MGC Pharmaceuticals | 22 October 2018
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upfront consideration at face value of C$9m, and include the C$2.5m working capital loan, which is
to be repaid in the future as cash or shares. At this stage, we do not include the C$3.5m of shares
payable on the achievement of certain revenue milestones; we will review this once we have more
visibility as to the sales trajectory.
Exhibit 4: MGC Pharmaceuticals rNPV valuation
Product
Launch*
Peak sales**
(A$m)
NPV
(A$m)
Probability
rNPV***
(A$m)
rNPV/share
(cents/share)
Juvenile epilepsy Europe & Australia
2019/2024#
90
50
20%-100%
7.5
0.6
Adult epilepsy Europe & Australia
2025
300
138
20%
25.8
2.0
Dementia Europe and Australia
2025
830
395
5%
16.8
1.3
Flower and resin API & food-grade resin sales
2018
60
20%-100%
85.7
6.5
MGC Derma/Cannaglobal
12.5
1.0
Admin and unallocated R&D costs
20%-100%
(11.8)
(0.9)
Net cash end FY19e
100%
3.4
0.3
Valuation
139.8
10.7
Source: Edison Investment Research. Notes: *Financial year of product launch; #sales of investigational
CannEpil begin in FY19 at 100% probability, registered pharmaceutical in FY23 at 20% probability; **peak
sales estimates rounded to nearest A$10m; ***risk-adjusted R&D costs are offset against income for each drug
development project.
Financials
MGC has been loss making since listing in February 2016, reporting losses of A$6.2m in FY16,
A$8.5m in FY17 and A$9.0m in FY18. We forecast smaller PBT losses of A$5.7m and A$6.6m in
FY19 and FY20 respectively, as it commences commercial sales of API in Europe and of CannEpil
as an Investigational Medicinal Product in Australia. We forecast R&D expenses of A$1.3m in FY19
and A$5.8m in FY20.
We assume that expansion of cannabis-growing and API extraction capacity to support 10,000m2 of
greenhouse space by 2021 will require capital expenditure of A$10m. The company raised net
proceeds of A$10.5m from stock issues in FY16, A$9.8m in FY17 and A$4.7m in FY18. The current
cash balance of A$9.9m should be sufficient to support operations into FY20. We estimate that
additional funds of A$6m will be required in FY20 to support construction of the new facilities in
Malta, which we model as indicative long-term debt.