Perth-based company Little Green Pharma (ASX: LGP) recently announced its intention to demerge the ownership of its psychedelics business Reset Mind Sciences. In conjunction with the demerger, Reset also intends to undertake an entitlement offer to LGP shareholders to fund its operations.
LGP entered the psychedelics space in late 2020, 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.
Since its formation, Reset has been a part of the significant progress made in the Australian psychedelics industry, which includes support from the Australian Government for medicinal psychedelics research through a $15M grant program awarded in January 2022.
In light of the company gaining significant momentum in the industry, LGP’s Chief Executive Officer Fleta Solomon believes its shareholders’ best interests are now served by demerging the subsidiary to allow it to pursue its strategy as a standalone company.
This will provide a variety of benefits, including giving new and existing shareholders the freedom to dictate their preferred investment appetite across the two industries, permitting each entity to appropriately fund, resource and focus on their individual businesses. Additionally, two separate management teams will be established to pursue independent strategies and growth opportunities and allow LGP to maintain focus on domestic and global cannabis markets.
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. We believe the Demerger rewards LGP shareholders for Reset’s progress to date and allow them to participate in its exciting future.
LGP CEO, Fleta Solomon
Demerger process
LGP will convene a general meeting of shareholders to seek approval for the Demerger. The notice of meeting will summarise Reset’s business strategy, the advantages and disadvantages of the Demerger, terms of the entitlement offer, key risk factors, and key dates for the proposed Demerger.
Subject to LGP shareholder approval, as well as satisfactory ASX and other regulatory approvals, LGP will then 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 within the June quarter. LGP reserves the right to amend the proposed terms of, or not proceed with, the Demerger in its absolute discretion.
The Company has also engaged with the Australian Tax Office (ATO) 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 (Australia) Limited has been appointed as capital markets adviser to the Demerger.
Post-Demerger plans
Post-Demerger, LGP will provide Reset with ongoing operational support and product supply, including exclusive access to the Company’s Schedule 9 licensed West Australian cultivation and production facilities. Reset is currently investing in the expansion of LGP’s facilities to include specialist mushroom cultivation capability.
As part of the Demerger, LGP shareholders are expected to 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 in due course.
Reset will be managed by a highly respected and experienced team. It includes Chief Executive Officer Shaun Duffy, a Chartered Accountant and former Senior Managing Director of FTI Consulting; Executive Director Angus Caithness, a former Executive Director at EY in London and Australia; and Non-Executive Director and Chairperson Honourable Cheryl Edwardes AM, a former Minister in the Court Government with extensive experience and knowledge of WA’s legal and regulatory framework.
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 clinical psychologist and Senior Lecturer of Addiction at Edith Cowan University in Western Australia, Dr Stephen Bright; clinical psychologist and previous member of a psilocybin based clinical trial team at Imperial College London, Renee Harvey; and Chief Executive Officer and co-founder of Enlighten Mental Health, Eternity Hausen.
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. They have commenced construction of its stand-alone psilocybin mushroom cultivation facility, which is expected to be completed in the June 2022 quarter.
Planning is also underway for a West Australian based clinical trial into psilocybin assisted psychotherapy. Reset is currently finalising the psychotherapy protocols for use in the clinical trial and has received a Federal import permit for the synthetic psilocybin to be used in the trial.
“We believe Reset is ideally placed to play a leading role in the evolution of the psychedelics industry in Australia,” said Mr Duffy.
“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 LGP, 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.”
