Dropping Coverage

Progress As Colorado Votes To Allow Psychedelic Treatment Centers

Patient Dosing Has Begun in Phase I Psilocin Trial, Seventh Patent Issued, and New Funds Raised

Collaboration Formed To Develop Additional Botanical Compounds

Robert LeBoyer

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Healthcare

Drug Manufacturers

Filament Health

Summary.&nbsp;Filament Health Reported a 3Q22 loss of C$(1.3) million or C$(0.01) per share. The company made progress in several areas, including patient dosing in clinical trials, new product development, receiving three new patents, and raising C$2.5 million in a private placement. Cash on hand at the end of the quarter was C$3.5 million. On November 8, Colorado voted to become the second state to allow medical use of psychedelic compounds, following Oregon.
Clinical Trial Are Making Progress.&nbsp; During the quarter, the company announced the first dosing of PEX010, 25mg oral psilocybin, in an FDA-approved clinical trial. This trial will also test PEX020, oral psilocin, and PEX030, sublingual psilocin. Filament announced that ATMA Journey Centers completed dosing of 14 patients using the psilocybin it had supplied through a collaborative agreement. 
Filament Now Has Five Active Supply Agreements.&nbsp;One of the features that distinguishes Filament Health is its proprietary technology for producing purified psilocybin from cultivated mushrooms that meets precise, pharmaceutical standards for therapeutic use. In addition to supplying its own needs, it has supply agreements with other companies testing psilocybin in six other indications. We see these licensing agreements as early validation of the products, as well as revenue opportunities.
 New Product Development.&nbsp; In June, the company announced the successful development of pharmaceutical-grade ayahuasca extract formulation for oral administration, now known as AXA0101. Ayahuasca has been used as a psychedelic in indigenous South American rituals and contains DMT as an active compound. Filament also has cultivated 70 variety of psilocybin-containing mushrooms.
Colorado Decriminalizes Psilocybin and Allows Regulated Access Centers.&nbsp;On Election Day, the State of Colorado has passed the Natural Medicines Health Act (Proposition 122), decriminalizing psilocybin mushrooms and requiring state agencies to create a &#8220;regulated access program for supervised care&#8221;. The new law will create treatment centers for psilocybin and natural medicines (&#8220;plants and fungi that affect mental health and are regulated as controlled substances&#8221;) in supervised settings. It does not allow for commercial or retail sales and contrasts to the legalization of recreational cannabis in 2012. Creating the regulations to authorize and open the centers is expected to take until fall 2023.
We see this as an important step that acknowledges the possible benefits of psychedelics, and&nbsp;expect increased numbers of clinical studies and medical use of psychedelics. Both factors are likely to increase demand for the pharmaceutical-grade products Filament Health has been developing.
Conclusion.&nbsp;We view Filament Health as a company driven by its proprietary technologies for producing pharmaceutical-grade psychedelic compounds. Its products are progressing in their clinical trials as expected. The increasing number of collaborations to supply other companies can provide revenue to reduce its development expenses, but we also see a validation its manufacturing technology and products. Filament continues to build its intellectual property estate, with eight patents in the US and Canada.
Many companies in the small-capitalization biotechnology industry have seen stock price declines over the past year. Investor interest in psychedelic compounds for psychiatric use declined as well, but we believe recent clinical data and acceptance by the public may renew interest. During this time, Filament Health has made progress important areas as a product development and supply company. We are reiterating our Outperform rating and $1.50 price target.

Filament Health (FLHLF)

Progress As Colorado Votes To Allow Psychedelic Treatment Centers

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Dropping Coverage (FLHLF)

Progress As Colorado Votes To Allow Psychedelic Treatment Centers (FLHLF)

Patient Dosing Has Begun in Phase I Psilocin Trial, Seventh Patent Issued, and New Funds Raised (FLHLF)

Collaboration Formed To Develop Additional Botanical Compounds (FLHLF)

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