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The Canadian Bioceutical Corp.(BCC.C) has signed a term sheet outlining the binding conditions under which it will enter into a joint venture (JV) agreement with Panaxia Pharmaceutical Industries Ltd. Under the terms of the agreement, Panaxia will be providing proprietary, smokeless, pharma-grade cannabis-based products that have been proven to be in high demand, but have not been readily available in the United States.

The products will be produced at Canadian Bioceutical-operated locations under licences owned or managed by the company. Canadian Bioceutical will also provide the raw cannabinoid materials for final product assembly, as well as be responsible for sales and marketing of these products through its Health for Life dispensaries and its wholesale channels. Panaxia will provide the capital and equipment to build out and equip the manufacturing facility, and will supply the non-active ingredients and compounds for formulation and packaging. Canadian Bioceutical and Panaxia will split the revenues resulting from the sales of these products equally.

Panaxia currently sells its products in the U.S. through a joint venture with a third party in New Mexico only, where the company's offerings have met with exceptional demand, selling out any inventory produced. The company believes its success is partly due to its pharma-grade approach to cannabis products, the efficacy of which has been demonstrated through clinical trials conducted in Israel. All products are being produced under Israeli pharmaceutical GMP protocols (the Israeli equivalent to Food and Drug Administration standards). Consequently, these products can be marketed in Israel as evidence-based products that deliver a metered and exact dosage which is standardized and repeatable.

The JV intends to open its first new pharmaceutical production site in Arizona, with expansion into Massachusetts and, subsequent to the closing of the previously announce acquisitions, into Nevada and Maryland. Each site will eventually produce all 32 offerings in Panaxia's pharmaceutical product line.

The offering

Panaxia's products are presently sold to patients with a variety of conditions such as posttraumatic stress disorder, chronic pain, cancer, epilepsy, Parkinson's, Alzheimer's, anorexia and HIV/AIDS. The offerings sold through Health for Life dispensaries, and through Canadian Bioceutical's wholesale channels, will initially consist of the following standardized, pharma-grade, smokeless, measured dosage and delivery protocols:

  • Sublingual tablets -- Offering faster delivery as well as greater bioavailability compared with other smokeless ingestion methods, sublingual tablets may offer advantages for conditions where fast onset is required, such as breakthrough pain.
  • Slow release tablets -- For prolonged activity of the active ingredients, these products aim to deliver therapeutic blood levels of cannabinoids for up to eight hours, with particular applications in the treatment of chronic pain.
  • Pastilles, for buccal absorption of cannabinoids utilizing Panaxia's patent-pending taste-masking technology.
  • Rectal suppositories allowing for rapid absorption and reduced product metabolic degradation. These products deliver substantial benefits to patients who are prone to vomiting, or who have difficulty swallowing. Rectal suppositories may also be useful in treating certain inflammatory diseases of the intestine, such as proctitis, providing topical efficacy.
  • Vaginal suppositories -- offering topical delivery aimed at conditions such as PMS and endometriosis.
  • Skin care -- cannabinoid-infused topical ointment for treatment of burns, local pain and psoriasis.
  • Topical patches for transdermal delivery.
  • Oral spray inhalers -- increased convenience and delivering fast-acting relief. Additionally, Panaxia's inhalers provide consistent dosage-specific delivery.

Management commentary

"Based on the traction Panaxia's products are enjoying in New Mexico, we believe this joint venture has strong potential to become a material contributor to revenue and margin development," said Beth Stavola, president of U.S. operations for Canadian Bioceutical. "Not only will we address a relatively underserved segment of a rapidly growing market, we have no required capital expenditures, making this a very cost-effective way for us to expand product offerings to our patients."

Michael Arnkvarn, chief marketing officer for Canadian Bioceutical, added: "Offering pharma-grade products of proven efficacy to a medical cannabis market that is shifting increasingly towards smokeless delivery is a very significant differentiator. Launch of the product line will be supported by an educational campaign targeted at physicians and the medical community, providing unbiased and research-backed information to increase awareness of the benefits of medical cannabis. Additionally, in those states we are currently, or expect to be operating, the enabling regulations detail an extensive list of chronic conditions for which cannabis and cannabis derivatives can be used, and which we will leverage with the launch of our new Salus Bio-Pharma brand."

Dr. Dadi Segal, Panaxia's chief executive officer, commented: "BCC, with its strict operating protocols, strong branding, deep retail experience and rapidly growing footprint, is the ideal partner to market our products to a growing U.S. audience. The joint venture is in line with our strategic rapid expansion into more states in the U.S. market. We have found that holding medical cannabis products to the same high-quality assurance standards as those required for any pharmaceutical product, has resonated exceptionally well with our initial test market in New Mexico, and we look forward to replicating this performance with BCC in other U.S. states."

Joint venture details

Panaxia will build and operate final assembly facilities within the footprint of existing and future Canadian Bioceutical cultivation facilities. Panaxia's proprietary production technology allows a last-mile production of pharmaceutical cannabis products, wherein the premixed excipients are sent from the company's GMP central production facility in Israel. At the local microsites established in each state, cannabinoids are extracted and added to the premix. Panaxia is capable of building GMP microsites, which can each produce the complete, diversified product line, within the existing Canadian Bioceutical cultivation facility. Panaxia will finance all capital expenditures related to the construction of these facilities, the first of which will be located in Health for Life's new dispensary and cultivation facility in the Mesa suburb of Phoenix, Ariz. Completion of the new Panaxia assembly plant is anticipated for November, 2017, with product available to the market before year-end. Additionally, Panaxia will assume financial responsibility for the operation of the subfacilities. Canadian Bioceutical's costs will be limited to those related to the provision of operating space within its facilities, the supply of the cannabis trim required for extraction, and sales and marketing. All products will be sold under the auspices of licences owned or managed by Canadian Bioceutical and/or its subsidiaries.

The agreement provides exclusivity to Canadian Bioceutical in those U.S. states in which it is currently operational, and those in which the company expects to be operating in the near future, most notably, Massachusetts, Nevada and Maryland. Beyond that, Canadian Bioceutical will have first right of refusal in any new U.S. market, apart from New Mexico, California and Colorado. The JV is based upon an equal revenue sharing of the sale of the products.

About The Canadian Bioceutical Corp.

Canadian Bioceutical, an Ontario corporation, through its wholly owned subsidiaries in the United States, provides substantial management, staffing, procurement, advisory, financial, real estate rental, logistics and administrative services to two medicinal cannabis enterprises in Arizona operating under the Health for Life (dispensaries) and MPX (high-margin concentrates wholesale) brands. The company also owns assets in Massachusetts, supporting cultivation, production and up to three dispensaries in Massachusetts; and it is supporting development of a third licensed dispensary in Arizona.