This quarter has been a busy one for Australian cannabis distributor Cann Group (ASX: CAN), evident in the Company’s sales revenue figures increasing a tidy 91% from the same quarter last year. But with the release of disappointing trial results following its CBD placebo-controlled study, the Company has had to work against a backdrop of negative publicity and investor sentiment.
With net cash outflows of $3.9m, R&D expenses, product and manufacturing costs, deposit receipts, and withdrawals from working capital facilities, this has continued the Group’s growth in the last few months as it worked against its largely embarrassing trial flop.
Having said that, the Company’s Mildura facility kept up demand and had lots to show as it churned out continuous orders for oil and flower products resulting in $5.8m in total sales revenue, equalling a lofty 91% increase compared to the same period last year.
Irrespective of their successes, the Board voiced their concerns about sustaining outflow volumes from the facility over the next year. This prompted them to seek an extension to their existing GMP licence from the Therapeutic Goods Administration (TGA), emphasising the need for sustained improvements across all processes at their facility.
With the extension granted in October 2022, the licence upgrade allows for additional capabilities for those who are allowed to access their product, mainly aiming to have its product available to patients across Australia.
To bolster and sustain growth leading into this year, Cann Group recently conducted a Share Purchase Plan (SPP) at an offer price of $0.22 per share, a slight discount from the $0.235 share price at the time, which was opened to investors late last year between October and November – in total, the Group pooled $8.1m from participants before closing.
The funds collected were invested towards the Mildura facility with a plan to expand its manufacturing capabilities, specifically the installation of special machinery that can encapsulate cannabis products into a pill, increase packing output, as well as further develop and research its Satipharm THC-containing product.
With these developments, soon followed the last participants enrolled on the Group’s Phase III low-dose CBD clinical trials on 21 November 2022, where data entries from the study were completed and recorded for research, leaving the Company to analyse and finalise the results for a release to market in January 2023.
The trials were conducted in order to produce the clinical data necessary for registering low-dose Satipharm CBD medicine (cannabidiol) capsules for over-the-counter sale. Aiming to make this medication more accessible and allow consumers to purchase it from pharmacies without requiring a prescription, it targeted sleeping disturbances.
A total of 257 randomised individuals partook in the study where the thesis of the study was to determine the impact and effect of the CBD medication against a placebo control to get the most accurate results.
But alas, unsurprising and disappointing preliminary results from the study were announced earlier in January – with the results concluding, across all participants, there was absolutely no difference between dosed participants and ones given the placebo-control.
In other words, despite the high hopes that Cann Group may have pioneered its research to launch its product into the market, it appears to have amounted to nothing. According to the Company, a market update is expected once a review of the trial is complete.
This news follows significant board changes in a few short months where Ms Geraldine Farrell officially stepped down as Company Secretary on 25 October with the CFO, Ms Deborah Ambrosini filling the role. Along with the search for a new CEO following the announcement of Peter Crock resignation a day prior to Ms Farrell – the board eventually sought out and locked in Peter Koetsier to officially take the reins and step in as the new CEO.
Setting aside Cann Group’s promising sales figures this quarter, worries remain whether similar levels of success will be repeated without key improvements. With such lacklustre trial results, the success with extending their GMP licence and solid SPP efforts just didn’t quite cut it – but with significant changes to the board and growth across other segments within the business, the bright outlook remains for the moment until any further announcements.