Myconic Capital (MEDI.E) entered into a share purchase agreement with Auxly Cannabis (XLY.T) to acquire KGK Science today, according to a press release
Myconic intends to expand upon KGK’s services to include special and compassionate access trials using ketamine and other psychedelics, as well as patient monitoring services, which is part of their vision of becoming a leader in mental health in North America.
“This agreement with Myconic is a win-win for Auxly and its shareholders in both the short and long-term, as the additional capital can be deployed into our core business and accelerates Auxly’s path to profitability, while continuing our long-standing relationship with KGK to leverage their deep clinical expertise as we continue to bring innovative cannabis products to market that meet our consumer promise of quality, safety and efficacy. KGK is an outstanding CRO that knows how to unlock value in emerging industries through clinical work and will be an excellent fit with the team at Myconic,” said Hugo Alves, CEO, Auxly.
London, Ontario-based KGK was founded in 1997, and provides clinical research trials focusing on the nutraceutical, cannabis and now the emerging psychedelic sector. They have helped hundreds of companies with custom designed clinical trials.
Their other existing services include regulatory support and compliance assistance and solutions, participant recruitment, research support services and consulting services. The business has produced 150 publications to date, completed more than 400 clinical trials across more than 40 indications, and amassed 25,000 participants in its database with 10 million data points.
The base amount for the acquisition is $12.5 million paid to Auxly in instalments of $1.5 million in cash when the transaction closes. After which, it’ll be $1 million in cash payable six months after closing, and $10 million in common shares based on a the 30-day volume weighted average price (VWAP).
KGK generated $4.4 million in revenue for Auxly, and it’s expected to grow in 2021. If KGK pulls in $8 million in revenue in any 12 month period during the first two years after the closing date, Myconic will offer an extra milestone payment of $1.5 million to Auxly in either cash or shares. They’ve also extended a service credit to Auxly worth $2.5 million for ten years.
—Joseph Morton
