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MGC sets a path for break even with latest medicinal cannabis deal

Medicinal cannabis company MGC Pharmaceuticals has hit a major milestone, locking down minimum order volumes of its pharmaceutical grade products over the next seven years with Brazilian medicinal cannabis player Onix.

The ASX-listed company said on Tuesday that it had signed an amended supply deal with ONIX subsidiary, OnixCann, a distributor of medical cannabis products in Brazil.

The deal will see the Perth-headquartered company’s medicinal cannabis-based products distributed in the South American nation for the next seven years.

In year one of the multi-year deal, a minimum order volume of 20,000 units with an estimated value of at least $1.65 million will be supplied to Onix, which would increase in years two though seven to at least 50,000 units, worth $4.1 million per year, MGC Pharma said, noting that the deal may be renewed for an extra five-year term by mutual agreement.

The ASX junior said the amended deal, along with its current level of monthly sales in Australia, is expected to deliver the company break-even cashflow at the start of year two of the agreement. Positive EBITDA is forecast for the start of 2021, the company added.

In further positive news for the local medical cannabis player, the Onix deal includes significantly improved payment terms for MGC Pharma. According to the company, this includes a down payment on purchase order and 30-day payment terms from product arrival -- better than the standard 90-day terms.

The landmark supply and distribution agreement will see ONIX purchase a bulk order of a combination of MGC Pharma’s pharmaceutical grade products, the company said, including CannEpil, CogniCann and products from the recently launched Mercury Pharma line such as MP100.

Given the high standards of regulatory compliance imposed by Brazilian authority Anvisa on medical cannabis, MGC Pharma sees the decision to allow ONIX to register MGC Pharma’s products in Brazil as a significant validation of the quality of the ASX-listed company’s products.

Co-founder and Managing Director of MGC Pharma, Roby Zomer, said: “This binding extension of our existing agreement with ONIX is a clear commitment of minimum order volumes over the next seven years, and confirmation that ONIX are the partners we are looking for in the region. This is a significant milestone for MGC Pharma and will have an immediate positive impact on the Company’s cashflows.”

“Importantly, the Amended Agreement, in combination with our current Australian sales is expected to deliver our stated operating breakeven cashflow target of 5,000 units per month by the start of 2021.”

Founder of Onix Marcelo Galvão said: “We are very pleased to sign this agreement with MGC Pharma. With a population of over 210 million, Brazil has a large pharmaceutical market.”

“The ability of MGC Pharma to meet Anvisa’s strict requirements is a significant validation of MGC Pharma’s products and capabilities as a leading bio-pharma company, firmly placing MGC Pharma ahead of many of its peers in entering the Brazilian market.”

The milestone deal with Onix is another boost for MGC Pharma after it earlier this year inked a new supply agreement with THC Global Group Limited, who will white label MGC’s pharmaceutical-grade phytocannabinoid, or “CBD” products to the Australian and New Zealand markets.

It also recently signed a distribution agreement to produce and supply its cannabinoid medicines to South American-based Anden Bio Naturals SA, a company that was at the forefront of importing cannabis-based products into Peru.

 

Is your ASX listed company doing something interesting ? Contact : matt.birney@businessnews.com.au

 

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