Pet owners may soon be one step closer to accessing medical cannabis as a pain-reliever for their furry friends thanks to CannPal, a Sydney-based pharmatech startup that is looking to raise $6 million when it lists on the Australian Securities Exchange later this year.
CannPal wants to develop cannabis-based products to aid veterinarians in administering in pain-relief for “companion animals” like cats and dogs, says founder and managing director Layton Mills.
Mills is also the co-founder of Canberra-based natural health foods trader Tanlay Food Group, and says CannPal represents his “culmination of two loves”: animals and natural health movements.
“Cannabis has got to be one of the largest movements towards natural health in the last 10 years,” he says.
For Mills, the decision to list the year-old startup on the ASX is “a no brainer” because it will raise awareness for the product, provide capital for research and development of the company’s CPAT-01 drug, and “really legitimises what we are doing”.
“The [medical cannabis] industry is now growing, the taboo is being dropped, this awareness [through listing on the ASX] really gets the story out,” he says.
CannPal has successfully lodged a prospectus with the Australian Securities and Investments Commission and plans to list on the ASX in October this year. The company intends to issue 30 million shares at an issue price of $0.20 per share to raise $6 million, with the company forecasting an expected market capitalisation of $18.5 million.
The funds raised will go towards funding the clinical phase of the company’s CPAT-01 drug, as well as the research and development of other products in the company’s pharmaceutical pipeline, according to CannPal.
The startup previously raised $500,000 in seed funding in June last year from unnamed “sophisticated investors”, according to Mills, and added to this funding with a second, oversubscribed seed round of $1 million closed in March this year.
Despite the success of this oversubscribed seed-funding, Mills says he “definitely did get pushback” from investors because of the social taboo of cannabis products.
Mills had realised from the outset that this would be a barrier for many investors, and sought to overcome this by approaching the US-based Food and Drug Administration (FDA) “very early on in the piece”, which saw CannPal granted a “sponsor fee waiver” from the FDA, allowing it to conduct its research without the usual associated fees.
Mills says that being awarded this FDA waiver “validated what we were doing in the eyes of the US regulator [FDA],” and “allowed us ammunition” to overcome the stigma surrounding cannabis products back in Australia.
“We knew we were going to get pushback, and engaging with the FDA early on allowed us to overcome that,” he says.
Mills says the key to marketing a “taboo” product is authenticity and forward-thinking. For startups setting off on their own entrepreneurial journey, this means anticipating the challenges that lay ahead.
“Think about it early on, plan ahead, understand what your obstacles will be moving forward,” he says.
“I cold called everyone that’s on the team”
CannPal has grown to a team of 13 since being founded in 2016, and Mills says it was his passion for the product, his understanding of the market and his vision for the future that convinced the likes of Max Johnston, ex-managing director of Johnson & Johnson Pacific, and Dr Kate Adams, co-owner of Bondi Vet Hospital and founder of gift-giving startup Thankly, to come on board as non-executive directors.
“As cliche as it sounds, its all about authenticity,” Mills says.
“I cold called everyone that’s on the team — even the initial investors”
While cold-calling may be an unconventional way to raise funds and gain new team members, Mills says his preparation and focus was what won people over.
“I understood the industry, took the time to research and understand what I was talking about and wanted to do,” he says.
“I had a clear vision and clear goal. When I reached out they could see the authenticity, see the value [in the proposition].”
He advises startup founders to similarly hone their vision and communicate their passion when approaching investors and advisors.
“It’s really important when you’re reaching out to people that you know what the vision is, and you need to be authentic,” he says.
Mills says his experience co-founding Tanlay Food Group helped “enormously” when it came to founding CannPal, because “every time you engage in a new venture you’re learning something new”.
“It teaches you along the way what you need to be careful of, and what you need when moving forward; you pick up something new every time,” he says.
While CannPal has no current revenue streams, Mills says it is focused solely on conducting ongoing research and clinical trials of its product to “get through the regulatory process, get it approved and enter commercialisation partnerships”.
For companies who have gone through that regulatory process, Mills says the “deal value is really strong” for these cannabis-based pharmaceutical offerings.
“We know that there are 30 states in US that have established medical cannabis frameworks, we know it’s safe…[in Australia] as research grows it will become more of a legitimate industry,” he says.