Israel's Nextar setting up medical cannabis incubator

Orna Dreazen, Yaron Penn  photo: Eyal Izhar

A cooperation agreement has been signed with an Australian medical cannabis investment fund.

Nextar, one of Israel's leading companies in the development of formulations for drugs, is expanding into medical cannabis formulations. The company will invest in setting up a development center and incubator for medical cannabis products. The incubator, to be called Nextage, will probably accept six companies a year and initially invest $100,000-400,000 in each company, with an option for more later on. The incubator will receive various services from Nextar, including pharmaceutical, laboratory, analytic testing, business development, and clinical trial management services.

In addition to the companies founded in the incubator, which can be cannabis formulation companies or companies with a relevant medical device, Nextar will also provide cannabis development services to external companies and overseas companies, and will develop independent cannabis products. The company will invest $5 million in the venture, and will also raise capital from external parties. An initial cooperative agreement has already been signed with Budding Tech, an Australian fund for the medical cannabis sector.

Nextar, founded and managed by CEO Dr. Orna Dreazen, has developed 70 drug formulations to date for most of Israel's leading pharma companies. The idea of entering the medical cannabis field originated in a meeting between Nextar and medical cannabis entrepreneur and Weizmann Institute of Science graduate Dr. Yaron Penn, who was looking for a service company in order to shorten the process of reaching the cannabis market with an independent initiative. At the meeting the parties realized that the process could be suitable for additional startups in the field. The incubator was born, and Penn joined Nextar as chief scientist.

Permission to export cannabis from Israel was recently granted, and in principle, the procedures developed in the Nextar incubator can be sent to any country in the world to which the material can be imported. There is currently only one company in the world serving the international market - a Dutch company with a large center in Canada.

The cannabis market reform, which is scheduled to go into effect soon, divides the field into two types of players. One is the growers and the other is the manufacturers, who extract and package the material. The material is sent for laboratory tests. Abraham Dreazen, Orna Dreazen's son, who will manage the development center, says, "We met with the Ministry of Health Medical Cannabis Unit, and together we realized that they had skipped over a category - development. The product goes from the plant to the patient, but does not really undergo development as a drug. Companies go to the Medical Cannabis Unit wanting to develop. There is innovation, desire, and ambition, but these are startups with no knowledge of how to approach the medical market."

Abraham Dreazen adds, "The Ministry of Health doesn't want everyone calling himself a startup for research in the field to get a license for medical cannabis. It's convenient for them to have another party like us between the startup and the market, so that the innovation doesn't get wasted, but there is nonetheless supervision. Every such startup will still have to get an independent cannabis research license, but it will have a home where it can conduct the research. We believe that this will make it easier for the Medical Cannabis Unit to grant the license."

Penn: "As someone who has dealt in restricted materials in higher education and startups, I can say that this is a real problem. It makes anyone nervous to know that there's a drug in the laboratory for which he's responsible."

Orna Dreazen: "We know how to work with materials that are hazardous or restricted. We have worked with drugs based on opiates and with Ritalin, which is subject to legal regulation and supervision, and we also know how to handle toxic materials, such as those used in chemotherapy."

Orna Dreazen emphasizes that all the products from the incubator and Nextar itself will be of medical quality. "We're not packaging flowers for the leisure industry now," she says. "We come from a world of quality and drugs. We're interested in making a controlled reproducible product." The question of reproducibility is one of the most important issues in the cannabis field today. Orna Dreazen says, "Cannabis is a botanical extract - a plant extract. In order to understand the complexity, imagine that when each of us makes tea, he's making a botanical extract, but one person pours boiling water and another one pours lukewarm water, and one stirs it and another doesn't, so there are differences in the tea."

The same thing is true for cannabis. It is known that two dosages of cannabis, even from the same plant, are not identical. This makes it hard for doctors to prescribe the drug, because they are not confident in their ability to give a precise dose. Orna Dreazen puts it like this: "We want to at least obtain a list of the most important molecules with a list of their desirable dosages (a monograph). Every drug has a monograph. In a conventional chemical drug, there's one ingredient, but there are more in botanical drugs. There can be up to 1,000 ingredients in cannabis."

Nextar was an essential partner in the development of many of the formulations of drugs developed in Israel. It was a very active partner in the development of the formulation of NeuoDerm, which was acquired for $1.1 billion, mainly because of its unique formulation for a known drug for the treatment of Parkinson's Disease.

Orna Dreazen: Formulation is an art. When you design a formulation, you have to be very creative, and take a lot of parameters into account: the effect you want to achieve, what dosage, and for which organ. There are ingredients that can't be inserted and ingredients that can be inserted. For example, a doctor came to us and said, 'I want to give this drug, which is for adults, to premature infants.' There are stabilizing and antibacterial ingredients that can't be given to premature infants. Their bodies break down the ingredients differently. So what do you replace them with in order to keep maintain the same action and avoid detracting from it? And in what dosage?"

Nextar has hitherto worked mainly on a service provider model. "Today, we sometimes also ask for a small holding in the companies in which we have a special belief as part of the agreement," Orna Dreazen says. Alcobra Pharmaceuticals Ltd. (Nasdaq: ADHD) was one of these. "I chose them because of their management. I saw that they could put a product on the market and raise money. The ADHD field is a very tough one." She does not say whether she made a profit on the shares she received in Alcobra, but it is possible, because the share gave a good return on Nasdaq before plummeting after the product failed in clinical trials.

Orna Dreazen reveals that she previously considered a TASE IPO for Nextar. "We have a story to tell, and we are also a stable business, but we decided to do it, if at all, only after we have a more substantial portfolio. It depends to a great extent on who enters as an investor in the cannabis field. There are investors who don't like very much being part of a public company.At present, we're a family company of my brother and myself, and we're very happy with this situation."

Published by Globes [online], Israel Business News - - on November 9, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

Orna Dreazen, Yaron Penn  photo: Eyal Izhar
Orna Dreazen, Yaron Penn photo: Eyal Izhar
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