MGC Pharmaceuticals (TSX: MXC, OTC: MGCLF) is a young cannabis biotech headquartered in Western Australia that specializes in pharmaceutical product research and development.
Australian cannabis stock have been red hot for the last few months.
- I added Australian-based Cann Group (ASX: CAN) to the members portfolio on July 31 and we’re already up 70% in less than three weeks.
- I added fellow Australian cannabis stock AusCann (OTC: ACNNF) to the member portfolio on June 6 and we’re up 55%.
If you want to learn more about our member portfolio click here.
Although the company is incorporated and headquartered in Australia it also has operations in both Israel and Europe.
For example, MGC received two licenses from the Slovenian government to grow, process and trade Cannabis Sativa L (Hemp) and its products, including Cannabidoil (CBD) resin, in Europe.
The company’s founders were leaders in Israel’s growing medical cannabis industry.
The goal is to sell its products in Australia, Europe and North America.
Shares are traded on the Australian Stock Exchange under the ticker symbol MXC. Shares are also traded in U.S. OTC (over-the-counter) markets under the ticker symbol MGCLF.
MGC specializes in CBD pharmaceutical research and product development.
I’ve talked about the CBD market before, but let me give you a quick refresh.
What are Cannabinoids?
CBD is the second most prevalent compound found in cannabis that has been proven to provide significant medical benefits, without the psycho active effects of THC. That means it doesn’t get the user ‘stoned.’
CBD is considered to have a wider scope of medical applications than tetrahydrocannabinol (THC), and with more appealing treatment options for patients seeking anti-inflammatory, anti-pain, anti-anxiety, anti-psychotic, and/or anti-spasm effects without any psychoactive effects.
Because of the big health benefits, CBD extracts are projected to be one of the fastest growing cannabis sub industries.
The Hemp Business Journal recently released a report projecting the global CBD market will grow to $2.1 billion sales by 2020.
Independent research firm GreenWave Advisors is even more optimistic, predicting the CBD market will grow to $3 billion by 2021.
The CBD market was valued at around $200 million in 2015 (I could not find 2016 market data) – so this would be an increase of more than 1,000% in around five years.
In addition to bullish growth projections, there is another reason I am attracted to companies developing CBD extracts – less legal risk than THC.
CBD treatments can be purchased online in most U.S. states.
15 states have legalized the sale of CBD-only products while another 28 states allow the sale of CBD extracts through medical or recreational dispensaries.
Here’s How MGC Is Planning on Cashing in on the High-Growth CBD Industry
MGC operates three divisions: MGC Botanic, MGC Derma, MGC Pharma.
This may sound a little confusing but it’s actually quite simple.
MGC Botanic grows medical grade cannabis that it uses to research and develop its dermatology and pharma products.
MGC Derma is developing CBD infused consumer products for dermatology and working on wholesale agreements with some of Europe’s largest cosmetic retailers.
Take a look below.
MGC Pharma is developing CBD pharmaceuticals products with the goal of treating cancer and epilepsy patients.
In early July MGC provided an update on all three divisions.
- In the Czech Republic, over 470 medicinal cannabis plants have been successfully transferred to the Company’s 1,000m outdoor greenhouse facility.
- In Slovenia, the Company’s research project to create new genetics strains of medicinal cannabis at the University of Ljubljana has commenced, with first batch of seeds planted.
- Raw material production is underway with the planting of high CBD cannabis strains at the Company’s open field farm in Slovenia for harvest in Q3 2017.
- In Australia, material progress being made with the Royal Melbourne Institute of Technology collaboration on a full suite of medicinal cannabis research initiatives centered on genetics for medical indications with initial operations scheduled to commence shortly.
What do the Financials Look like for MGC?
MGC has a lot of interesting things going on but this is still a very early stage cannabis company.
Right now the company isn’t producing any material revenue.
I’m optimistic that will change sooner than later with its derma products and its new wholesaler deals.
Longer term I also see plenty of revenue potential from its pharma division with its pursuit of cancer and epilepsy drugs.
While MGC works on growing revenue the company should have plenty of cash to sustain operations. MGC reported a cash balance of $11.4 million in the quarter ended June 30.
MGC is Down 69% From its All-Time High
MGC has been weak with the broader cannabis sector for the last few months. Shares are down about 68% from the all-time high in March. Take a look below.
Right now MGC only has a market value of about $42 million.
I don’t view this weakness on the chart as a major problem. In fact, I actually view it as good. It means that investors are not pricing in mega growth into this company like we see in so many other cannabis stocks.
MGC still has a lot to prove. But if the company succeeds, anyone buying right now would see some pretty big gains in the long run.