(Reuters) - Kannalife Sciences Inc is considering an initial public offering this year to fund development of a cannabis-based treatment for a brain disorder that affects 200,000 Americans, its chief executive said.
A successful listing in an unforgiving IPO market would be a springboard for the Huntington, New York-based company to develop an experimental drug that has shown promise in treating a condition known as hepatic encephalopathy (HE).
“We have a good shot on goal with HE,” said Dean Petkanas, Kannalife’s CEO and co-founder. “We want to shoot the puck. If we do that and we score, then our other desires in the field of cannabinoid therapeutics can become self-evident.”
About 1.5 million Americans suffer from HE, a decline in brain function that results from severe liver disease, whereby toxins build up in the bloodstream. About 200,000 people have late stage, or Grade 3, HE, according to Kannalife.
Kannalife’s HE drug, KLS-13019, is derived from synthetic cannabis. Preclinical data published this month showed it to be safer and significantly more potent than pure cannabidiol in protecting brain cells.
“We believe we can push KLS-13019 into clinical trials, but first we need to raise capital,” Petkanas, who has more than 25 years’ experience in investment banking and capital markets, said in an interview.
Kannalife, founded in 2010, raised $1.5 million in a first round of funding three years ago. It aims to raise $5 million to $10 million in a second round within the next 90 days.
That would be sufficient to see the company proceed to clinical trials by the first quarter of 2017, Petkanas said.
Kannalife would then consider an IPO, a bold move at a time when biotechnology stocks are reeling from political criticism of drug prices. The Nasdaq Biotechnology index had fallen nearly 24 percent this year through Wednesday’s close.
More generally, a tepid U.S. market for IPOs has raised just $253 million so far this year, compared with $4 billion in the corresponding year-earlier period.
“We’re throwing the ball in the air right now, because the dynamics of the market have changed considerably in the last six months,” said Petkanas.
As well as its HE drug, Kannalife is conducting a feasibility study into the development of a preventative treatment, also derived from synthetic cannabis, for chronic traumatic encephalopathy (CTE).
CTE is a brain condition resulting from repeated blows to the head, which is poorly understood and has no existing treatment. A sure-shot diagnosis can only be made after death.
For this study, Kannalife has procured a permit from the U.S. Drug Enforcement Administration to import a limited amount of pure cannabidiol, a non-psychoactive component of the Cannabis sativa plant.
John Kagia, director of industry analytics at cannabis-focused data firm New Frontier, said the drug had significant potential due to the extent to which CTE has become an issue for football players and the military.
“The successful deployment of cannabis within these two communities could be a watershed moment in the way the general population thinks about the therapeutic applications of marijuana,” he said.
Reporting by Natalie Grover in Bengaluru; Editing by Robin Paxton