Nature Identical Therapies

In 2007, a National Health Interview Survey found that four out of ten adults use some kind of complementary or alternative treatment to conventional medical care.  Such therapies include a variety of botanicals, nutritional and organically derived compounds. They can be used along with standard medicines or as substitutes.  Integrative medicine is an emerging discipline that combines both standard and alternative medicines. 

Based in Canada, PreveCeutical Medical (PRVCF:  OTC or PREV:  CN) is an early stage life sciences company with a focus on compounds using natural substances for health and wellness products.  The company has already brought one product to market and has a five research projects in its development program. 

Development Pipeline

One of the projects in PreveCeutical’s development pipeline involves the identification of peptides and proteins in the venom of Caribbean blue scorpion.  The peptides and proteins will be used to engineer ‘nature identical’ compounds.  Synthesizing compounds identical to the natural venom is expected to facilitate more commercially viable formulations. 

PreveCeutical already has experience with the Caribbean blue scorpion venom.  The company already markets CELLB9, a commercially available oral solution of scorpion venom for use without prescription.  The solution has been found instrumental in treating inflammation, but has also been used for bacterial infections, pain and tumors.  The company’s development team believes there is potential for scorpion venom for the treatment of other health issues and is beginning with sports-related concussion. 

A high priority on PreveCeutical’s development agenda is a non-opioid pain treatment compound based on cannabinoids and administered through a proprietary nose-to-brain drug delivery system.  Called the Sol-Gel system, it is intended to deliver a therapeutic compound to a targeted diseased site at a slow, controlled rate.  The work is being undertaken through a research and development partnership with UniQuest Pty. Ltd., the development arm of the University of Queensland in Australia.  Management believes the Sol-Gel system can help make application of cannabinoids more effective for pain treatment without negative side effects.  

The research team at UniQuest began working May 2018, with the first supplies of medical marijuana.  UniQuest took delivery of cannabis samples in early May 2018, and will undertake the ’fingerprinting’ steps in the months ahead.  Management has also begun vetting alternative nasal delivery devices.  The company plans to partner with a developer that has a strong track record for regulatory approval and manufacturing excellence.

Market Opportunity

PreveCeutical is targeting a large market opportunity with its ambitious R&D pipeline.  According to Grandview Research, an industry research firm, the alternative and complementary medicine market was valued at $40.3 billion in 2015.  The group determined that at least 60% of the global population uses some form of traditional or non-conventional medicine. 

Few alternative therapies have undergone careful clinical evaluation.  To improve safety and efficacy the U.S. National Cancer Institute and the National Center of Complementary and Integrative Health are currently sponsoring dozens of clinical trials that test alternative treatments and therapies.

Lack of regulatory endorsement does not appear to dissuade patients and consumers.  Grandview estimates the market could grow at an annual compound rate of 15% to reach $196.9 billion by 2024. 

One element in the building demand is an aging population that is more prone in later life to chronic disease.  Persistent and lingering disease can often be managed better or at lower cost with alternative medicines.  There is a building body of anecdotal evidence that alternative medicines can be promising treatments for chronic pain. 

Early detection, screening and diagnostic techniques are critical components of preventative health and key drivers of growth in the market.  All over the world governments and non-profit organization are focusing programs on improving the life expectancy and quality through preventative health practices and medicines.

Capital Raise

PreveCeutical records nominal sales of is CELLB9 oral solution of Caribbean blue scorpion venom.  The sales volumes are not sufficient to generate enough revenue that would cover much more than manufacturing and marketing costs.  The company has ramped investment in a research and development program aimed at bringing important therapies to the market.  In the first quarter of the year 2018, the Company recorded CA$1.3 million (US$1.0 million) in operating expenses, including CA$381,208 (US$290,404) on research and development activities.  This compares to CA$359,897 (US$274,170) in total operating expenses in the same quarter in the previous year when only CA$145 (US$110) was directed at research and development projects. 

Despite issuance of common stock for the payment of suppliers, advisors and employees, the company uses cash resources to support operations.  In the first three months of 2018, the company tapped its bank account for CA$916,637 (US$698,294) to pay for operating expenses.  This was more than four times more than the cash used in the same period in the previous year.  The increase was primarily due to acceleration in research and development work as well as corporate and administrative activities.  The company may need to use approximately CA$1.0 million (US$760,000) in cash per quarter for the balance of the year 2018. 

To support its project development agenda PreveCeutical Medical raised capital through the private placement of common stock and warrants.  The transaction was closed in June 2018, raising CA$6.5 million (US$4.9 million) in exchange for 130.8 million in units composed of one share of common stock and one warrant.  The warrants are exercisable at CA$0.20 per share.

Most investors would probably agree that adequacy of cash resources is critical for PreveCeutical Medical at this stage in its development.  By the end of June 2018, it is estimated that the Company had CA$5.7 million (US$4.3 million) in total cash available based on recent cash usage rates and the company’s recent capital raise.  If this estimate is accurate for cash requirements near CA$1.0 million (US$760,000) per quarter, it is possible the company now has sufficient cash resources to support operations for the next twelve to fifteen months.

                                                                       

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein. PreveCeutical Medical is the subject of research coverage by Crystal Equity Research through the Focus Report series for research sponsored by issuers or their agents.