ramot, Tel Aviv University’s Technology Transfer Company, for the development of a CBD-loaded exosome delivery platform on December 6, 2021. According to the initial agreement made in 2020, Ramot invested roughly $500,000 over 13 months, and under the new agreement, it will fund an aggregate amount of about $1,200,000 over 21 months, payable to InnoCan in four distinct installments. InnoCan also gets exclusive, worldwide royalty-bearing licensing rights to commercialize any research discoveries connected to the technology created. Over the next two years, the increased funds from this arrangement can be expected to boost the turnover by about $700,000 per year according to company filings, reducing the amount of external financing required to support operations and extending the run rate.
The company has been researching skincare and body care products as well. On June 16, 2021, InnoCan announced statistically significant results for two clinical studies carried out by UPTEC, the Science and Technology Park of the University of Porto, the first of which looked at the effectiveness of the company’s SHIR CBD EyeSerum in reducing puffiness and the second of which looked at the level of anti-inflammatory protection provided by the company’s SHIR CBD+ Anti-Aging Sleeping Mask. Following the results of the clinical tests, InnoCan entered a joint venture agreement with Brandzon Co. Ltd. to advertise and sell skincare and body care products online. On July 1, 2021, the company announced the signing of an exclusive distribution agreement with Health Investments Group S.A. to distribute the SHIR and Relief & Go brands to the Polish cosmetic market.
On July 9, 2021, InnoCan filed an international patent application for a topical composition for the treatment of diabetes symptoms and several compositions containing cannabis for the treatment of diabetic-related diseases. The company also stated on June 14, 2021, that it had filed an international patent application for a unique cannabis-based vaginal moisturizer and lubricant treatment and on July 28, InnoCan filed a patent application for its topical compound for hair loss treatment.
The company’s pioneering initial findings have spurred it to boost staffing and construct its own facility to ensure speedy progress. As the company aims to begin human trials, InnoCan is now striving to secure the upscaling of capabilities, which will enable the company to produce CBD-loaded liposomes in bigger quantities, a step closer to commercialization. The company is also performing animal studies relevant to numerous parts of the LPT Programme in parallel with the creation of a lab, which may subsequently provide supportive data when transitioning to human clinical trial preparations. According to Grand View Research, the global veterinary medicine market size is expected to expand at a compound annual growth rate (CAGR) of 7.4% through 2028.
The demand for CBD medicines has risen significantly, with the global cannabidiol (CBD) market expected to grow at a CAGR of 47.49% from $3.67 billion in 2021 to $55.79 billion in 2028. There is potential for long-term sustainable growth with wider adoption of CBD in the medical and healthcare industries, and the development of innovative delivery systems as CBD’s efficacy in treating a wide range of medical ailments is widely documented. Despite its benefits, the medical community faces a barrier in delivering CBD in a consistent and predictable manner to assure bioavailability, a key indicator of drug absorption. The current bioavailability of existing medicines employing vaping/smoking or oral administration techniques ranges from 6%-35%. The other way to reach a higher level of bioavailability is to directly inject drugs into the bloodstream, however, the levels soon decline. This is the primary research area of InnoCan, and the CBD-loaded liposomes used by LPT enable accurate and controlled dosing as well as a predictable release of CBD into the bloodstream. LPT was proven beneficial in a series of successful small animal experiments in 2020 and clinical experiments on large animals in 2021. These successful experiments allowed the company to prepare for human clinical trials. Currently, the company is developing three delivery system technologies which include Inhalation, Injection, and Topical Applications.
Risks to monitor
Investing in small-scale pharmaceutical companies carries a lot of risks as these companies usually do not enjoy the benefits of having a commercialized suite of products. Investing in InnoCan carries this same risk, and only growth-oriented, risk-seeking investors should consider this company.
The company, recently, has achieved several milestones, but none of this guarantees any future success, which is in part true for any company. Because the company does not generate substantial revenue at the moment, this risk needs to be carefully monitored by potential investors.
InnoCan Pharma is focused on the development of novel CBD delivery techniques, and the company enjoyed some success with its trials in 2021, which suggests the company is moving in the right direction to commercialize its products in the future. If the company goes on to achieve the desired success, investing in InnoCan early could prove to be lucrative.
Disclaimer: The author was compensated to provide his independent analysis of the company. The author owns no shares nor plans to do so in the near future. The stock market is volatile and investors are advised to do their own research prior to making a decision.
Updated on Feb 16, 2022, 9:05 am