New Zealand cannabis firm Helius Therapeutics has landed a further $20 million in investment funding.
This adds to the $15 million the company raised in a 2018 funding round, spearheaded by businessman Guy Haddleton.
This initial group of investors injected a further $5 million into the business, while the other $15 million came from a new group of investors.
"Medicinal cannabis is a capital-intensive business," said Haddleton, who serves as the chairman of the company.
"This raise ensures Helius has the resources it needs to deliver for patients."
Helius has so far resisted the pull of the New Zealand stock exchange, opting instead to go directly to the institutional investment community.
The company now has 16 New Zealand-based investor-shareholders, the largest of which are Guy and Sue Haddleton.
Helius chief executive and co-founder Paul Manning, who retains a 15 per cent shareholding, said he invited a collection of around 30 sophisticated investors to the company's offices in East Tamaki last year to discuss the potential of putting more money into the business.
At this meeting, Haddleton and Manning outlined plans to put any newly acquired funds toward clinical trials for Helius products.
This objective came as a direct response to the growing scepticism in the medical fraternity about claims being made by some companies operating in the space.
"Doctors are looking for more evidence," says Manning.
"They want to understand that these products really work and that they do what people believe they do. And although there are thousands of studies from around the world that look at therapeutic benefits of medicinal cannabis, there are very few actual products that have the clinical evidence to support their therapeutic effect."
Manning sees these clinical studies as giving the company a major point of difference in the global marketplace, which is quickly being saturated by cannabis companies.
"There's a sea of sameness among medicinal cannabis products and they're very difficult to tease apart. They tend to be oil-based preparations, oils or capsules, and they're all just ratioed cannabis products.
"If we want to be set apart, we need to use scientific rigour, we need to invest in clinical trials and we need to position ourselves as having the safest and most efficacious cannabis products in the world."
But conducting these clinical trials isn't cheap, with Manning saying that the expense can quickly stretch from hundreds of thousands into millions of dollars.
"This was definitely going to demand an increase in the funds available to us," he says.
No revenue, $105m value
Despite still being in the pre-revenue phase, Manning says a Canadian-based investment bank, which has raised over C$3 billion in the sector globally, recently valued Helius at $105 million.
While that number may seem steep for a business yet to make any money, local investment banker Tim Preston, a principal at CM Partners, says it's too early to gauge whether it's too high.
"It may seem ridiculous at the moment, but that could end up being a low value in the future," says Preston.
"It all depends on what happens in the market."
Preston was previously involved in the stockmarket listing of Cannasouth and says this business offers the only real benchmark for cannabis company valuations in the local market.
Cannasouth has a current market cap of around $53 million, but it has previously been as high as $77 million.
Preston says that while cannabis valuations are more of an "art than a science" at this stage, he says there's significant potential for New Zealand to become a major global player.
"If you look at the honey or milk export markets, New Zealand has a reputation for being clean, green and traceable," he says.
These factors, he argues, will play an integral role in establishing New Zealand as "trusted global exporter," particularly in the Asian market.
Asked whether he thought investors were putting too much money into companies like Helius, Preston said he would be more concerned about companies receiving lower levels of investment given that they may not be able to deliver what they're promising.
"You should be more worried about the companies securing only $1 million or $2 million in investment. This is never going to be enough."
Despite the hype and the flurry of new business activity, Preston anticipates cannabis to follow a similar trajectory to other sectors, with the field eventually whittling down to three or four companies.
"There'll be many failures, but there'll also be some real winners," he says.
Alsatian at the gate
A somewhat overlooked aspect of running a cannabis business is the level of security required to ensure the product isn't stolen off the site.
Manning says he got a huge surprise when, after announcing the location of his facility, he received a phone call from the head of intelligence at the Manukau Police department.
"He and an analyst came and sat down with us and warned that it wasn't if but when organised crime would try to hit the facility," he said.
"It might not be through the front gate. They might try to get people appointed into roles within the business. They also warned about the possibility of sabotage, with someone poisoning our water supply."
Manning said this served as a major wake-up call, which led him to up security at the location.
He now has guards patrolling the premises with Alsatians, tall security gates, internal security checks as well as a number of other measures to ensure the business remains safe.
"They really opened our eyes to the potential risk," Manning says.
"We haven't had any attempted incursions so far, but we thought we're not going to take any chances, so it's become Fort Knox."