FSD Pharma Acquisition Looks to Be a Big Company Catalyst

In this market news, FSD Pharma Inc. (CSE:HUGE), one of the Canadian marijuana stocks, said it is set to acquire Therapix Biosciences Ltd. (NASDAQ:TRPX)

SmallCapPower | October 25, 2018: FSD Pharma Inc. (CSE:HUGE), one of the Canadian cannabis stocks, Monday announced its intention to acquire Therapix Biosciences Ltd. (NASDAQ:TRPX) effective October 22, 2018. Under the terms of the agreement, shareholders of Therapix Biosciences will receive US$48 million (C$62.4 million) of FSD stock upon closing of the transaction, representing ~130 million class B subordinate shares of FSD Pharma or nearly 10% of the Company’s outstanding shares. The final number of Class B subordinated shares and percentage ownership of the Company will fluctuate based on the 20-day average of FSD Pharma stock’s closing price on the date the Transaction is finalized.

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The Transaction is subject to a number of customary conditions as well as approval from Therapix shareholders. The Transaction is expected to be completed by Q1 2019, contingent upon meeting the conditions.

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It is expected that the common shares of the Company will continue to be listed on the Canadian Securities Exchange (CSE) and the Frankfurt Stock Exchange (FRA), and FSD Pharma intends to apply to list on NASDAQ, subject to regulatory approvals. The terms of the LOI will be superseded by a definitive agreement, which FSD Pharma and Therapix intend to execute within 30 days.

FSD Pharma and Therapix Biosciences complement each other and the acquisition is a strategic move to focus on the research and development of advanced cannabinoid treatments as well as access to international capital markets. The acquisition also focuses on Therapix’s proprietary IP and related technology and assets pertaining to all clinical-stage pharmaceutical assets applications.

FSD Pharma focuses on the production and distribution of the highest-quality pharmaceutical grade cannabis as well as R&D for cannabinoid therapies. It is currently in Phase 1 of its growth plans with 25,000 sq. ft. indoor grow space available at its Ontario facility and an additional 220,000 sq. ft. in development, expected to be completed by January 2019.

The target company, Therapix Biosciences, is a specialty clinical-stage pharmaceutical company focused on cannabinoid pharmaceuticals. Therapix is developing a strong product portfolio anchored on repurposing an FDA-approved cannabinoid, namely THX-110 for the treatment of CNS disorders, THX-120 for the treatment of sleep disorders and the treatment of pain; THX-130 for the treatment of Mild Cognitive Impairment (MCI) and Traumatic Brain Injury (TBI); and THX-150 for the treatment of infectious diseases.

Dr. Raza Bokhari, Director of FSD Pharma and Chairman of the M&A committee said, “The intended acquisition of Therapix Biosciences at this time is a pivotal step in the evolution of our company by entering the high-value medical cannabis market. In addition to growing products for the direct to consumer retail cannabis market in Canada, we are now developing a new class of novel cannabinoid-based treatments for several central nervous system disorders, including chronic pain, fibromyalgia, irritable bowel syndrome and several other disease areas. With this acquisition, FSD Pharma is signaling our commitment to furthering very high-value pharmaceutical R&D clinical programs centered on cannabinoid molecules.”

Ascher Shmulewitz, Chairman and interim CEO of Therapix, said, “Our research at Therapix is focused on a multifaceted, clinical drug development program that is poised to potentially yield novel, breakthrough therapeutic discoveries to benefit mankind and medicine in ways we have never before seen. We are excited to join FSD Pharma to be part of one of the fastest growing, most forward-thinking companies in this sector.”

Post the announcement, shares of FSD Pharma surged more than 16% to trade at a market capitalization of C$752.4 million with a price-to-book multiple of 14.0x.

Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.

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