Stock deal locks funds for Scythian marijuana study

Making connections: From Western Canada to Long Island to Miami, Scythian Biosciences' cannabinoid-vs.-concussions study is coming together.

A Canadian R&D firm with Long Island roots has locked up the first tranche of a strategic investment that will fund a major study involving concussions and medical marijuana.

Scythian Biosciences Inc. and Canadian mining exploration company Kitrinor Metals Inc. on Tuesday announced a “brokered private placement” that gives 32.7 million common shares of Calgary-based Scythian, owned by Great Neck investment banker Jonathan Gilbert, to an investment team including lead agent Clarus Securities Inc. of Ontario, and its lead investor, Toronto-based medical marijuana producer Aphria Inc.

Clarus Securities and its partner brokerages, Vancouver-based Haywood Securities Inc. and Toronto-based Canaccord Genuity Corp., paid roughly 40 Canadian cents per share.

The transaction, signed Monday, hinges on a proposed reverse takeover of Scythian Biosciences by Kitrinor Metals. The companies announced that deal – which still requires the approval of Canadian stock exchange TSX Venture Exchange – in February, saying it would generate a lead investment of $10 million for the medical marijuana study through Aphria and other backers.

The study, to be conducted over five years at the University of Miami’s Miller School of Medicine, is projected to cost $16 million and will explore cannabinoid-based methods for reducing post-concussion brain cell inflammation, which causes headaches and more serious neurological complications.

Jonathan Gilbert: Going green.

The Clarus Securities-led stock buy generates just over $13 million Canadian (about $9.6 million U.S.) for the Miller School study, which will be led by behavioral neuroscientist Gillian Hotz, co-director of the University of Miami medical school’s Concussion Program for more than two decades.

That initial stake will be followed by “another tranche over the next week or two,” Gilbert said Tuesday, and that additional investment will push funding past that $10 million plateau – with years left to solicit and secure investments to cover the rest of the projected $16 million cost.

Gilbert predicts capital investments will become easier to raise as the study progresses.

“When we’re further along in the process, we’ll go out and raise $40 million or $50 million,” he told Innovate LI in February.

The study will expand on the science behind two pending patents written by Scythian Biosciences Chief Operating Officer David Schrader, a corporate attorney with a biochemistry degree from Johns Hopkins University. The patents involve a proprietary compound that combines CBD, a cannabinoid derivative of hemp, with a chemical that disrupts nerve-cell receptors.

With the first tranche secured and the concussion study kicking into gear, Gilbert suggested the time was approaching for the new Scythian Biosciences – essentially, Kitrinor will form a subsidiary that merges with Scythian to form a new entity – to stretch its legs.

“I think now we can embark on some other drug-development projects,” Gilbert said, referring to the second of Schrader’s pending patents – which covers CBD’s potential as a treatment for gastrointestinal disorders – and other possible uses for the cannabinoid compound.

In fact, as things progress in Miami and investments roll in, the company might even “start looking for some acquisition targets as well,” Gilbert added, including pharma firms “developing CBD drugs that can be effective on various health issues” and “companies in later-stage CBD clinical trials.”

Ultimately, the entrepreneur likens his Canadian R&D firm to GW Pharmaceuticals, the British biopharmaceutical company known best for Sativex, a multiple sclerosis treatment made from cannabinoids.

Sativex marked the first natural cannabis plant derivative to gain market approval in any country, and Gilbert believes that with Schrader’s science, Hotz’s clinical expertise and now the financial backing it has long sought, Scythian Biosciences – which has been endorsed on its concussion quest by the NFL Alumni Association, the World Boxing Association and others – is on a similar commercial trajectory.

“The gold standard of what we want to become is GW Pharmaceuticals,” Gilbert said. “They also have a drug based on CBD that treats epilepsy in children, and it’s pretty far along in clinical trials.

“They’re a public company and their stock is well over $100 a share,” he added. “They’re a behemoth, and they started off just like Scythian.”