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
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
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
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.
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