ANTG looks to cut through the noise in medicinal cannabis and build a viable pathway to profits
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For many local players in the medicinal cannabis space, establishing a viable path to profits has proven difficult in the early going.
Australian Natural Therapeutics Group (ANTG) is looking to change that, combining a strong research focus with material revenue streams across multiple jurisdictions.
The company was founded by CEO Matt Cantelo, whose initial interest in medicinal cannabis arose somewhat unexpectedly.
Cantelo was based in Denver, Colorado earlier this decade to assist in the US expansion of Corporate Travel Management, the ASX-listed company where he was a founding director.
It also gave him a front-row seat to some positive flow-on effects from the legalisation of cannabidiol (CBD) products.
Most notably, the high-profile case of Charlotte Figi — a five-year old girl who experienced a sharp reduction in epileptic seizures after being prescribed medicinal cannabis.
Returning to Australia, Cantelo set up ANTG in 2015 — initially with plans to fund more research in the space.
He partnered with the University of Newcastle, commencing studies into the use of CBD in the treatment of acute leukemia, which are now progressing towards clinical trials in early 2020.
But he knew that in order to fund more studies, that research focus would have to be combined with a viable business model.
“It’s important for everyone that the industry is strong,” Cantelo told Stockhead. “I think a lot of companies in the space have been focused on obtaining the relevant licences, and not necessarily profits.”
“But that’s what creates sustainability. So my focus and the commercial team’s focus has been to ensure a pathway to profit from early on.”
ANTG now has three production farms in Australia with a combined size of around 25,000sqm, accompanied by a manufacturing and research facility in California.
And like many local producers, the company aimed to position itself for global growth once the federal government approved medicinal cannabis products for export early last year.
But to turn that expectation into reality, Cantelo said the company took a key step forward after chief operating officer James Gaskell attended an industry conference in Canada.
The key talking point was around moves by European regulators, who were enforcing higher standards around good agricultural practices (GACP) and good manufacturing practices (GMP) for medicinal cannabis imports.
Existing standards applied in Canada for example, wouldn’t cut it. In response, ANTG promptly set about upgrading its Australian facilities.
“It costs us more to build to those stricter GACP/GMP specifications, but it means our cultivation and manufacturing processes are now set to the highest pharmaceutical standards globally,” Cantelo said.
“We’re the only Australian producer that meets those criteria, and we’re also the only Aussie producer that’s able to export raw cannabis flower to Eastern Europe. Our starting material is the purest that you can find.”
He said those steps had in turn created differentiation and an important pathway to profit. The company recently signed a multi-year off take agreement with German wholesaler Cannamedical Pharma.
“Europe’s the largest medicinal cannabis market in the world,” Cantelo said.
“The German market is estimated to grow to around 830,000 (being 1 per cent of the population), and if you expand that through the EU those numbers grow further.”
ANTG’s focus on partnerships extends to the local market, where it’s joined forces with health giant Blackmores to bring a prescription medicinal cannabis to market “in the very near future”, Cantelo said.
And turning to the company’s third key jurisdiction — the US — Cantelo said ANTG’s California facility provides the opportunity to develop its intellectual property.
“We went to California because we know it’s an epicentre of plant-breeding and genetics,” he said. “I think the experience gained, both in manufacturing and understanding the US market, has been invaluable for our growth.”
The company took a different approach to the US, given the two-speed regulatory framework around THC which is only legal in select states.
“We made a strategic decision to focus on the CBD market, which operates under the federal Farm Bill framework. That creates regulatory certainty and opens up the addressable to call 50 states,” he says.
“We’ve done 50-odd harvests there now — it’s provided a vehicle to really delve into the science of our breeding program. And it’s also given us the opportunity to introduce our EVE branded products into the US market.”
With plenty on the go in three jurisdictions, ANTG is now looking to raise capital from the public markets to finance its next stage of growth. The company is meeting with institutional investors, ahead of an ASX-listing early next year.
By this point, large insto funds have seen a number of medicinal cannabis plays come across their desk, with varying degrees of success.
In that environment, Cantelo said holding investor talks wasn’t always easy, but so far the level of interest had been “really positive”.
“When I ask why’s there’s interest, the main bit of feedback I’ve been getting is ‘you’re actually doing something’,” he said.
“In other words, we’ve got a plan in place to not only provide patients with medicines, but we’ve also got a viable pathway to profit to ensure the sustainability of the company’s future.”
Looking ahead, Cantelo said the next key regulatory update for the sector could come in March next year, when the United Nations (in conjunction with the World Health Organsiation) releases its recommendations around whether to de-schedule CBD as a controlled substance.
If that happens, he said ANTG was well-positioned for possible flow-on regulatory changes.
“I think in general Australia tends to move a bit slower in these things, so I think it’s likely that the European market will move quicker,” Cantelo said.
“But I wouldn’t rule out that once the UN gives the green light, the CBD market could become a global movement.”