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MGC Pharmaceuticals Says It May Need A Further Capital Raise As Losses Grow

MGC Pharmaceuticals (MXC) has reported its ‘its strongest half-year result to date’ seeing sales more than triple year-on-year, helping lift its stock price out of an all-time low. 

After becoming one of the many European cannabis companies to see its stocks hit historic lows on Thursday as the crisis in Ukraine escalated into a full-blown war, MGC saw its stocks rebound some 26% to around £0.0135 following the release of its results.

Despite its sales figures continuing their upwards trajectory over the interim period, MGC’s net losses followed a similar trend, rising 30% year-on-year. 

This saw MGC inform investors this week that it expects to require a capital raise over the next 12 months to meet expenditure requirements, following the completion of an additional $10.4m capital raise in November 2021. 

Interim Results

In the six months to December 31 2021 MGC reported revenues of $2.6m, up 243% from the $741,911 it made in the same period a year earlier. 

Nearly half (45%) of its product sales for the period were attributed to its ArtermiC Covid-19 supplement, representing around $1.06m. 

A further $1.25m in revenues came from sales of its cannabinoid products, with the remaining cash generated through MGC’s consultancy services via its wholly owned subsidiary MedicaNL. 

Gross profits also increased nearly 150% year-on-year from $251,694 to $613,921, but this was more than offset by significant increases in operating costs. 

MGC’s operating losses rose by a third from $5.6m to $7.5m in the second half of the year, with net operating cash outflows of $5.3m. 

Its current cash and cash equivalents, as of December 31 2021, stood at just over $8m leaving some investors to question the sustainability of its current burn rate. 

Additional Capital 

In November MGC completed a $10.4m raise on the LSE, issuing new shares at a price of 2p each, which at the time represented a 13% discount for investors. 

The proceeds were mostly earmarked to fund clinical testing of its flagship Covid-19 drug CimetrA, which is currently in the final product testing stage in India to be granted Emergency Use Authorisation. 

While MGC says Emergency Use Authorisation in a market as large as India could transform its finances overnight, the costly process ‘remains ongoing’ with little indication from either the company or local authorities on when it might conclude. 

This means that the company’s considerable outgoings are expected to continue into the year, requiring MGC to seek yet another raise to keep the cogs turning. 

Though its directors say they are ‘satisfied additional capital can be raised as and when required’, the company’s share price now stands at around half what it was worth in November. 

This, alongside increasing dilution of its shares and an ongoing shift away from risky stocks like cannabis in the wake of the Ukrainian war, mean accessing capital could be increasingly difficult for the Australian operator. 

“The Group’s cashflow forecasts for the 12 months ending 28 February 2023 indicate that the Group will require additional capital to meet its expenditure requirements and carry out its planned activities,” it stated in its interim figures.

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