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Cannabis Company Forms Partnership to Develop Pharmaceuticals
Research Report

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Analyst Russell Stanley with Echelon Wealth Partners explained the significance of the recent licensing agreement signed by this Canadian medical marijuana producer and distributor.

In an Oct. 4 research note, Russell Stanley, an analyst with Echelon Wealth Partners, reported that Emblem Corp. (EMC:TSX.V) entered into an exclusive licensing arrangement with the private company Canntab Therapeutics Ltd. to collaborate on "preclinical formulation, clinical development, regulatory approval, manufacturing and commercialization" of Canntab's "patent-pending oral sustained release formulation for cannabinoids."

About the event, Stanley concluded, "We view this as a positive step towards developing pharmaceutical applications for cannabis, which is a major pillar of [Emblem's] strategy." The company's other two areas of focus are advancing marijuana production and health care services.

Under the agreement, Emblem will have "exclusivity in Canada with respect to Canntab's intellectual property and know-how and would sell the product under the Emblem brand (though the agreement does not include import/export rights)," described the analyst. Either firm could handle manufacturing.

As for the financial component, Emblem must make "milestone payments to Canntab based on completion of stability studies, bioavailability studies and regulatory approval" and, eventually, "royalty payments based on gross product sales," Stanley said.

The major advantage to Canntab's product is that it is sustained release, Stanley indicated. It is "believed to release the cannabinoid content over a period of 12+ hours," he added. "This allows for maintaining a constant drug concentration over a specific period of time, generally with the aim of improving therapeutic outcomes and/or patient compliance."

This compares to "most existing dosage forms," Stanley said, which "release the active drug component right away." As such, these immediate release therapeutics "tend to lose their effect in four to six hours, necessitating frequent dosing, which can impede patient compliance."

Stanley commented on the potential market for such a cannabis pharmaceutical. The sustained release feature makes it "particularly suited to managing chronic pain, which represents a $500 million a year market and affects 2 million Canadians," he said.

Further, according to surveys, "almost 80% of current medical cannabis prescriptions" are for chronic pain management," noted Stanley, "however less than 10% of physicians in Canada actively prescribe cannabis." This suggests that "a product that supports stronger patient compliance could help improve physician penetration and broaden the medical cannabis market's reach."

Echelon has a Speculative Buy rating and $2.25 per share price target on Emblem, whose stock is trading currently at around $1.98 per share.

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