Lexaria Bioscience Corp (LEXX)

[Shawking]

Ted Ohashi
https://letstoke.us19.list-manage.com/track/click?u=f2e0706764f99154e3a11feb5&id=c6535d835f&e=9cbb5a4bc7
Last week, I spoke to Chris Bunka, CEO of Lexaria Bioscience (NASDAQ: LEXX) to get some
clarification of the delay in submitting the Investigational New Drug (IND) application. Whether it
was the wording or the way I parsed the words, I was left with he impression that LEXX wasn’t taking
the problem with the urgency I would have expected.
Here is what Bunka had to say:
(a) While some shareholders and observers did not believe a press release was necessary, Bunka
believes it is important to keep shareholders up to date.
(b) The problem rests with an American service provider whose input is required to proceed with
the IND application.
(c) Unlike my interpretation of the news, Bunka has been in regular contact with the third party by
phone call or email probably once or twice a week for the past two months. But LEXX has not
received a completely acceptable reason for the delay.
(d) The responses are more like excuses and leaves Bunka wondering if there is an underlying
issue. He has said if the problem is finances, LEXX is willing to try to work out a solution. He
has also threatened to confront them at their offices.
(e) The specific issue is the Drug Master File (DMF) which is used to provide confidential and
detailed information to the Food and Drug Administration (FDA). It enables parties to reference
material in the DMF without disclosing the contents.
(f) The DMF must be updated annually and this has caused the delay. Updating is mainly clerical
but some scientific data might be required from time to time. The third party has not provided
an update and the IND cannot be submitted without it.
(g) The next steps involve raising the pressure on the third party. To date, LEXX has not disclosed
the name of the service provider and neither CEO Chris Bunka or President John Docherty has
gone down for a person-to-person meeting.
(h) In the worst case scenario, I suppose legal action is possible but this seems to be a “lose-lose”
option. The other worse case might be a critical problem with the third party but that seems
doubtful as well. As is most often the case, the final result will fall somewhere between the best
and worst cases.
Conclusion: if the issue is resolved in a few weeks, the lasting impact of the delay should be minimal.
If it stretches into a month or two without further information,
it becomes more problematic. In the meantime, the market
took the news well although it looks like it has stopped the
streak of consistent price increases that had been building.
My sense of it is that it is not a serious problem or “show
stopper” but it is a situation that bears watching. Rest
assured, I will be watching.