Shareholder Letter

Dear Shareholder:

As an early-stage company, we’ve made notable progress over the last 2-3 years, and throughout it all we’ve been looking for a catalyst that will take our company to the next level. In a fortuitous turn of events, and as part of our ongoing R&D efforts, we have made significant discoveries that we believe will enable just that, and that we’ll seek to capitalize on through a thrilling transformation.

Our Early Work Provides Impetus for Change and Opportunity

To fully leverage these findings, we are changing our parent company name to “Vitality Biopharma,” which reflects a new focus on drug development. For reasons that I hope will become apparent, we have an opportunity that is impossible for us to ignore, and which we believe will fuel the company’s growth for years to come.

Today, based on our early efforts, we remain one of the few organizations in the world who understands how to “fix” stevia, in order to make it taste better, and how to achieve this at industrial scale. We have filed for key intellectual property related to these technologies, and we are seeking to commercialize them mainly through joint ventures.

However, it became apparent to us that there are other commercially important molecules that can be improved, or “fixed” in a similar way, and by using the very same enzymatic processes we have pioneered.

The process we use to make stevia taste better is called glycosylation, whereby we attach additional glucose molecules to the stevia, and it modifies both its taste and solubility. Over the last 10 years or so it has been identified within the drug development industry that glycosylation could act on a wide variety of molecules, especially natural products, and could act on them in ways that dramatically improve their drug properties. This process for modifying natural products to make them more useful is often called glycorandomization, or glycodiversification.

We Hold the Key to a New Class of Proprietary Cannabinoid Pharmaceuticals

In November 2015, it became clear that the emerging field of cannabinoid pharmaceuticals is a highly lucrative area for exploration. So we applied our unique bioprocessing tools to them and were able to quickly generate an entirely new library of cannabinoid molecules, including derivatives of all of the most hotly pursued cannabinoids that are currently being investigated as pharmaceutical drugs.

We have now generated more than 15 novel cannabinoid glycosides, or cannabosides, which act as part of a class of medications known as “prodrugs.” Importantly, while these new prodrugs should retain all the same benefits of cannabinoids (that have been established through independent clinical trials), they can actually be approved at far lower cost and on an accelerated timeline, through the use of the 505(b)(2) regulatory pathway in the United States, and similar abbreviated approval paths that are available in other countries.

These new compounds are also proprietary. We have already filed for broad intellectual property protection covering this new class of compounds, including strong composition of matter claims on prodrugs of all the most medically significant cannabinoids known today. The value of this aspect should not be underestimated, as intellectual property is what very often represents the core value of any early-stage biotechnology or drug development venture.

If You Haven’t Heard About “Prodrugs,” You Need To

“Prodrug” is a common term to describe a medication or compound that, after administration, is metabolized (i.e. converted within the body) into a pharmacologically active drug. Prodrugs are often designed to improve bioavailability, or overcome issues that make drugs unappealing or inconvenient to patients. Prodrugs have been around for a while, with Aspirin (acetylsalicylic acid), first made by Felix Hoffmann at Bayer in 1897, a classic example, as well as products like levodopa, which helps deliver dopamine to the brain. As of 2013, there were approximately 15 prodrugs that have been classified as “blockbusters,” where they had annual sales in excess of $1 billion.

The compounds we’ve developed are cannabinoid prodrugs. Cannabinoids are a class of more than 50 molecules found within Cannabis sativa, and that are the active ingredients in medical marijuana. Over 50% of Americans have used marijuana, so it’s unlikely to need much introduction, although many may not know that pharmaceutical versions have already been approved both in the U.S. and abroad. These pharmaceuticals are not blockbusters today. Despite the boom in legal marijuana at the state level (whose sales reached an estimated $2.7 billion in 2014), sales of pharmaceutical cannabinoids in the U.S. are still less than $150 million each year.

Current Cannabinoid Pharmaceuticals Have Problems We Can Fix

Cannabinoids, and especially cannabidiol (“CBD”), have recently been discovered to have very exciting neuroprotective and anti-inflammatory effects. Researchers in 2016 just validated that CBD is useful for treating rare forms of debilitating seizures in children. Beyond epilepsy, CBD may also be useful for treating inflammatory bowel disease, multiple sclerosis, schizophrenia, and more.

But current formulations of CBD leave a lot to be desired. As just one example, in a study of kids being treated with drug-resistant epilepsy, it was found that nearly 20% of the kids became “somnolent,” which means drowsy, and could indicate that after oral delivery CBD is being degraded to psychoactive THC in the acidic stomach environment. Our proprietary prodrugs are far more stable, so they could readily bypass the stomach and avoid this side effect, and potentially enable higher doses to be delivered more safely, all while providing therapeutic benefits in a very convenient, oral formulation. I encourage you to find out more about the benefits of our cannabinoid prodrugs by visiting our new company website, at “www.vitality.bio”.

Recent clinical trial results also show that medical marijuana can improve the symptoms of inflammatory bowel disease, with reported improvements in 83.9% of patients with abdominal pain, and 76.8% of patients with abdominal cramping. While current cannabinoid drugs and medical marijuana may be effective, they often aren’t selective enough, and the “off-target” effect that limits the amount that can be used is CNS toxicity, where patients experience an undesirable high. Our proprietary prodrugs are much more targeted products, which may be especially useful for gastrointestinal disorders, as they can enable cannabinoids to be delivered specifically to the large intestine or colon. Because of this, drug formulations we develop could have a much more localized effect, and be far better tolerated by patients. The intent is to enable even more dramatic symptomatic improvement in large market disease indications like irritable bowel syndrome and inflammatory bowel disease, a drug market that some analysts have already predicted will reach $9.6 billion in sales in 2017.

The Future Holds Promise for Everyone

Since our inception, we have prided ourselves on trying to make a meaningful impact on people’s lives, and our attitude today is no different. Through our pursuit of cannabinoid prodrugs, we are interested in drug approvals first and foremost, but our overarching mission is to improve the lives of patients afflicted with devastating neurological and inflammatory conditions, such as inflammatory bowel disease and multiple sclerosis.

One of the most striking aspects of cannabidiol is that not only does it exert a wide variety of beneficial neurological effects, but it has an almost complete absence of serious side effects. This makes it a perfect candidate to be used in combination treatment regimens, which may provide patients with far more than symptomatic relief, and even hold potential to reverse their condition. We are acting now in concert with researchers from major institutions such as Stanford University, the University of Chicago, and the University of British Columbia, to deliver therapies with this type of potential to patients. Ultimately, we see it as a way where informed patients and physicians will become just as excited about our company and drug development pipeline as we are.

By now I hope our intentions and next steps in the biotechnology and pharmaceutical arena have been made apparent, and that each of you are as excited as we are regarding our company’s next chapter. Thank you for your continued support.

Kind regards,

Robert Brooke, CEO


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