DECEMBER 2022 NEWSLETTER

Welcome to our inaugural end of year newsletter

2022 has been a year of significant development for Celadon since our IPO in March. Despite the challenging macroeconomic backdrop, we have made significant progress towards our key operational milestones and have recruited some leading talent into the business as we continue to build the Celadon team.

Our mission is clear: to improve patients’ quality of life by developing breakthrough cannabis-based medicines. We believe the opportunity in the pharmaceutical sector remains compelling. Indeed, as the patient feedback from LVL’s chronic pain study demonstrates, cannabis-based medicine can be life-changing.

There were a number of highlights this year that I’d like to reflect on:

  • Successful IPO on AIM – the first pharmaceutical cannabis company since GW Pharma in 2001
  • Seven harvests of high-THC cannabis completed from Phase 1, with high-quality results
  • Production of Active Pharmaceutical Ingredient (API) completed for GMP inspection by MHRA
  • Phase 2 build underway, with structural work largely completed
  • Launch of LVL chronic pain study, with significant improvement in quality of life for pain relief, sleep and opioid reduction experienced by patients
  • Home Office licencing renewed
  • Leading talent recruited into the business, including a new CFO and a Head of Quality

There have, of course, been some challenges also. The macroeconomic backdrop has led to inflationary pressures in construction and energy costs. Celadon has not been immune to this but has worked to absorb and manage it where we possible by bringing in-house certain aspects of the build.

The word “cannabis” still carries some stigma in certain quarters, and this has emphasized the importance of positive and proactive PR and media engagement. Finally, the transition from remote working has had its pain points for a business like ours that largely requires an in-person workforce.

We hope this newsletter provides a good snapshot of some of the developments of recent months, as well as an opportunity for those to see some images on progress for those that have not visited the facility.

On behalf of everybody at Celadon Pharmaceuticals, I thank you hugely for your continued support, and I wish you a very Happy Christmas and New Year.

James Short
Founder and Chief Executive Officer

Successful Phase 1 Cultivation

During the year, we successfully completed seven harvests of high-THC cannabis in our Phase 1 facility. The quality and consistency of the product has been hugely encouraging, further demonstrating why the investment in controlled environment indoor hydroponic cultivation has been so important to achieve pharmaceutical-grade product.

This product was independently tested by a third-party analytical testing laboratory, confirming it in-specification to be used as the feedstock for the manufacturing of Celadon’s high-THC oil-based API.

Through the year, we have continuously refined and improved our cultivation process; for example, by adjusting the lighting schedules, and the harvesting and trimming process. We have also fully integrated new inventory tracking software (used in cultivation) with our pharmaceutical quality software (used for GMP manufacturing) to enable absolute supply chain transparency.

The data we have collected during the seven harvests has been fully captured and analysed – this data engine in the long run has the potential to be hugely valuable intellectual property, as Celadon builds a view of the optimal growing conditions – including lighting schedule/intensity, gas and moisture levels – for each strain of cannabis it cultivates.

Simply put, we aim to have the highest-tech pharmaceutical cannabis cultivation operation globally for EU-GMP product. 

Strong progress on MHRA registration

This year has seen continued progress on our application to be a Good Manufacturing Practices (GMP) registered manufacturer with the UK’s Medicines and Healthcare products Regulatory Agency (MHRA). It has been a long and intensive process for the company, involving setting up our quality management systems, validating the extraction and manufacturing process and equipment used, and completing all documentation for licencing.

GMP is the certification required by regulators globally to produce any pharmaceutical medicine or API for human use and this stamp of approval is essential for us to begin commercial production.

 

Celadon has successfully made the necessary submissions to the MHRA as part of its GMP registration, having received an MHRA inspection of its facilities during Q4 2022. This is in line with the timings provided in the Interim results announced in September 2022. We remain confident of receiving GMP registration, and anticipate this being in Q1 2023.

Upon receiving GMP registration from the MHRA, we believe that we will become one of a small number of companies globally with the ability to produce high-THC API to EU-GMP standards. It would be a significant milestone in the UK, and what we understand to be the only such registration since cannabis was legalised in 2018 for medicinal purposes.

Celadon’s API product has been fully developed from our own intellectual property, comprising our cannabis strain, cultivation, and extraction technology; all based in our 100,000 sq ft facility in the West Midlands, UK.

Obtaining GMP registration will enable us to pursue revenue-generating opportunities and accelerate the development and manufacturing of cannabis-based medicines, both in the UK and globally. We have already been approached by several pharmaceutical companies to explore potential partnerships for drug development and clinical trials in anticipation of the registration.

Since 2018, Celadon has been the pioneer in the pharmaceutical cannabis sector, playing a key role in laying the foundations of the regulatory process. This was demonstrated last month with the MHRA issuing a clarification to industry of the formalised regulatory approach that companies seeking to cultivate and manufacture cannabis-based medicines must follow.

Progress on the Phase 2 facility build-out

We are making continued progress with the build-out of the Phase 2 facility, which remains on track to become operational by Q1 2023. All the initial structural work, including the walls and floors of cultivation rooms, has now largely been completed. The next stage is the process of installing lighting, HVAC and cultivation equipment.

Due to increased costs and supply chain delays in the construction sector, we took management of the build in-house during H1 2022, which itself has produced both some time and cost savings for the company.

We will continue to take a prudent approach to rolling out capacity in Phase 2, with the area at full capacity adding a potential annualised yield of approximately three tonnes of dry flower, enough to supply around 20,000 patients.

Early results from our chronic pain study

As part of the feasibility study of the MHRA conditionally-approved clinical trial for chronic pain, LVL has been onboarding patients into the clinic during 2022. Earlier in the year, LVL secured Care Quality Control (CQC) approval for its physical clinic in Harley Street in London. In September, the British Pain Society ran a six-page spread on the uniqueness of the LVL clinical trial and its potential to transform the cannabis-based medicines landscape in the UK.

The benefits of cannabis for chronic pain are well documented It is the largest therapeutic area driving prescriptions in markets like Australia and Germany and in 2021 the Australian market grew to over 220,000 patients on medicinal cannabis having hardly existed two years prior. In the UK, there are eight million people with moderate to severely disabling chronic pain. In the past two years, the UK government has advised against their long-term use in the treatment of non-cancer pain due to the risk of dependence and addiction. The door is open for cannabinoids to play a critical role as an effective treatment.

While LVL’s study formally commenced in September 2022, the early results have been hugely encouraging. We spend time with these patients every day, and it’s extraordinary to see how life-changing LVL’s cannabis-based medicine has been. Below we include a selection of testimonials from LVL patients sharing their experiences.

Breakthrough R&D

We aim to discover and develop breakthrough cannabis-based medicines that will improve patients’ quality of life. To this end, we are focused on three core areas of R&D:
  • Development of Celadon’s high-THC API
  • Development of “specials” product range
  • Partner of choice for licenced drugs
API
This year we successfully produced a high-THC API using our proprietary extraction technology, following three years of intensive preparations. We believe this will be the first EU-GMP grade API of its kind in the UK.

Specials
Our API has the potential for sale to UK pharmaceutical companies, but also in Celadon’s own medicines. We have been conducting research to map out our product range for a target set of indications, with a focus on chronic pain, for the UK “specials” framework. The aim is to give doctors more confidence in prescribing. This product range will build on Celadon’s API, as well as the data from the LVL clinical trial.

Licenced drugs
Beyond the “specials” framework, we believe that there is considerable value creation potential in the development of licenced cannabinoid medicines. While this route to market typically involves a longer-term investment, it can yield superior returns: in 2021 GW Pharmaceuticals was acquired by Jazz Pharmaceuticals for over $7bn for its licenced epilepsy product, Epidiolex (CBD oil).

Celadon’s approach to the development of novel licenced medicines has been through partnering, in order to access external expertise and reduce capital outlay at this stage in the company’s development. Our 19.5% holding in Kingdom Therapeutics has given the company exposure to the ground-breaking science for a novel cannabinoid drug for Autism Spectrum Disorder, as well as an option to supply Celadon’s API to Kingdom as development progresses. Furthermore, our collaboration with Phytome, announced in September, is exploring the potential of cannabis-based medicines in other therapeutic areas with unmet need.

Building the team

Jonathan Turner

Burleigh Abbott

In November, we announced the appointment of a new CFO. Jonathan Turner joins us from FTSE-250 listed Oxford Instruments and brings with him a wealth of experience that will be invaluable for Celadon as we move to the next phase of the company’s growth. Jonathan succeeds Katie Long who is returning to her role within Tessera Investment Management, having successfully led the Company through its IPO onto AIM. 

Jonathan has been starting a phased transition into his role from November 2022 and will join the Company on a full-time basis from February 2023.

Another key hire for the business is Burleigh Abbott, who joins as our new Head of Quality in January 2023. Burleigh joins from Porton Biopharma and will add significant experience to our GMP operations and new MHRA licencing as Celadon expands its product portfolio in the upcoming years. 

Recruiting leading talent is a priority for the business. The two individuals above will add significant experience to our top team, which also included the addition earlier this year of Arthur Wakeley as Managing Director, recruited from McKinsey & Company and formally Lazard. We have continued to hire highly qualified personnel across the rest of the business, including R&D talent for our drug development programme, a new agronomist, and a new M&E Manager to oversee the Phase 2 construction and facility maintenance.

Celadon in the news

 

ENVIRONMENT

Celadon uses a highly controlled indoor cultivation environment in order to produce plants to the tightest pharmaceutical tolerances and cannabinoid content. Hydroponics is used to grow plants in a soilless substrate, with mineral salts dissolved into high quality filtered water and delivered direct to the roots of the plant. Micro-zoned sensors monitor every aspect of the environment in real time; from the room’s temperature, lighting cycles and humidity, to the plant’s mineral absorption and transpiration rates. This allows Celadon to build a data bank of optimal growing conditions for each strain, as well as adjust the room automatically.

TRACKING

Celadon has a bespoke “track and trace” system throughout the production process, providing complete transparency. Each plant is given a unique QR code, allowing it to be traced from its origins through to the final product. IOT boxes are used to automatically feed data into the system, from environmental data to the product’s weight, at each stage of production. This provides full visibility over the production process, as well as inventory tracking and accurate cost analysis which feeds into our accounting systems.

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Medical Cannabis Market, Transparency Market Research May 2022

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Stannard et al, (2016) Traditional opioids for chronic non-cancer pain: untidy, unsatisfactory, and probably unsuitable

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Stannard et al, (2016) Traditional opioids for chronic non-cancer pain: untidy, unsatisfactory, and probably unsuitable

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Stannard et al, (2016) Traditional opioids for chronic non-cancer pain: untidy, unsatisfactory, and probably unsuitable

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ENVIRONMENT

Celadon uses a highly controlled indoor cultivation environment in order to produce plants to the tightest pharmaceutical tolerances and cannabinoid content. Hydroponics is used to grow plants in a soilless substrate, with mineral salts dissolved into high quality filtered water and delivered direct to the roots of the plant. Micro-zoned sensors monitor every aspect of the environment in real time; from the room’s temperature, lighting cycles and humidity, to the plant’s mineral absorption and transpiration rates. This allows Celadon to build a data bank of optimal growing conditions for each strain, as well as adjust the room automatically.

TRACKING

Celadon has a bespoke “track and trace” system throughout the production process, providing complete transparency. Each plant is given a unique QR code, allowing it to be traced from its origins through to the final product. IOT boxes are used to automatically feed data into the system, from environmental data to the product’s weight, at each stage of production. This provides full visibility over the production process, as well as inventory tracking and accurate cost analysis which feeds into our accounting systems.

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Legalised in 2018

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Legalised in 37 States Limited Federal legalisation

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Legalised in 2016

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Legalised in 2016

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Legalised in 2016 Rapid growth to >200k patients (2019-21)

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Legalised in 2001

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BUSINESS DESCRIPTION

 

Celadon Pharmaceuticals Plc is a UK based pharmaceutical company focused on the research, cultivation, manufacturing, and sale of breakthrough cannabis-based medicines. Its primary focus is on improving quality of life for chronic pain sufferers, as well as exploring the potential of cannabis-based medicines for other conditions such as autism.

Its 100,000 sq. ft UK facility operates to an EU-GMP standard and comprises indoor hydroponic cultivation, proprietary GMP extraction and manufacturing and an analytical and R&D laboratory. The Company's subsidiary, LVL, owns a MHRA conditionally-approved clinical trial using cannabis based medicinal products to treat chronic pain in the UK. Celadon also has a minority interest in early-stage biopharma Kingdom Therapeutics which is developing a licenced cannabinoid medicine to treat children with Autism Spectrum Disorder.

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COUNTRY OF INCORPORATION/OPERATION

 

Celadon Pharmaceuticals Plc is incorporated in England and Wales and is listed solely on the London Stock
Exchange Alternative Investment Market (AIM), and is subject to the UK City Code on Takeovers and Mergers.

TIDM: CEL.L
ISIN: GB00BDQYGP38

There are no restrictions on the transfer of Celadon Pharmaceutical’s shares.

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AIM SECURITIES IN ISSUE

 

The following information is correct as at 10th January 2023.

The Company’s issued share capital comprises

61,669,773 ordinary shares

Each with a nominal value of 1 pence

So far as the Company is aware, 71% of its issued share capital is not in public hands.

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