MGC Pharmaceuticals will focus on its cannabis-based pharmaceutical products after reaching a deal to sell its cannabis cosmetics division, MGC Derma, to Canadian private cannabis investment company CannaGlobal for CAD$12.5m in scrip. CannaGlobal will also commit to an exclusive five-year supply agreement for MGC to supply it with raw materials and proprietary production intellectual for the period.
MGC Pharmaceuticals is divesting its cannabis based cosmetics division to a private Canadian cannabis investment company that will allow the ASX listed company to focus on developing its cannabis-based pharmaceutical products.
Notably, the sale of MGC Derma to CannaGlobal for CAD$12.5m worth of CannaGlobal shares will still allow the ASX listed medicinal cannabis player to retain exposure to the emerging cannabis cosmetics industry.
CannaGlobal has a portfolio of cannabis assets in markets worldwide and can leverage its global retail footprint and existing distribution networks to grow MGC Derma’s sales.
MGC will also benefit from an exclusive five-year supply agreement whereby MGC will supply CannaGlobal with cannabidiol, proprietary production intellectual property and cosmetics materials required to manufacture the MGC Derma range of products.
This includes CannaGlobal making an upfront payment of CAD$1m for raw materials to MGC.
In addition, the existing CAD$2.5m working capital loan owed to MGC by MGC Derma will remain in place with the option of it being repaid in cash or CannaGlobal shares.
As part of the transaction, MGC has acquired the remaining 49% of MGC Derma it does not already own from its current partner, Dr. M. Burstein Ltd in return for forgiving Burstein’s share of the working capital loan owed by MGC Derma.
The sale allows the company to focus its resources on fast tracking development of its pharmaceutical product pipeline and building its commercial seed-to-pharma operation in Europe.
MGC Managing Director Roby Zomer said: “Strategically, MXC will continue to benefit from the on-going success of MGC Derma, as the exclusive supplier of CBD and cosmetics materials required to manufacture Derma’s products.”
“Importantly, the transaction will allow the management team to focus MXC’s resources on the pharmaceutical side of our business, as we continue to build out our seed-to-pharma operations and conduct research and development to develop additional cannabis-based medications in the future.”
Earlier this month, MGC signed a key distribution agreement with Maltese based A.M. Mangion Ltd that will fast track the distribution of its medical cannabis based pharmaceutical products into key target markets in Europe.
The company also expects to start construction of its Maltese based medical cannabis production and cultivation facility once it signs the final, formal contracts to build and operate it in the near term.
Medical cannabis from the Maltese operation will be used to produce GMP-grade pharmaceutical products at a commercial scale for sale into the EU market, which is widely expected to be worth $56 billion by 2020.