MGC Pharmaceuticals continues to put the building blocks in place for its seed-to-pharmacy medicinal cannabis business. It has received its first formal purchase orders for CannEpil in the UK, and has already received repeat orders from new distributors in Australia. It recently appointed distributors for Brazil, Germany, Austria and Switzerland. Its Phase II study of CogniCann in dementia is recruiting faster than expected. Preliminary approvals are in place for its Malta production hub, but it will need to raise funds for construction. We adjust our valuation to A$157m (vs A$135m).
MGC received a UK import licence in April and delivered its first shipment of CannEpil in May. It has entered distribution agreements with Grow Biotech and IPS Specials, which have already received initial CannEpil prescriptions. MGC is an early mover in the UK medical cannabis market, where regulations came into effect in November 2018 allowing specialists to prescribe medical cannabis products.
MGC is steadily putting the building blocks in place for its medicinal cannabis business. While no cash receipts for sales were reported for Q119, it received its first formal purchase orders for CannEpil in Australia and the UK in April, totalling over A$200k; recent repeat orders have taken the total to ~A$300k.
MGC has received preliminary approval for its GMP-certified medicinal cannabis production and cultivation facility in Malta. It will be in a position to start construction once final permits are received. Given the proposed facility is significantly larger than originally envisaged, we have increased our estimated cost from ~A$10m (€6m) to ~A$15m (€9m). We envisage the new facility being operational by H221.
MGC had A$4.1m net cash on 31 March. Cash burn averages A$1.7m/quarter. Based on our estimated cost of A$15m for constructing and commissioning the Malta production facility, the company will likely need to raise substantial additional funds before the end of 2019 (we model A$14m indicative long-term debt in FY20).
We have increased our valuation to A$157m or A$0.13/share (vs A$135m or A$0.11 per share) as we have increased our expected post-approval price for CannEpil to bring it closer to Epidiolex pricing. We have reduced near-term revenue forecasts to reflect the slow start-up of CannEpil sales, and increased forecast Malta facility capex from A$10m to A$15m.
