The jack pot?

July 14, 2006

Zena Olijnyk, Canadian Business Magazine

Moses Znaimer, the media mogul who founded the Citytv empire, is on a crusade to promote the virtues of medicinal marijuana in his new role as chairman of Cannasat Therapeutics Inc., the first publicly traded medical cannabis company in North America. He knows there will be the inevitable jokes, puns and sly references--like, what has he been smoking?--but such is the social stigma that still hangs over pot. So he cuts off this line of discussion, saying using cannabis to relieve pain and other symptoms of illness is a dead serious subject.

"It's not about fun--it's about function," says 63-year-old Znaimer (right), who resigned as president of CHUM TV in 2003 after 32 years. He sees his new role shepherding Toronto-based Cannasat not only as good business sense, but good social activism.

Cannasat went public on the TSX Venture Exchange in late March at 35¢ a share. The stock (TSXV: CTH) climbed to a euphoria-inducing 80¢, before settling back around its original price. While the company is in its money-losing startup phase, Znaimer, who owns 5%, says the potential is enormous: "We have the opportunity to develop drugs based on cannabis that will have the same impact [on pain] as the opiate drugs that originally came from the poppy plant."

During the past two years, Cannasat has raised $6.5 million in financing and has picked up a 20% stake in Prairie Plant Systems Inc., based in Saskatoon. It is Canada's only government-licensed grower and distributor of medicinal marijuana; its grow operation is in an old mine shaft in Flin Flon, Man. Cannasat's stake in Prairie Plant Systems is part of a business plan whereby the cash flow it receives from the legal crop, along with money from investors, is used to support research into new ways to deliver the active components of cannabis in a form more like a prescription drug. While not divulging specifics for proprietary reasons, the company says it has the rights to develop several promising, patented technologies. Eventually, it hopes to partner with a large pharmaceutical company to market and distribute products, though Cannasat executive director David Hill says that goal is about five years away. He adds that it will take $10 million to $15 million over the next four years to get one of its products to a Phase 2 clinical trial.

With a doctor's approval, Canadians with conditions ranging from cancer and AIDS to epilepsy and severe arthritis can become registered users of pot under the federal Marihuana Medical Access Regulations. More than a thousand Canadians have signed up, but a 2001 study published in the Canadian Medical Association Journal suggests as many as 400,000 people use the drug to treat pain or illness. With those kinds of numbers, Cannasat expects its lead product to capture up to 10% of Canada's $700-million market for severe, chronic and neuropathic pain relief. Part of the strategy is to inform eligible Canadians about the right to legally use marijuana for medicinal purposes.

Developing drugs from marijuana is becoming a competitive business. Several products are now available on the market, including Sativex, an oral spray used to treat pain from multiple sclerosis. Produced by GW Pharmaceuticals of the United Kingdom, Savitex won conditional approval in Canada in 2005. Another drug is Marinol, a synthetic version of THC approved in the treatment of nausea and vomiting associated with chemotherapy, and for appetite loss in people with AIDS. So far, says Znaimer, none of the legal cannabis-based products has proven as fast or effective as marijuana that is inhaled. Finding one that is would be a high in itself.



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