Avecho Signs Cannabidiol Deal With Sandoz, Eyes OTC Market in 2028
In March this year, Avecho (AVE: $0.004), formerly Phosphagenics, signed a key licensing deal with Swiss pharmaceutical company Sandoz AG. The deal grants Sandoz rights to Avecho’s cannabidiol (CBD) therapy for insomnia in Australia, which is currently in a 519-patient Phase III study. Under the terms, Avecho received an upfront fee of $4.8 million, with potential milestone payments of up to US$16 million and royalties between 14%–19% on Australian net sales.
Sandoz’s First Cannabinoid Deal
The agreement marks Sandoz’s first foray into cannabinoid-based medicine. Sandoz reportedly spent three months conducting due diligence prior to signing, and is said to expect rapid market penetration in Australia. CEO Paul Gavin confirmed that Avecho is also in discussion with Sandoz regarding expansion into other territories. He highlighted Sandoz’s strong distribution relationships with pharmacy chains in Australia, including the Terry White group.
TPM: Avecho’s Differentiating Delivery Platform
Avecho has been developing its proprietary TPM drug delivery technology—based on a Vitamin E derivative—for nearly two decades. TPM significantly enhances the solubility and absorption of compounds such as CBD. Gavin noted that 10%–30% of people suffer from some form of insomnia, and while CBD is known to help, formulating it into an effective and patient-friendly delivery format has been a barrier.
While only one CBD product—Epidiolex from GW Pharma—has FDA approval, Avecho’s product aims to improve on its performance. TPM has reportedly improved CBD’s bioavailability by 400% (from 6% to 30%) and achieves peak absorption in just 30 minutes, compared to two hours for Epidiolex.
Regulatory Tailwinds in Australia and New Zealand
A key tailwind for Avecho is regulatory. In December 2020, Australia’s TGA enabled low-dose cannabinoid medicines (<150 mg/day) to be available over-the-counter (OTC) at pharmacies, pending approval. New Zealand followed in October 2023, reclassifying CBD from prescription-only to pharmacist-only. This regulatory pathway aligns with Avecho’s two dosing options—75 mg and 150 mg—both of which sit within the OTC threshold.
Insomnia Trial and Market Outlook
The ongoing Phase III trial in Australia is studying Avecho’s oral, TPM-enhanced CBD soft gel capsule in 519 patients. By the end of 2023, 70 participants had been enrolled, with a further 150 needed for an interim futility analysis planned for Q1 2025. Avecho has built in measures to reduce placebo effects and hopes to seek early approval from the TGA based on strong interim data.
However, a key risk is that Avecho skipped a Phase II study, and data on CBD’s objective effectiveness in insomnia remains sparse. A 2022 systematic review (Ranum et al.) noted that while CBD may help with insomnia symptoms, more robust and specific trials using validated subjective and objective metrics are needed.
Expected Commercial Impact
Avecho projects initial pricing between $150–$200 per month. With an estimated 3.6 million chronic insomnia sufferers in Australia, the company believes the domestic OTC market could reach US$125 million annually. Gavin emphasised the value of Sandoz’s global reach in both OTC and prescription markets.
Financial Position and Patents
Avecho is capitalised at $16 million and ended March with $6.6 million in cash. Its net cash used in operations for calendar 2024 was just $4 million. The company’s patent estate for TPM extends out to 2040, giving it long-term exclusivity if it reaches market.
Bioshares recommendation: Speculative Buy Class B
(Chimeric Therapeutics has been added to the Bioshares Model Portfolio)
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