Here’s why this fundie expects MGC Pharma’s stock price to more than double
The research note out of fundie Canaccord says that MGC Pharma has several tailwinds, including near term revenues and clinical trials potential over the next year.
UK-based wealth manager Canaccord Genuity has just initiated a speculative Buy rating on ASX-listed MGC Pharma (ASX:MXC), with a price target of GBP 8 pence (or around A$0.15).
MGC Pharma currently maintains a dual LSE (London Stock Exchange) and an ASX listing.
According to Canaccord’s research note, MXC has the potential to increase valuation based on a mix of near-term revenue generation, and a rich pipeline of clinical trials that are expected to announce results soon.
Stockhead spoke exclusively with Alex Brooks, the Canaccord analyst who wrote the report, to find out more about his predictions.
Brooks said MXC’s revenue potential is four-pronged — ranging from the near term sales of CimetrA, to clinical trials of CannEpil, CogniCann, and its food supplement ArtemiC.
“If I divide up the 15c price target, roughly seven cents of that would be CimetrA, five would go to CannEpil, and the rest is relatively small,” Brooks told Stockhead.
According to him, CimetrA, a treatment for addressing anti-inflammation and cytokine over-production (known as cytokine storm) in COVID-19 patients, would start generating revenues by the end of 2021.
This revenue would mainly come on the back of its supply agreement deal in the US with AMC Holdings, and in India with Medopharm, Brooks said.
“MGC CEO Roby Zomer has mentioned previously that there is an active business development campaign around CimetrA, and so we can reasonably expect other countries to join those two in the not too distant future,” said Brooks.
“This means they could get a big revenue bump going into next year, and that would start to become substantial around the fiscal year 2023.”
The potential for CannEpil
MXC is currently running a Phase-2b double-blind, placebo-controlled study in Israel for CannEpil with the first patient expected to be enrolled this month. Interim results are expected from 1Q FY22 onwards.
Canaccord sees CannEpil as the single most valuable asset for MXC, given the known efficacy of cannabinoid therapy for drug-resistant epilepsy.
CannEpil is addressing a condition (epilepsy) which is already well served by Epidiolex, produced by UK-based GW Pharma, a company that was recently acquired by Nasdaq-listed Jazz Pharma.
“CannEpil is at an advanced clinical trial stage, and will be sold at a lower price point than Epidiolex. So that’s a pretty clear economic case,” said Brooks.
CannEpil is addressing epilepsy that doesn’t respond to other treatments, known as refractory epilepsy.
Epilepsy itself is a prevalent condition, affecting around five in a thousand people globally.
“If you add up the five largest countries in Europe, you end up with an addressable market of 20,000 to 25,000 children, and 150,000 to 200,000 adults.”
MGC Pharma has also made several breakthroughs for CannEpil in Europe.
In Ireland, CannEpil has just been made a fully reimbursable drug under the country’s Medicinal Cannabis Access Programme starting in June.
And this week, the UK government has given an import licence for CannEpil+ to be imported to the kingdom.
Brooks estimates that peak sales for CannEpil alone could be above €600 million by the early 2030s.
But could anything go wrong with these projections?
“Obviously clinical success is subjective,” Brook explained.
“There are two separate issues in a clinical trial, one is technical success i.e.; does it work at all? But then there’s a separate question, which is, can it reach a commercial stage?”
You can have products which are clinically effective, but only selling in a limited number of territories, Brooks explained. For example, they may only sell in Europe or the US.
For CannEpil, Brooks says the clinical risk is not enormous because the drug is not going down a totally new molecule path, and there’s already fairly well proven side effects in using ingredients such as THC and CBD.
Addressing dementia with CogniCann
MGC Pharma is currently developing a cannabinoid spray formulation product using a mixture of THC and CBD, called CogniCann.
The concept is very similar to Sativex, a GW Pharma product approved in 2006 in some European territories including the UK, but not as yet in the USA.
According to Brooks, whereas Sativex is indicated for multiple sclerosis spasticity relief, MGC Pharma is trying to develop a new market in the relief of dementia symptoms such as in Alzheimer’s disease (AD).
AD is the most common form of dementia (50–70% of cases), although there are several other types, mainly vascular dementia (20–30% of cases).
In addition to the characteristic cognitive decline in AD, patients often experience behavioural and psychological symptoms, particularly agitation, short term memory loss and aggression.
CogniCann is a spray formulation with one mL containing 17mg CBD and 25mg THC. It’s believed that CBD may reduce anxiety, although there are no good large clinical studies at present.
MGC Pharma is testing CogniCann in an Australian exploratory study in 50 patients with AD, who are resident in nursing homes and have mild to moderate dementia (allowing them to express informed consent).
Results are expected in mid-2022.
Canaccord believes that CogniCann could have sales greater than €150m annually when it reaches the market.
ArtemiC and CimetrA – supporting COVID care
Over FY21, MXC has managed to develop an important non-cannabis product range. This comprises a nutraceutical branded product, ArtemiC, and a potential pharmaceutical equivalent, CimetrA.
ArtemiC is now being sold by Swiss PharmaCan with MGC Pharma as the supplier.
The pharmaceutical version, CimetrA, is in late clinical development, and is seeing active business development as a potential early-use product in a number of countries, with the US and India being the first two to sign up.
The key differentiating factor over generic formulations appears to be the nanoparticulate MyCell formulation.
Swiss PharmaCan claims that the MyCell technology improves the individual bioavailability of the oily components 100/250-fold, however there is no data on this beyond top-line claims.
MGC Pharma says that ArtemiC and CimetrA’s activity is anti-inflammatory.
It’s been proven that reducing the hyper-inflammatory response seen in some COVID-19 patients, known as “cytokine storm”, improves survival and shortens the time in ICU for a proportion of these patients.
Canaccord expects sales on ArtemiC and CimetrA to reach $8.6m by 4Q 2022, from $0.4m today.
And he’s optimistic about the potential of what MGC Pharma will bring to the market.
“The heart of what MGC Pharma does is bringing plant molecules or phyto-medicine with proven effects into a clinical trial delivery mechanism,” says Brooks.
“They’re turning what’s effectively a folk remedy into a pharmaceutical treatment. And that’s very impressive.”
This article was developed in collaboration with MGC Pharma, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.