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LEXX: Global Deals Take Center Stage

06/08/2022

By John Vandermosten, CFA

NASDAQ:LEXX

READ THE FULL LEXX RESEARCH REPORT

Lexaria Bioscience Corporation (NASDAQ:LEXX) has announced three material partnerships since the beginning of June that will provide a variety of upfront, milestone and royalty opportunities over the next quarters and years to come. It has also updated investors on other events including the results of its annual meeting and the grant of a patent. We speak with CEO Chris Bunka about Lexaria’s opportunities in a number of areas in a video series included below. As a result of the deal with Premier Wellness Science, we raise our revenue estimates to reflect the anticipated upfront payments. See below for a summary of the new relationships Lexaria has signed and additional detail on other items related to the company’s operations.

AnodGen Bioceuticals

As reported in a June 8th press release, Lexaria granted a pharmaceutical license for use of its DehydraTECH platform by AnodGen Bioceuticals for manufacturing and distributing cannabidiol (CBD) active pharmaceutical ingredient (API) powders in Europe, Australia and New Zealand. The license includes pharmaceutical and medical product applications for psychoactive cannabinoids and medical product applications for non-psychoactive cannabinoids and can be extended to third party companies to use in their own products. Products qualifying under the license will be designated by a national regulator as a medical product, drug, nutraceutical, pharmaceutical or biopharmaceutical under its cannabinoid product license rights. Lexaria will receive royalties for AnodGen products sold using DehydraTECH. Although rates have not been disclosed, royalties received for pharmaceutical products are generally greater than those received for consumer products.

Anodgen is a contract manufacturing organization (CMO) that will manufacture and distribute active pharmaceutical ingredients for the pharmaceutical industry by focusing on plant-based medicine. Anodgen specializes in sourcing and compounding custom CBD APIs and other customized blends. It has recently signed two research memorandums of understanding (MOUs) with multiple U.S. universities for research collaboration.

Premier Wellness Science

Lexaria granted an exclusive license to Premier Wellness Science Co. for use of the DehydraTECH technology in a variety of CBD products as detailed in a June 3rd news release. The products may be in oral liquid or non-liquid form and may be used in the topical, hair-care, lip-care and cosmetics segments. The arrangement includes minimum payments of $4.5 million to be paid over the first five years of the deal to maintain exclusivity. The magnitude of the license payments will start from a small base and grow as the arrangement moves into its final years. First payments will be made to Lexaria on September 1st. Royalty percentages were not disclosed nor were Premier sales forecasts; however, the press release noted that under the worst case sales projection by Premier, Lexaria could receive annual royalties of over $5 million. Technology transfer between the companies has already begun.

Premier is a wholesale and retail marketer of cosmetics and health foods in Japan which are offered under the DUO and CANADEL brands. The company is also involved provides information and consulting services to entities involved in the anti-aging, beauty and health industry. It also offers market research and data collection and analysis for its clients. Premier is a subsidiary of Premier Anti-Aging Co which trades on the Tokyo Stock Exchange under code 4934.

Valcon Medical

Lexaria and Valcon Medical A/S signed an agreement granting the latter rights to use the DehydraTECH platform for medical cannabis applications as described in a June 2nd, 2022 press release. The products subject to the license are classified as non-registered medical products and authorized through country-level programs or EU Commission registered cannabis products. Examples of intended products include bulk powders, solid oral dosage forms, powder-filled capsules, compressed tablets, pills, oral melts and topical creams and lotions with or without patch integration. It is a non-exclusive license with milestone fees due Lexaria upon completion of batch validation and marketing authorization application approvals. Royalties on sales will also be due from related products sold by Valcon using the DehydraTECH technology. While financial details of the arrangement were not made public, in the pharmaceuticals space, royalties are normally in the 6-10% range.

Valcon Medical is a European contract manufacturing organization (CMO) that is good manufacturing practice (GMP) certified and license in Denmark to manufacture medical cannabis. The CMO works with partners to provide contract processing and bulk extract services. It can also produce white label product for other companies to commercialize.

CEO Interview

We recently spoke with CEO Chris Bunka about the DehydraTECH platform, Lexaria’s hypertension and nicotine programs and the company’s competitive advantage with respect to input cost, which is particularly relevant in today’s environment. See below for links to the five brief videos in the series.

I. Introduction

II. What is DehydraTECH?

III. Lexaria’s Work in Hypertension

IV. Lexaria’s Nicotine Efforts

V. Fireside Chat

Annual Meeting

Lexaria held its 2022 annual meeting on May 31, 2022 where votes on directors and auditors were submitted. All nominated directors and auditor Davidson & Company LLP were approved. Approximately half of all shareholders were represented in person or by proxy at the meeting. Additional matters that received a favorable vote include approval of compensation granted to executive officers, and approval of the acts of the directors since the prior shareholder meeting, which encompasses any transactions effected, contracts signed or other lawful acts on behalf of the company.

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1. Source: Lexaria Biosciences CEO Chris Bunka YouTube video screen capture, June 2022.

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