Two years ago Zelira (ASX:ZLD) — then Zelda — was set to invade the German market, planning to storm the walls with unregistered marijuana products that had a little bit of clinical data behind them, data which would be the reason for a bigger pharma company to swallow the little Australian fish.

Today Germany may as well be chopped liver because it’s certainly now a side dish: snazzily renamed Zelira has shifted the main play to the US.

CEO Richard Hopkins is very convincing about the new strategy, which came about via the merger with Pennsylvania-based Ilera Healthcare last year.

“All of these companies running around Australia have missed the biggest opportunity, the US,” he says.

Now Zelira has its first trial results in the bag — a phase 1a/2b trial of its treatment on insomnia sufferers which met all primary endpoints of putting subjects to sleep and keeping them there — it can now start making and selling the product in the US, the largest cannabis market in the world.

Or at least, using its new US base to do that work.

Hemp-derived cannabidiol (CBD) is federally legal but marijuana-based products, which contain THC, are not.

Therefore while medical cannabis is legal in a number of states, for a foreign company to sell its products there it must have a base or a partner which can make and distribute said products within the borders of the states where it is legal. THC can’t cross state lines.

 

A big assumption

Hopkins’ and Zelira’s strategy has always been that doctors will be more willing to prescribe products with good quality clinical data behind them, so sell the product as an unregistered drug (meaning it hasn’t been registered for a specific illness or indication with a national regulator, an expensive and slow process).

Then over time they will fill out the data file and register the product as a drug.

The counter argument is why would customers or insurers, used to buying the cheaper unregistered product, pay more for the same thing just because it’s registered?

The assumption Zelira is working on is that in the US the all-powerful Food and Drug Administration (FDA) will crack down heavily on the whole cannabis market, making it difficult to get unregistered cannabis drugs.

The FDA is cracking down on cannabis and hemp products that claim any kind of medical benefit, and has specifically said cannabis can’t be marketed as a supplement, and can only be added to food or drink if it doesn’t contain CBD or THC.

The FDA sent 22 warning letters in 2019, and has warned 44 companies in total since 2015, for marketing unapproved new drugs that contain CBD.

That action is already tying up large companies.

Locally-listed Elixinol (ASX:EXL), among its other bothers, is being sued in the US via a class action alleging its products are “illegal to sell” in that they’re mislabeled under federal law.

Hopkins is betting the FDA will eventually bring the US medical cannabis market to heel and only allow registered cannabis drugs to be sold.

 

Patent protection

Hopkins says Zelira is going about cannabis from a biotech perspective, which means patents.

The company has patents approved in Australia for three different ratio formulations, one being 2:1 parts THC:CBD. The same claims are “well advanced” in the US.

Patents allow the owner to prevent anyone else from selling their protected product.

In the cannabis world, which until now has been a land grab for market share, enforcing patents could shake up the market significantly.

Hopkins did not want to comment on what Zelira will do with its patents, only that they are setting the company up for acquisition.

“We’re going to be acquired for our patents,” he says.

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