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Zalm deal brings Cann-do for Rua

GROWING UP: Cann Group’s Muldura facility, the first stage of which will be commissioned early next year. If Rua Bioscience’s proposed purchase of Zalm Therapeutics is approved by shareholders, it brings with it a partnership with Cann — Australia’s leading listed medicinal cannabis company — and the ability to get products to market earlier. Picture supplied
GROWING ROOM: The “mother room” inside the Mildura growing facility. Picture supplied

A proposed deal to purchase Zalm Therapeutics Limited provides Tairawhiti-based Rua Bioscience

with a “great opportunity”, Rua chief executive Rob Mitchell says.

NZX-listed Rua has entered into an agreement to acquire 100 percent of Zalm Therapeutics, a New Zealand-based medicinal cannabis company which has Australia’s leading listed medicinal cannabis company, Cann Group, as one of its key shareholders and partners. Rua is acquiring Zalm for $10m equity value through the issue of new Rua shares at approximately $0.41 per share.

“This is a great opportunity for us to accelerate our growth and I think it will be really good for the company in the short and long term,” Mr Mitchell said.

The deal would involve three milestones, he said.

The first is shareholders approving the transaction.

“That will trigger the first load of shares and then after that there are two more tranches, based on milestones.

“Ultimately, $10m worth in script will be issued. It’s important to note too, as part of this transaction we actually get $1.5m in cash.”

The net cost to Rua would therefore be $8.5m.

Overall, more than 24m shares would be issued.

“The benefit to shareholders, first and foremost, is that we are going to get products earlier.”

Cann Group product from Mildura would be available to Rua from mid-2022.

“That will supplement our own CBD product we will have coming up for market early next year.”

It would also allow Rua to send its own genetics over to the Cann facility in Mildura, where it could be grown at scale.

“Of course, that can be turned into profitability and return on investment for shareholders.”

Mr Mitchell said the deal would also result in the upskilling of its own workforce.

“It’s exciting for our shareholders and it’s exciting for our own personnel, and a good step forward.”

Under the deal, Rua would acquire Zalm’s third-party supply contract for GMP-grade medicinal cannabis with Cann, including exclusive supply into New Zealand. Cann is currently in the final commissioning phase of one of Australasia’s largest and most technologically advanced indoor growing facilities at Mildura, Victoria, which will deliver world-class and globally competitive scale and GMP capability — and will complement its existing production facility in Melbourne.

When the first stage of this facility is fully commissioned in early 2022, Cann expects to have capacity to produce 12,500kg of medicinal cannabis per annum, with the ability to increase this to 70,000kg in future stages. The supply contract has no minimum commitment levels for Rua, but allows preferential access to a percentage of Cann’s supply.

Rua would acquire Zalm’s market-ready products, including distribution agreements in New Zealand and distribution relationships across key export markets, supplying products directly into retail, hospital, pharmacy, and other wholesale channels. Rua would also own an exclusive Therapy Awareness and Empowerment Toolbox developed by Atlantis Healthcare, which will provide personalised support to patients during their medicinal-cannabis therapy.

Co-founder Manu Caddie said the deal would provide the company with a “longer runway” as revenue came in sooner, with a greater range of products.

“Rua continues to stay out in front,” Mr Caddie said.

“The team is amazing and everything is heading in the right direction, it has just been slower than any of us thought it would be.

“Having said that, we have our first product in being assessed by the regulator at present and we’re just waiting for that to get the tick of approval.”

Mr Caddie said the company was still committed to supporting the East Coast community.

“From our perspective, it’s a good deal for the company but it’s also a good deal for Ruatoria and the East Coast/Tairawhiti to allow us to have access to not only products, but also expertise and a bigger team that our growers and staff can learn from.

“It just gives us a greater chance of success.”

Mr Mitchell said last year had been all about building capacity, now it was “all about getting to market”.

“There’s an exciting time ahead.”

The issue of shares for this transaction is subject to approval by Rua’s shareholders by way of ordinary resolution, requiring a simple majority of the votes of those shareholders eligible to vote and voting. Rua intends to hold a virtual Special Shareholders Meeting in mid-January 2022 for this purpose. Further details will be included in the coming Notice of Meeting, expected to be sent out to Rua shareholders around mid-December.