Flora Growth Looks to Bridge the Gap Between Cannabis & Pharmaceuticals
October 15th, 2021
App, Exclusive, News, Top Story
Cannabis-based pharmaceutical drug products remain a niche market despite the plant’s significant promise. By acting on the endocannabinoid system, a widespread neuromodulator that plays an important role in everything from central nervous system development to synaptic plasticity, cannabinoids have the potential to treat a wide range of conditions.
Dronabinol, a synthetic version of THC, and Nabilone, a synthetic analog of THC, have been FDA approved since the 1980s for HIV/AIDS-induced anorexia and chemotherapy-induced nausea, and more recently, GW Pharmaceuticals—recently acquired by Jazz Pharmaceuticals—secured FDA approval for synthetic CBD for the treatment of seizures.
However, cannabinoids have shown promise that extends well beyond these niche markets and into areas like chronic pain and mental health treatments. The liberalization of cannabis regulations across North America and Europe has opened the door for researchers to study these products—potentially creating billions in value for shareholders.
Flora Growth Corp. (NASDAQ: FLGC), a leading all-outdoor cultivator and manufacturer of cannabis flower and derivative products, plans to capitalize on these dynamics and bridge the divide between cannabis and pharmaceuticals with its unique drug development platform and pathway to commercialization. Additionally, Flora continues to focus on its core business of building a global distribution platform to supply its medical-grade cannabis products and input materials to its global portfolio of premium, cannabis consumer packaged goods (CPG) brands for cosmetics, nutraceuticals, hemp textiles, and food and beverage.
A Unique Approach
Flora Growth aims to identify scientific gaps in the cannabis industry and leverage its proprietary drug development platform to identify new bioactive compounds. Using artificial intelligence and machine learning, the platform identifies compounds in the cannabis plant that interact with certain gene targets responsible for specific disease states and conditions.
“There is an urgent need for more research to better understand the molecular and biochemical effects of cannabis at the cellular level, to begin to apply its implications as a pharmaceutical drug,” said Flora’s Director and Lead Scientific Advisor, Dr. Annabelle Manalo-Morgan in a recent press release outlining the company’s ambitious plans.
In addition to its unique approach to drug discovery and development, the company intends to work with government regulators and academic institutions to initiate academic studies at a low cost and efficiently move through the drug development process. The company also expects to fast-track traditional timelines by running phase trials in parallel. These combined initiatives should prove to significantly derisk this ambitious initiative by taking advantage of government subsidies and grants, as well as prove to be incredibly and relatively capital efficient compared to traditional clinical trials as Flora will only be responsible for a small portion of the bill, presumably largely contributing by supplying flower and derivative products for the trials, as well as their human capital to oversee and manage their research projects.
These efforts could unlock shareholder value in many ways. For example, the company could license promising compounds to third parties to develop in exchange for royalties or bring these programs through clinical trials leveraging its existing supply capabilities. Of course, GW Pharmaceuticals demonstrated the demand for M&A across the cannabinoid-based pharmaceutical industry.
Flora Growth sets itself apart from development-stage pharmaceutical companies with its diverse commercial operations. For example, the company is already manufacturing and distributing more than 60 over-the-counter products in a 16,000 sq. ft. facility with a modern laboratory. These products are focused on everything from beauty to food and beverage.
In addition to product manufacturing, the company cultivates cannabis in Colombia where it has production costs of less than $0.06 per gram and yields greater than 125 grams per plant. The company has 10.8 million sq. ft. of licensed cultivation area that could make it one of the largest cannabis cultivators in the world and larger than competitors like Aphria or Aurora.
The company’s multi-sector ambitions are supported by an exceptional management team. For instance, President and CEO Luis Merchan has over a decade of experience in everything from enterprise sales to corporate strategy, serving as VP of Workforce Strategy for Macy’s where he managed a multi-billion-dollar P&L expense line for its 540 stores.
Flora Growth Corp. (NASDAQ: FLGC) offers investors an opportunity to participate in a low-cost cannabis cultivator and manufacturer with a global cannabis CPG portfolio of premium brands that is also foraying into high-margin cannabis-based pharmaceuticals. With its existing commercial operations and revenue streams, the company may be less risky than development-stage pharmaceutical companies without any other operations.
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