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Zelda (ASX:ZLD) is a cannabis biotech that doesn’t make drugs and doesn’t really want to.

Yet it still plans on making a quick killing within five years and be acquired, before the market begins to be dominated by heavy-duty pharmaceuticals.

Richard Hopkins, the CEO who jumped over from doggie cancer biotech PharmaAust (ASX:PAA) in May last year, says it plans to steal a march on big (and small) pharma by taking the unregistered drug route.

His theory is that by the time fully tested marijuana drugs are entering global markets, in about five years, it expects to have massive market shares in countries from Germany to the US for conditions that people already use cannabis for: insomnia, pain and anxiety.

“This is a people’s movement,” he says.

“(The market for unregistered products) empowers people to control their own medication.”

What on earth is he talking about?

Drugs are usually registered with a recognised regulator, meaning they’ve been tested and proved effective and safe according to that entity’s requirements.

Unregistered products are those which, obviously, haven’t gone through that process for the condition the seller wants to use it for, but for whatever reason the regulator has decided the benefits outweigh the risks.

It means a company like Zelda can run clinical trials to provide validation so consumers can trust a product works, but don’t need to take it through registration which can take years.

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In Australia, the government deemed cannabis safe enough to allow limited access via the Special Access Scheme B (SAS B) for a set number of conditions, such as cancer pain and childhood epilepsy, which lets doctors prescribe it as a treatment after other options have been tried.

In the US, the powerful Food and Drug Administration (FDA) is starting to allow ‘phase 4’ data; that is, data from patients collected as they’re using medications in their lives, rather than within a trial.

Because cannabis has millennia of history as a drug, no evidence of directly causing serious harm, such as death, and has widespread social acceptance as a treatment, it makes the unregistered drug market a uniquely lucrative place to be.

This is unlike almost every other medicine and potential medicine on the market.

The people’s pill

Hopkins believes this makes cannabis the very first bottom-up medication, where consumers can choose what they want and are driving the market rather than pharmaceuticals companies.

“You have to position yourself now and anticipate where it will go later,” he says.

What this means is using Zelda has a clinical trial machine: it runs the trials and licences the data for specific successful formulations to other companies to make and sell.

It’s going to be a “virtual” biotech and drug registration is a luxury it doesn’t need, yet.

This is the deal with US company Ilera.

Zelda and Ilera will co-develop formulations around insomnia, opioid reduction and autism which the former will trial in Australia. Ilera then gets the licence to sell in the US states where cannabis medications are legal.

So far, so simple.

IP protection and raising prices

The key criticisms made to Stockhead about the unregistered market to date have been from biotechs going the expensive, registered drug route.

The view is that cannabis is a difficult to patent product, given it’s so widely used, so IP protection will be hard if a treatment doesn’t have the added protection of a regulator’s approval.

And raising prices will be tricky once registration is achieved because your customer won’t want to pay more for the same product they were buying yesterday, just because it has a new sticker.

Hopkins says none of this matters if Zelda can claw out enough market share in the medical cannabis market before registered drugs start arriving, which he estimates gives it a five-year window.

By that stage he wants to also have a truly biotech IP portfolio to include in any future sale.

That IP includes cannabis’ effect on cancers such as breast cancer, a feature Zelda has been very quiet about because it does not want to distract investors from the main game.

Also, Hopkins spent 20 years in oncology and knows how fiercely competitive that market is. He even gave Zelda founder Harry Karelis “s..t” for having a cannabis cancer division.

He now says it’s an “IP land grab” where Zelda is seeking to create a “backend of really good science” for the day when it needs it.

Show me the money

Zelda has licensing arrangements with Ilera and German company HAPA Medical Group, which is now being chaired by Zelda’s Karelis.

Clinical trials for insomnia are “mostly” to return results by mid-2019; a US autism trial is also expected to return early results by June; and an Australia opioid addiction trial will start after ethics committee approval.

Hopkins says once a trial is finished it’s possible that revenue can start rolling in within six to nine months.