Lifespot Health (ASX: LSH) has announced a significant investment by major Canadian cannabis investment fund Ela Capital, marking a great achievement for the Australian cannabis industry as well as providing the necessary boost for the accelerated development of its Medihale vape device.
Earlier this month, Lifespot completed the issue of 22.3 million shares as part of a 1-for-4 non-renounceable pro-rata rights issue announced before Christmas. Priced at $0.07 each, the placement raised $1.56 million before expenses, leaving a shortfall of around 11.3 million shares.
The company today advised the market the shortfall has been placed with Toronto-based Ela Capital, raising the additional $793,070 of funds.
According to Lifespot, this is particularly important as it appears to be the first time a major North American cannabis investment fund has invested in an Australian company.
Speaking with Small Caps, Lifespot chief executive officer Matthew Golden said the company is thrilled to have secured the first investor of the sort and anticipates many other North American cannabis investment funds will follow suit.
“I think it’s going to signal the start of a wave of North American [cannabis-focused] investment firms coming into Australia … because they see Australia as a prime growth market,” he said.
Cannabis investment fund
Ela Capital is an investment and advisory firm that provides capital and services to companies in the cannabis, medical devices, and life science industries.
Since 2015, it has made multiple investments in the cannabis life sciences industry including founding and remaining a significant shareholder of TerrAscend Corp (CNSX: TER), a multi-billion-dollar cannabis multi-state operator (MSO) in the United States.
According to Lifespot, Ela Capital’s participation in the company will be “both financial and advisory, offering growth opportunities for Lifespot medical devices to enter the lucrative medical markets in North America and Europe”.
In its own press release, Ela Capital said it will leverage its expertise and networks to provide Lifespot with distribution opportunities in Canada, US and Europe’s medical cannabis markets, access to differentiated, patented inhalable technology products, leading regulatory expertise, and access to diversified pools of public and private capital globally.
First investment of its kind
Lifespot believes this is the first time a major North American cannabis investment fund has taken a stake in an Australian company.
Now, there have been ASX stocks such as Cann Global (ASX: CGB) that have secured partnerships with Canadian counterparts, and companies like Cann Group (ASX: CAN) and Elixinol Global (ASX: EXL) that sell cannabis products into Canada.
Cann Group was also once supported by Canadian producer Aurora Cannabis (although it sold its stake late last year) but this is still one cannabis cultivator investing in another.
There is also Australian company MMJ Group Holdings (ASX: MMJ), which has morphed into a cannabis investment company itself, taking a slice of cannabis ventures across the globe including Canadian growers Embark Inc and Harvest One Cannabis.
So, while this appears to be the first investment in the reverse, Mr Golden believes more North American investors are seeing the growth potential of Australia’s medical cannabis market.
“While there’s a medical cannabis element in Canada, it is very much a recreational market.
“Australia is very much a medical market and I see companies like Ela Capital seeing the value of a medically validated inhaler vape with medically validated and registered products, which is where Australia is going, and definitely where Lifespot is directed,” he said.
Medical cannabis vape trials
The rights issue was intended to raise additional funds to accelerate the clinical trials of Lifespot’s Medihale medical cannabis inhaler device.
Prior to the rights issue, the company said it aimed to determine study protocols and initial target disease areas by the first quarter of 2021, as well as secure non-company inhaler devices for the trials.
The clinical safety, proof of concept and pharmacokinetic trials were planned to start by the second quarter.
Discrete and portable device
Vaping differs from smoking in that it does not burn cannabis but rather, heats it to just above its critical temperature to transform it into a vapour, releasing the medicinal compounds.
Benefits of vaping include its cheaper cost, faster onset, and the avoidance of many side effects of smoking combustible cannabis or ingesting oil.
There are currently registered vaping devices on the market in Australia, but Mr Golden described these as expensive, large and clunky – not as “portable” as they are marketed to be.
Lifespot, on the other hand, aims to develop a device along the lines of an e-cigarette, which would greatly aid in patient discretion yet still offer the quality expected from a registered medical device.
“Most patients who want to treat a medical condition generally want to be very discrete – they don’t want people seeing they are taking medication, regardless of what it is,” Mr Golden said.
He said this is even more so the case with cannabis due to the lingering negative public perception around the way it is used.
“For people who want discretion – who want something they can easily have in their hand, inhale a few times without being noticed and put back in their pocket – nothing like that exists as a medically registered vaping device.”
Mr Golden said another point of difference for Lifespot is to utilise a pod system, where the cannabis e-liquid will be in a sealed pod from the manufacturer and can’t be refilled with just any product off the street.
Not only does this provide supply chain security, it also ensures the patient is getting a controlled dosage of a “high-grade pharmaceutical product that’s designed to help the with their condition,” he added.