IM Cannabis
IM Cannabis has become the latest major Israeli cannabis company to announce potential plans to depart the industry altogether and sell off its remaining assets.
Last week, IMC announced in a press release that it has signed a ‘non-binding term sheet’ with Israel-based Kadimastem to complete a ‘reverse merger’ which would effectively combine the two businesses.
Should the deal go ahead as planned, the new combined entity (Cadimastem) will ‘change its business from medical cannabis to biotechnology’, a market in which Kadimastem is already well embedded.
IMC shareholders would hold just 12% of the newly combined entity, whereas shareholders of the Tel Aviv Stock Exchange-listed Kadimastem would hold 88% of the common shares of the resulting issuer.
Furthermore, Kadimastem is set to lend IMC $650,000 with an annual interest rate of 9%. The stated purpose of the loan is to facilitate the preparation of IMC’s medical cannabis assets for potential sale, as outlined by both companies.
The remaining assets of IMC’s ‘legacy business’, which according to the Israeli Cannabis Magazine consist of three cannabis pharmacy businesses and a cannabis trading house, will now go up for sale via a tender process.
The proceeds of the sale will reportedly go towards settling debts, and ‘the remaining balance, if any’, will be distributed to stakeholders.
“We have been looking for a way to deliver maximum value for our shareholders in the current situation and believe that a reverse merger with Kadimastem will provide this,” said Oren Shuster, CEO of IMC.
“With its focus on clinical stage cell therapy, and an FDA approval for a Phase IIa clinical trial, we believe that Kadimastem has tremendous potential.”
It comes as the company continues to pursue a strategy of cost management and margin improvement amid falling revenues and consistent losses into the millions of dollars.
In the three months to September 30, 2024, its most recently published financial figures, IMC saw revenues dip from $14.2m to $12.4m sequentially, a drop of 13%.
Its net losses for the same period came to $2.1m, a significant decline from the $4.5m loss seen a year earlier.
IMC is just the latest Israeli cannabis company to announce its departure from the industry over the past 18 months as companies continue to struggle to turn a profit.
Of the 15 Israeli cannabis companies publicly traded on the stock exchange at the beginning of 2022, four had either left or announced their intention to leave by the end of the year.
This included the planned withdrawal of Panaxia, one of the most prominent players in Israel, from the public market and Israeli cannabis market altogether in December.
In March 2023, Business of Cannabis reported that ‘more than 50%’ of Israeli companies were expected to have gone bust or been acquired within two years.
Jazz Pharmaceuticals
Jazz Pharmaceuticals saw its stock price fall by around 10% this week following the publication of its Q4 and full-year results.
Last week, the pharmaceutical giant announced that its revenues for 2023 came to $3.8bn, with $1bn of that revenue coming from a single quarter (Q4) for the first time.
Despite revenues increasing slightly to $3.7bn year-on-year, Jazz Pharma failed to meet analyst expectations for earnings, seeing its stock price dip.
For the full year, Jazz reported diluted earnings per share of $18.15 – $19.35, below the analyst consensus of $19.62.
Epidyolex, its leading cannabis-based drug now approved in more than 35 countries, continued to be one of the company’s strongest performers last year, reportedly remaining ‘on track to deliver on its blockbuster potential’.
Over 2023, net product sales increased by 15% to $845.5m, including a 16% year-on-year rise in Q4 to $240.6m.
DanCann Pharmaceuticals
Conversely, Danish medical cannabis operator DanCann Pharma saw its stock price skyrocket last week after publishing its Q4 and full-year results.
During the final week of February, DanCann’s stock price more than doubled in value, and while it has corrected slightly in the week of trading since then it is still up 113% since February 22.
This upswing came despite the company reporting a 23.8% year-on-year drop in Q4 turnover, and an operating loss of DKK3.2m, though this was less than the DKK4.3m seen a year earlier.
For the coming financial year, DanCann says it expects turnover to more than double to DKK13.3m, and EBITDA losses to fall from DKK11.9m to DKK4m.
The results were also published alongside news that Germany’s CanG bill had been passed through the German parliament.
DanCann Pharma has publicly announced their intention to enter the German market once legalisation occurs, and this strategic focus may have seen its stock price swept up in the positive sentiment towards German cannabis operators’ stock.
