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April 25, 2024

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Private med reformulator SecureDose acquired by PharmaDrug Inc (PHRX.C)

A few weeks back, in what has become a seminal Equity.Guru piece about the quickly legalizing safe supply drug space, I tore into PharmaDrug (PHRX.C), which was lurching into strategic alternatives land as it appeared to have run out of dough to push its drug trials forward.

Pharmadrug (PHRX.C) would love to be in the cocaine space, at least in terms of synthesizing the stuff, but its efforts to commercialize DMT through research and clinical trials have hit a financial dead end, and it can barely get its stock over half a cent as it actively ‘assesses strategic alternatives.’

Well, now it turns out I’m a PharmaDrug investor as a private company I own a piece of, SecureDose Synthetics, just got acquired (though perhaps one could more accurately call it ‘RTOed’) by them.

What’s the Deal?

On October 27, 2023, Pharmadrug shared its plan to buy Securedose Synthetics, a company that researches and develops synthetic versions of existing drugs. This can mean a faster and potentially more profitable route to getting new drugs on the market, as it’s often quicker to build on existing (and approved) IP than starting from scratch. With a clean financial record – $750,000 in the bank – and no debt – Securedose is in a healthy place.

Why is Pharmadrug Interested?

Pharmadrug already works on researching and developing controlled substances and natural medicines. Acquiring Securedose means they can expand their operations and possibly develop drugs more quickly, including the ones they’ve stalled on. Robert Steen, the head of Pharmadrug, believes that with this move, they can bring drugs to the market faster, which might mean more profits in less time.

Probably also worth noting that $750k in free cash as well.

What are the Terms?

In simpler terms, if you owned a share in Securedose, it would become a share in Pharmadrug once the deal is finalized. PharmaDrug rolled itself back 7:1 to make the deal even, and to give itself a bit of trading room. Securedose currently has about 31.5 million shares out there, with warrants that are well out of the money. After the deal, Pharmadrug will have a total of around 82.8 million shares.

Is this a big ownership shift for Pharmadrug?

Not really. Even after the deal, the people who combined owned 100% of Securedose will now own about 38% of Pharmadrug’s shares. There’s no major shift in power or control within Pharmadrug, though there are conditions. Several boxes need to be ticked off before this deal becomes official. Both companies’ boards need to agree, and some regulatory bodies have to give their nod.

What About Leadership?

The leadership at Pharmadrug remains the same so, no big shake-ups at the top. However, there’s a small change on the board with Al Quong stepping down and Paul McClory taking up a new role. Overall, the company’s strategy and direction will stay the course.

A Bit About Pharmadrug

Pharmadrug works in a niche area of medicine, focusing on controlled substances and natural drugs. They have a special interest in researching natural medicines, reformulating them, and getting them approved for use in places like the US and Europe. They have a patented drug that could help with infectious diseases, including COVID-19.

One thing that makes this acquisition interesting is, SecureDose should be able to also synthesize the rapidly decriminalizing illicit substances that governments would like safe supply of; cocaine, LSD, MDMA, psilocybin, ketamine and more. Synthesizing those and perhaps tweaking to remove negative effects would take them to a place where true legalization is faster and more possible.

The Bottom Line

I’ve been loud in criticizing where PharmaDrug had found itself previously, but credit where it’s due, this brings in a little cash, and tech that can get the company back on course. I bought into SecureDose because it’s real, and in an area I think has a ton of potential, so though I think this deal does a lot more for PharmaDrug than it does SecureDose, the fact that I now own PharmaDrug means I too win. Bought in at $0.05 per share, so where it stands is level.

Next steps are going to be all important. If this is a life jacket as opposed to a speedboat, I won’t be around for long. But if PHRX can build on the momentum of this acquisition, capitalize on what they’ve bought and not fumble the storyline, this is a very cheap buy in.

— Chris Parry

FULL DISCLOSURE: As mentioned in the article, I am an investor in SecureDose and will, by virtue of that, soon be an investor in PharmaDrug. I have no commercial agreement with either company and am not a representative.

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