Wednesday, 28 February 2018

Pascal Biosciences: The Cannabis Immunotherapy for Cancer?

Over the past couple of months, we have been focusing our energy on OTC stocks primarily listed in Canada. The Canadian microcap market has been brutal, but the pullback has also supplied us with a tremendous buying opportunity. While some of our trades have been hit and miss, we have experienced incredible returns for our cannabis-related picks. In July, we picked Isodiol International (ISOLF) (ISOL.CN) in our articles Isodiol: 10x Undervalued Cannabis Stock Inks Deals With Canopy and Isodiol: A Profitable Cannabis Company. ISOL moved up nearly ten times since then, hitting a high of $2.14 in Canada from $0.23 and sits at $1.17 today. In November we picked Global Cannabis Applications, or GCAC, (FUAPF) (APP.CN) in our article A Cannabis and Blockchain Story when FUAPF was sitting at $0.09. GCAC moved up more than eight times in a couple of months with the U.S. symbol hitting a high of $0.77 and sits at $0.28 now. If you like our picks make sure to follow our blog by clicking the follow button on the top of the left hand panel. We are up to 462 followers despite not giving out a lot of alerts, a fact that we think is indicative of a diligent and prudent stock picking history. If you would like to share this blog, make sure to use the URL "nasdaqnewsreports.blogspot.mx" as certain spam filters on social media don't let you post blogspot.com addresses.

Both ourselves and our readers who got in early and cheap made incredible gains on Isodiol and GCAC with plenty of opportunity to sell at several times their investment. Even if they held until now, they are still sitting on substantial gains. However, we think that the next cannabis pick will greatly outperform those two. Isodiol is a profitable company in a hot sector. GCAC is an app and token company looking to streamline data for that hot sector. But what Pascal Biosciences Inc. (BIMUF) (PAS.CN) has discovered goes far beyond what those two companies can do. It has the potential to impact how the medical cannabis industry is perceived and save countless lives and hardship from chemotherapy and other drastic measures when combating cancer. This is the news release from February 21:

Pascal Biosciences Identifies Molecules in Cannabis That Stimulate the Immune System to Destroy Tumor Cells


VANCOUVER, British Columbia and SEATTLE, Feb. 21, 2018 (GLOBE NEWSWIRE) -- Pascal Biosciences Inc. (TSX.V:PAS) (“Pascal” or the “Company”) today announced the Company has discovered certain cannabinoids that enhance the immunogenicity of tumor cells, rendering them more susceptible to recognition by the immune system. This discovery is important because the leading class of new cancer fighting agents, termed “checkpoint inhibitors”, activates the immune system to destroy cancer cells. Enhancing recognition of cancer cells with cannabinoids may greatly improve the efficacy of this drug class. Cannabinoids are the chemical compounds which give the cannabis plant its medicinal properties with over 100 different cannabinoids identified. There is a growing body of research demonstrating the effectiveness of cannabinoids in the treatment of cancer symptoms, including nausea, appetite enhancement, and pain management. However, Pascal is the first to identify a mechanism in which cannabinoids may provide a direct benefit in immunotherapy.

Tumor cells often arise in individuals, but they are usually recognized by the immune system and destroyed. The immune system identifies cells as either normal or dangerous in a process called immunosurveillance. Cells that have become cancerous are recognized by cytotoxic T cells, specialized immune cells that target and kill the tumor cell. However, some malignant cells, particularly metastatic cells, employ an immune escape strategy to subvert and avoid recognition and are not recognized and attacked by cytotoxic T cells. This allows the spread of tumor cells to other tissues, potentially leading to fatal disease.

Checkpoint inhibitors are recently approved drugs that activate the immune system to kill tumor cells. These drugs are commercially successful (Opdivo®, Keytruda®, and Yervoy® together had over $6B in 2017 sales) and more importantly, can cure patients with some types of cancer, but only a fraction of patients (generally less than half) respond to the drugs. There are currently many efforts to find drugs that will enhance the activity of checkpoint inhibitors, and Pascal has discovered cannabinoids that activate a key step for immune recognition.

University of British Columbia Professor Wilf Jefferies and his research team in the Michael Smith Laboratories have developed a proprietary assay to discover compounds that can increase immune recognition of tumor cells. Dr. Jefferies, the scientific founder of Pascal, and his team screened thousands of natural products and subsequently identified certain cannabinoid molecules which have the greatest potency in their assay. While different cannabinoids show numerous biological and pharmacological effects, this is the first demonstration of immune activation by individual cannabinoids. Scientists from both UBC and Pascal have demonstrated that specific cannabinoids have strong potency on both mouse and human cancer cells.

“We are very excited about this novel discovery,” commented Dr. Patrick Gray, CEO of Pascal Biosciences. “Cannabinoids typically have good pharmacological properties, as most have low toxicity and are easily absorbed into the blood, which are great advantages for drug development. In combination with immune checkpoint inhibitors, cannabinoids may significantly improve cancer care. We look forward to soon translating our results into clinical studies.”

We wish to highlight specifically the line "Pascal is the first to identify a mechanism in which cannabinoids may provide a direct benefit in immunotherapy". Reviewing cancer.gov's website we see that CBD has been studied in a variety of anti-tumor activities, but it is in fact true that Pascal is the first to identify a direct benefit to immunotherapy.



Why is this so important? Review this video for a brief comparison of immunotherapy to chemotherapy:


Chemotherapy is an awful, painful process that can lead to permanently debilitating side effects. The side effects of immunotherapy are benign in comparison. The reason why it is the primary therapy in only some cancers instead of all cancers is that it is still not as effective as chemotherapy (some cancers it is more effective). What proponents of medical cannabis have suggested and what Pascal has for the first time demonstrated is that CBD can be used to enhance recognition of cancer cells which will improve the efficacy of immunotherapies.

After reviewing the Reddit thread about the Pascal discovery, we have seen some incorrect assumptions put forth which may have led to the cooling down of the stock after its initial run. Namely, that Pascal will be unable to patent its discovery that is based off of CBD. This is untrue. GW Pharma Limited (GWPH) has gotten around this issue and holds a patent for "Phytocannabinoids in the treatment of cancer" which appears to be the basis for its Phase 2 study on Glioblastoma, one of the points referenced on the cancer.gov website. We have confirmed from the CEO that Pascal has already filed for patent protection:



GWPH is actually a great comparable to what Pascal could be. Its market cap is over $3 billion with Epidiolex in its final stages before becoming a commercial drug for certain types of epilepsy. The bearish argument on GWPH has always been that one could go to a local dispensary to experiment with a treatment that works best for them. The bullish argument is that many people will prefer an FDA-approved and insurance-covered product. Judging by GWPH's market cap, the bullish argument is winning.

Inclusive of a recent $5 million CAD private placement, Pascal has 50 million shares outstanding. Fully diluted (and we do expect warrants to get exercised well in the money, including the new ones at 60 cents), it's 67 million outstanding. With BIMUF closing at $0.33 on Wednesday, that is a minuscule $16.5 million market cap, $22.1 million fully diluted. Pascal is trading at less than 1% of GWPH's market cap. The global cancer immunotherapy market is expected to be worth $119.4 billion by 2021 while the epilepsy market is expected to grow to $6.9 billion by 2027. So Pascal's market is a lot bigger.

Pascal has a $10 billion discovery in its hands. The issue is that it will likely cost hundreds of millions of dollars and five or more years to take the discovery to the market. GWPH has an accumulated deficit of over $450 million to put this into perspective. With $5 million in the bank from the private placement and an additional $9 million assuming all warrants are exercised...the company is still hundreds of millions of dollars away.

Pascal is not going to do this on its own, nor should it. GWPH would make a prime candidate in a takeover bid. But the licensed producers in Canada, particularly Aurora Cannabis Inc. (ACBFF) (ACB.TO), would make a great suitor as well. We can also see a partnership deal where Pascal gets paid substantial milestone payments.

We think a buyout offer or at least a strategic partnership will occur from this discovery. But even without that, we think that Pascal should be worth a minimum of $100 million in market cap, or about $2.00 per share. This is an upside similar to what we saw on Isodiol and GCAC, and should get to that kind of return in short order if the cannabis industry heats up again.

Disclosure: We are long stocks listed in this report.

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