Mark Bunting (MB): Jim has talked about the huge advantage you have from your network of doctors and patients. Can you expand on that?
Dr. Neil Smith (DS): There are as many as 400 data points that we collect on patients, and just having that data is extremely valuable to licensed producers that want to look at trends in prescribing, trends in terms of what strains are working, how their strains are competing with another competitors strain. That information we sell back to LP’s through annual subscription that give them the top line data.
Dr. Smith says if LP’s want Canabo Medical to do a deeper dive into the data they can do that for an extra cost.
DS: Where there is even more potential with regard to monetizing this data is by doing these prospective, double blind, placebo controlled trials. LP’s want that data to be out there to legitimize the industry. Family doctors want that research to show that this is evidenced-based medicine, and what they’re doing is not anecdotal, and is a real therapeutic option for them.
A wide variety of medical groups have a keen interest in Canabo Medical’s research, according to Dr. Smith.
Areas of treatment of Canabo Medical clinics
That’s where WCB, Workers Compensation Board, also wants to know can a patient get back to work faster if they’re on this drug versus that drug. Do they function better, do they have less impairment on the job.
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Overcoming misconceptions
Canabo Medical is working to overcome misconceptions about medical marijuana, Dr. Smith says.
DS: One of the stigmas around medical marijuana is that historically people have thought of it as getting people high, employers may say — ‘I don’t want a bunch of guys in my warehouse who are stoned’ — the reality is the way that most physicians prescribe it, it’s very low in THC, and as such does not have that high property that most people think of when they think of medical marijuana. Many patients who take our prescriptions take them all throughout the day and never actually get high.
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Milestone study
Canabo Medical recently published results from a “milestone” study which showed more than 40% of patients who were prescribed medical cannabis to treat pain and anxiety eliminated the use of benzodiazepine drugs, such as Xanax, within 90 days. That percentage increased to 45% within a year of cannabis treatment. Canabo estimates the benzodiazepine market is worth roughly $15 billion annually.
DS: One of things that we need to do is do a trial that, not only shows that we have reduction in some of those drugs by substituting medical marijuana, but I believe that research is going to show that, not only do we get reductions in those drugs, but patients actually function better and are happier on the drug, and have a better quality of life. All of that research we believe we can monetize through the insurance industry, through WCB, by involving ourselves with licensed producers who want the research to advance.
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A Canopy Growth overnight
An example of that, according to Dr. Smith, would be Aphria asking Canabo Medical to study a certain strain of medical cannabis to treat anxiety. The company’s published study could ultimately examine factors such as patient function, quality of life and hours at work.
DS: It’s no value to the medical community until they have actual numbers, and if those numbers are associated with a particular licensed producer, and a particular strain that was substituted, then obviously physicians are going to go to that particular strain, and that’s where licensed producers have started to see that there’s real value in being involved in that research.
Mr. Megann says benzodiazepines are so loathed by doctors and patients due to their “horrible” side effects that an LP could hypothetically spend $2-to-$3 million on four or five studies conducted by Canabo to prove that a certain cannabis strain was a superior treatment to benzodiazepines.
Jim Megann (JM): That one LP could end up being literally the size of Canopy overnight. I can’t imagine that those kinds of arrangements aren’t somehow going to come to fruition.
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Insurance sector very interested
Canabo Medical is just starting to scratch the surface of the revenue possibilities from the independent medical evaluation consulting aspect of its business. Dr. Smith says its research-based patient assessments can help save insurance companies thousands of dollars a year.
DS: That’s hugely important for the insurance industry so that they can, not only set standards which will help them save money, but they can show definitively that there is a rationale behind these standards, and we’re the ones who can provide that data and that research to support that.
We may save the insurance $70-to-$80 a day on one patient, so that’s hugely valuable. When we go back to the insurance industry and say ‘do you have any more of those’, their answer is usually either hundreds or thousands of them. That’s a revenue source that we’ve just started to tap into but it seems quiet promising and has huge margins. We only see that increasing because of the value that we provide to the insurance industry sometimes saving them $20-to-$30 thousand on one patient per year.
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First mover advantage
While there are other medical cannabis clinics in Canada, Dr. Smith says their business models involve LP’s paying physicians to write prescriptions, which will eventually draw regulatory scrutiny.
DS: The medical community has been trying to figure out how to police itself, and how to put in regulations that prevent physicians or clinics from getting kick backs from LP’s. The first time the College (of Physicians and Surgeons) comes down on one of these companies that are getting paid for prescriptions then the physicians are going to run to the hills because they don’t want their license in jeopardy. We don’t see that there’s anybody out there who is simply monetizing the data and the research in the ways that we have, and that keeps us onside, and that keeps physicians onside of the College, which makes them comfortable, which makes it easier to recruit those doctors, and keeps our clinics onside.
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Cash in the bank
MB: With all of this research that you plan to do and with new clinics opening, are you all cashed up to do that?
DS: We’ve got over $9 million in cash right now. Even with rapid expansion that we’ve experienced this last year — we’re at 15 clinics now, we’ve got eight more that are going to be open within the next two-to-three months — our cash burn rate is almost negligible. We think we’re going to be cash flow positive in the last quarter of this fiscal year. We can use our cash either to speed up expansion or to spend some of that money on research so we’re nicely cashed up right now. We’re in a great position for that.
MB: Jim, what’s the revenue potential for the research part of your business?
JM: It could be hundreds of thousands of dollars in the next six months, it literally could be millions. Canada could be really the biggest resource for growing the product that then goes into secondary processing that then really feeds the world. It’s great for the grower, but truthfully, we can play such a dramatically key role in moving that forward. I don’t think it’s all about patient numbers. I think it’s really more about how we’re going to be able to utilize this research, and how that revenue is going start really for the first time.
Lastly, Mr. Megann says Canabo Medical’s doctors enjoy working at the clinics the one or two times a week that they’re there because it’s not as onerous as dealing with car accident victims, for example. They also derive fulfillment out of seeing certain patients getting better and getting back to work due to the medical cannabis treatment, he says.