MGC Pharmaceuticals | 22 October 2018

Investigational Medicinal Product pricing of €8,000 per year and A$14,900 per year in Europe and

Australia respectively. We assume a modest 10% price increase if relaunched as a registered

pharmaceutical.

We model clinical trials and regulatory submissions in Europe and Australia to cost €7.0m for

juvenile epilepsy and €6m for adults.

CogniCann for dementia patients

We model an addressable market for CogniCann of 990,000 dementia patients in Central and

Western Europe and Australia with neuropsychiatric symptoms that are not adequately controlled

by non-pharmacological interventions, as described on page 12. We model a 5% market

penetration and assume a low 5% probability of success given the low success rate typical of

dementia trials. We assume pricing 15% below that for CannEpil, ie €6,800 per year and A$12,600

per year in Europe and Australia respectively

We model clinical trials and regulatory submissions for CogniCann in Europe and Australia to cost

A$15m.

For both CannEpil and CogniCann we model the company earning an average gross profit margin

of 35% on sales, after allowing 35% for COGS and a 30% average distributor margin.

Cannabis flowers and resin API and food-grade resin

The company intends to sell a proportion of cannabis flowers and THC and CBD resins produced at

its facilities in Malta, the Czech Republic and Slovenia as APIs in addition to using the resin to

manufacture CannEpil and other finished products, and for the supply of food-grade CBD resin to

MGC Derma and other customers for the manufacture of cosmetic products. It is currently growing

cannabis in 1,100m2 of greenhouse space in the Czech Republic and has received full GMP

certification for its resin extraction facility in Slovenia.

We expect the company to expand its greenhouse space to 5,000m2 by 2020 and 10,000m2 by

2022 and increase its resin extraction capacity at a total cost of ~A$10m. This would allow it to grow

5,000kg of cannabis flowers (on a dry matter [DM] basis) from two crops per year by 2023. We

assume that by 2023, 90% of the crop will be used for the production of resin and flowers for sale

as API, and 10% will be used for the production of food-grade CBD for cosmetics and other

products.

We assume that the flowers for API production contain 7% THC and 7% CBD, and that the

company achieves an 80% extraction efficiency. We model cannabis flower sales priced at €3.5 per

gram with a growing cost of €0.7 per gram and a 30% distributor margin. According to the company,

at present in Europe API-grade, GMP-certified CBD resin is selling for €45-50/g and GMP-certified

THC resin is selling for €200/g. We assume that the prices will decrease over time as supply

increases, and conservatively model all API-grade resin sales at an average price of €50/g, with a

cost of production of €25/g.

We assume that food-grade CBD resin is sold for €25 per g. The lower-purity requirement for food-

grade resin results in a lower cost of production. This is due to both the lower expenditure on quality

assurance testing and the higher extraction yields that result from a wider proportion of the CBD

profile being collected during flash chromatography separation. We assume cost of production of

€16 per g for food-grade resin.

MGC Derma

We assume that shareholders will approve the sale of MGC Derma, and that the transaction is

completed according to the announced terms. We value the Cannaglobal shares to be issued as