Avecho Biotechnology announces $11 million capital raising to fund phase three CBD trial to treat insomnia

Melbourne-based Avecho Biotechnology (ASX: AVE) is seeking to raise $11 million to fund a pivotal clinical trial evaluating the use of its cannabinoid (CBD) soft-gel capsule to treat insomnia.

The biotech company has announced an entitlement offer on the basis of one new share for every one existing share held by eligible shareholders at an issue price of $0.006 per share. The offer includes three free attaching new options for every two new shares subscribed for.

Proceeds from the raise will be used to fund a randomised, placebo-controlled phase three trial planned to test the effectiveness of the company’s proprietary capsule in the treatment of insomnia.

The trial will target 540 patients across three treatment groups to compare nightly doses of 75mg and 150mg CBD with placebo over an eight-week dosing period.

Avecho chief executive officer Dr Paul Gavin said the phase three trial is the penultimate step in the clinical development process before seeking regulatory approval with the Therapeutic Goods Administration (TGA) as an over-the-counter (OTC) medicine.

“It’s an outstanding opportunity for the company, both within Australia but also for the potential to take this product and target further geographies, markets, and indications,” he said.

Striving to succeed where others have failed

To date, no regulatory agency in the world has approved CBD for an insomnia indication, and industry peers have tried and failed in similar trials. However, Avecho believes its point of difference is in the trial design.

Earlier this year, Cann Group (ASX: CAN) and Ecofibre (ASX: EOF) revealed their sleep-related phase three clinical trials of CBD products did not deliver statistically superior responses compared to placebo.

Avecho believes it has fine tuned the trail design, patient selection criteria and dosing regimen to help meet the key requirements of regulators in the Australian market and abroad.

“We’ve been particularly strategic over the last 12 months to design this trial to account for the placebo effect, something that this type of sleep trial is susceptible to and was not factored in by others in Australia who have taken CBD products into phase three trials to date,” Dr Gavin said.

“The work we’ve put into carefully designing the trial will give Avecho the best chance of a successful outcome, and the funds we’re aiming to raise in this round will allow us to pursue that unimpeded,” he added.

Avecho also hopes the study will improve the chance of negotiating significant commercial deals with leading international pharmaceutical companies.

Capital raising

The entitlement offer price of $0.006 per share represents a 33.33% discount to Friday’s close of $0.009 and a 26.83% discount to the 15-day volume weighted average price (VWAP).

Peak Asset Management and CPS Capital are joint lead managers to the offer, which is not underwritten. The offer is expected to open on 13 April.

The funds raised under the offer will be used for manufacturing activities associated with the production of test articles to be used in the trial, as well as formal stability studies required for a future regulatory submission.

Funds will also go on conducting the trial and cover the costs of the entitlement offer.

Avecho has estimated the total cost of the phase three trial will be about $12 million.

In addition to its $11 million capital raising, the company said it intends to leverage a research and development tax reimbursement on the trial spend to fund the day-to-day operations of the company as well as any cost over-run on the trial.

Avecho’s CBD technology

The CBD products Avecho is developing use the company’s proprietary drug delivery system called Tocopheryl Phosphate Mixture (TPM), which is delivered from Vitamin E using unique, patented processes.

The TPM technology has been proven to enhance the solubility and oral, dermal and transdermal absorption of drugs and nutrients.