Strong sales development driven by ArtemiC
MGC Pharma develops and markets medicines using compounds derived from cannabis and other plant-based sources. MCG recently reported its second-quarter (Q2) fiscal 2022 (FY22) cash flow and sales numbers. In this report, we also review the timing of the clinical trials programme. Our initiation report was on 22 June 2021.
MGC recognised medicinal cannabis sales of A$1.3mln in H1FY22 (to 31 December) and A$1.1mln in sales of ArtemiC (the food supplement to relieve COVID-19 symptoms that is distributed by Swiss PharmaCan (TSX-V:MJN)). Other sales income was not disclosed; MGC acquired a medical cannabis clinic and a clinical trial organisation in H2FY21.
The cash flow showed H1FY22 receipts of A$3.5mln; this is different to reported sales due to the timing of accounting recognition of income. The major difference is that MGC received a US$750k deposit (A$1.1mln) from its US partner AMC in November. This payment will be recognised in the profit & loss once CimetrA is shipped to the US. This implies that A$2.5mln of cash flows were from recognised sales. The AMC payment is part of a US$24mln three-year deal.
MGC reported much higher underlying Q2FY22 operational costs of A$6.5mln vs A$2.6mln in Q1FY22 due to clinical costs and regulatory consultancy fees. Overall, net operational costs in H1FY22 were A$4.6mln with a further A$2.3mln in investment into the new Maltese facility; this is backed by a government grant and should be operational by late Q4FY22. To offset cash burn, MGC raised a net A$9.3mln in Q2FY22. This took 31 December 2021 cash to A$8.9mln.
Over H2FY22, we anticipate significant sales of ArtemiC into India as a food supplement; however, CimetrA, the pharmaceutical grade version of ArtemiC, requires further clinical data before it can gain Indian authorisation and sales. In the US, AMC is working through the regulatory processes needed to sell product. Phase 2 studies in childhood epilepsy of CannEpil have not yet started. A small trial for the relief of dementia symptoms (CogniCann) is on hold due to Australian COVID-19 restrictions. On a positive note, the latest CimetrA Phase 2 study of modified formulation for relief of COVID-19 symptoms in hospitalised patients has started in Israel. This trial is being expanded, possibly into South Africa and Russia.
Strong sales development
In September 2021, Proactive raised its revenue forecast for FY June 2022e to A$15mln based on potential US sales. This may have been optimistic as the US regulatory processes appear to be taking longer than anticipated by AMC. The estimates do not include any sales into India of CimetrA. The main current revenue-generating product line, MP Line cannabinoids sales fluctuate month to month but H1FY22 (July-Dec 2022) at A$1.3mln was similar to H2FY21 (Jan-June 2022) at A$1.2mln. MGC supplies CannEpil to Ireland as a fully reimbursed product. If ArtemiC sales do not develop strongly in H2FY22, there is a risk that further funding may be needed; our forecast continues to assume A$20mln of funding over FY22.
Financial forecasts
Year end Jun 30 · 2021 · 2022 · 2023 · 2024
Revenue (A$-000's) · 2,962 · 14,950 · 21,660 · 30,060
Gross Profit (A$-000's) · 1,310 · 6,728 · 9,747 · 13,527
EPS (AUS cents) · (0.7) · (0.2) · (0.2) · (0.1)
The Proactive financial estimates for FY22 to FY24 (30 June year-end) are shown unaltered below.
Financial estaimtes
Income statement
Source: Proactive Research
Balance sheet
Source: Proactive Research
Cash Flow
Source: Proactive Research