Little Green Pharma Ltd announced its intention, subject to shareholder and other required approvals, to demerge the ownership of its psychedelics business, Reset Mind Sciences.
Reset intends to undertake an entitlement offer to LGP shareholders to fund its operations.
Fleta Solomon, the Chief Executive Officer at LGP expounded more on this aspect.
“We have invested effort in investigating and advancing Reset’s psychedelics operations in 2021 and it is at a point where it is best placed to grow as a stand alone business.”
“We are confident the Demerger will allow for both Reset to drive its psychedelics strategy and LGP to focus solely on its medicinal cannabis business. The Demerger rewards LGP shareholders for Reset’s progress to date and allow them to participate in its exciting future.”
Little Green Pharma demerger overview and rationale
There is an increasing body of research globally into the use of psychedelic medicines, most notably psilocybin and MDMA, to treat various chronic mental health conditions.
This global research has produced highly encouraging results and has catalysed the development of a significant global medicinal psychedelics industry in USA and UK.
Psychedelics are gaining momentum in Australia with support from the Australian Government for medicinal psychedelics research in a $15m grant awarded in January 2022.
The Company entered the psychedelics space given its logical fit with LGP’s long term stated goals of solving real patient problems and transforming lives, as well as LGP’s existing regulatory platform and expertise in cultivating and manufacturing Schedule 9 herbal drugs.
The strategy also aligned with LGP’s record of being a pioneer in emerging pharmaceuticals.
Reset has made progress in psychedelics and LGP believes its shareholders’ best interests are served by demerging the subsidiary to allow it to pursue its strategy as a standalone company.
This gives shareholders the freedom to dictate their preferred investment appetite.
LGP will provide Reset with operational support and product supply with exclusive access to the Company’s Schedule 9 licensed West Australian cultivation and production facilities.
Reset invests in the expansion of LGP’s facilities to include specialist mushroom cultivation.
LGP shareholders will receive a pro rata allocation of 100% of the shares in Reset and a pro-rata offer to participate in a Reset entitlement offer, with further details to be provided.
Post-Demerger, Reset will focus solely on developing its psychedelics business with the aim of being at the forefront of the psychedelics industry in Australia.
Reset Mind Sciences leadership
A highly experienced and respected team has been assembled to run Reset, including:
Shaun Duffy as CEO and Executive Director
Mr Duffy is a Chartered Accountant and former Senior Managing Director of FTI Consulting as well as head of that firm’s Australian Strategic Communications practice and member of its Australian Leadership Group.
Mr Duffy provided strategy consultancy and corporate advisory services to LGP since 2020.
Angus Caithness as Executive Director
Mr Caithness is an executive director of Little Green Pharma and an experienced corporate finance executive and consultant in Australia and international markets.
As an Executive Director at EY in London and Australia specialising in IPO of large cap mining companies, Mr Caithness is a Harvard Business School alumnus, a Chartered Accountant, holds a Master of Science and is a fellow of the Financial Services Institute of Australasia.
Honourable Cheryl Edwardes AM as Chairperson
Ms Edwardes is a member of the Foreign Investment Review Board and a company director on a number of ASX Boards, private companies and not-for-profit associations.
A solicitor by profession, Ms Edwardes is a former Minister in the Court Government with extensive experience and knowledge of WA’s legal and regulatory framework.
Ms Edwardes was the first female Attorney General for Western Australia, Minister for Environment and Labour Relations, and was the Member for Kingsley for nearly 17 years.
Reset has also engaged a highly credentialed Clinical Advisory Board with an emphasis on expertise in the delivery of psychedelic assisted psychotherapy.
The Clinical Advisory Board comprises Dr Stephen Bright, a clinical psychologist and Senior Lecturer of Addiction at Edith Cowan University in Western Australia, Renee Harvey, a clinical psychologist and previous member of a psilocybin based clinical trial team at Imperial College London, and Eternity Hausen, CEO and co-founder of Enlighten Mental Health.
Benefits of the Demerger
- Demerging LGP’s cannabis and psychedelics businesses can unlock greater value for LGP shareholders and allow different investments in medicinal cannabis and psychedelics
- Permits each entity to appropriately fund, resource and focus on their individual businesses
- Creates 2 management teams to pursue independent strategies and growth options
- Capitalises on strong momentum in the global psychedelics sector and allows shareholders to better share in any sector uplift
- Attracts stronger investor attention and valuation as a standalone entity
- Allows LGP to maintain its focus on the domestic and global cannabis markets
- Provides a timely, clean separation of businesses
Update on psychedelics business
The Company has commenced construction of its stand-alone psilocybin mushroom cultivation facility which is expected to be completed in the June 2022 quarter.
Planning is underway for an Australian clinical trial into psilocybin assisted psychotherapy.
Reset is currently finalising the psychotherapy protocols for use in the clinical trial and has received an Federal import permit for the synthetic psilocybin to be used in the trial.
Next steps
LGP will shortly convene a general meeting of shareholders to seek approval for the Demerger.
The notice will summarise Reset’s business strategy, advantages and disadvantages of the Demerger, terms of the entitlement, key risk factors, and dates for the proposed Demerger.
Subject to LGP shareholder approval, ASX and other regulatory approvals, LGP will distribute 100% of the Reset shares on issue via an in-specie distribution to eligible LGP shareholders pro-rata to their shareholding held in LGP as at a record date in the June quarter.
LGP reserves the right to amend the proposed terms of, or not proceed with the Demerger.
The Company has also engaged with the Australian Tax Office to confirm the expected CGT rollover relief tax treatment arising from the Demerger, however, LGP and Reset may elect to complete the proposed Demerger prior to receiving definitive advice from the ATO.
Canaccord Genuity has been appointed as capital markets adviser to the Demerger.
Reset’s Chief Executive Officer, Shaun Duffy said, “We believe Reset is ideally placed to play a leading role in the evolution of the psychedelics industry in Australia.”
“We’ve been able to make significant progress drawing on the expertise, experience and facility investment that exists in LGP, and our first mover status has allowed us to attract the attention of many experienced organisations and individuals as potential partners.”
“While we plan to continue to maintain a close operational relationship with Little Green Pharma, operating as a standalone company with our own board, management and strategy will allow us to better prioritise and focus on advancing our psychedelics business.”
