A new high for MXC: Clinches another pivotal $1M deal to supply CBD extract

By Zoe Gross. Published at Nov 22, 2017, in Biotech

Specialist medicinal cannabis company, MGC Pharmaceuticals (ASX:MXC), today updated the market with its second intriguing development of the week.

MXC has now penned a multi-year supply agreement with European medicinal products distributor, Mabsut Life, to supply cannabidiol (CBD) extract from its European extraction facility – a deal that’s set to generate $1 million in annual sales.

Under the binding agreement, MXC will supply a specialized, industrial-grade CBD extract, which has been developed and produced using the company’s leading European R&D facilities.

The extract will be supplied to Mabsut Life, commercialised under the distributor’s own CBD electronic cigarette brand, and distributed throughout its sales network into a range of central and eastern European countries including Germany, the Czech Republic and Austria.

The terms of the agreement set out a minimum supply by MXC of 12 kilos of extract per quarter, which is set to generate around $1 million in annual sales for the company.

However, it is early stages in this deal so investors should seek professional financial advice if considering this stock for their portfolio.

This contract effectively commences immediately, with an initial purchase order of two kilos of extract already placed by Mabsut Life, which includes an initial pre-payment of US$40,000, expected to be received within two weeks.

The deal is for an initial two-year period and will then automatically renew each year upon mutual agreement.

The deal, the product, the benefits

Mabsut Life is a lifestyle and medical cannabis product manufacturer and distributor, with a focus on multiple segments of the emerging European supply chain, operating in Germany, the Czech Republic and Austria.

The specialised extract supplied by MGC Pharmaceuticals will be used by Mabsut Life to develop a CBD-based vaporiser/e-cigarette cartridge formula based on 100% cannabis ingredients, removing the need for any additional chemicals or solvents.

Research conducted at the University of Lausanne in 2016 showed that e-cigarettes can provide a safe and effective way to deliver cannabis for medicinal purposes.

There is also potential for MXC to supply additional products to Mabsut Life – the agreement includes a right of first refusal for the supply of any future cannabis extract or other cannabis-based products that Mabsut Life may require.

MXC’s European extraction facility contains state-of-the-art extraction equipment, providing the ASX junior with a considerable edge in the development and production of CBD extracts.

The company’s laboratory is currently undergoing Good Manufacturing Practice (GMP) certification, as is its CBD extraction facility – this is expected to be completed in 2018, at which point it will be fully certified to produce Active Pharmaceutical Ingredient grade (API) cannabidiol extracts.

This agreement is clearly advantageous for both parties. MXC co-founder and CEO, Roby Zomer, said: “The supply agreement with Mabsut Life builds on a number of transformational deals we have recently executed that provides the company with a diverse and growing revenue base.”

“The deal also demonstrates the capacity of our research and development platform to develop formulas that are of the highest quality which can then be utilised for a number of purposes by our growing list of partners,” continued Zomer.

In turn, Mabsut Life CEO, Moshe Wasserman, said: “We are very happy to complete this first supply agreement with MGC Pharmaceuticals, which is a strategic and important agreement with partners with whom we plan to embark on a long-term relationship.”

“The agreement reflects both our company policy and development plans, and this agreement is just the first of a series of agreements that we expect to make with MGC, taking advantage of the relationship of each company and bringing together these innovative, quality products to the new emerging markets.”

An auspicious series of developments – and more to come

The $112.4 million-capped MXC has been riding a considerable high of late. This latest announcement comes on the back of a number of pivotal developments, including the company’s first binding purchase order from Varm Cosmo for CBD cosmetics products, and, as of Monday this week, MXC’s foray into the multi-million-dollar Australian market, as Finfeed reported on the day.

Compellingly, the latter announcement – the company’s execution of a definitive supply agreement with specialist Australian pharmaceutical distributor, HL Pharma – saw a surge in MXC share price, which is now trading at 9.4 cents.

The past performance of this product is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

The remaining weeks of 2017 will also see further waves of news from MXC, including the launch of its new line of DermaPlus skincare products, as well as the completion of MXC’s additional two contracts with Van Cosmo – to name only a couple of items in the pipeline.

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of Maven Capital Pty Ltd (AFSL No. 418504). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

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