Research update DanCann Pharma Q4 2021: The start of a new era?

Read the full update here:

Update DanCann Pharma Q4 2021

Analaysis Dancann Pharma

DanCann continues to deliver on schedule. The acquisition of CannGros generated the Company’s first reported net sales, an essential step in the ongoing commercialisation phase. Furthermore, the Company reports a steady cost base despite investments to meet expected growth. We continue to expect 2022 to be the most exciting year in the Company’s history. Against the backdrop of the weak performance of the stock market as well as DanCann’s peer group, the fair value per share is adjusted downwards to DKK 7.6 (9.5) while our bull case decreases to DKK 12.0 and DKK 4.0 in the bear case.

A Nordic player in medical cannabis

DanCann was founded in 2018 by the current CEO, Jeppe Krog Rasmussen. The Company’s strategy is to provide medical cannabis to the European market. It intends to do this by (i) importing and distributing medical cannabis products, (ii) cultivating and exporting cannabis raw material, and (iii) identifying and developing cannabis products as part of combination medicines.

Reported sales for first time

DanCann reported sales of goods for the first time in the history of the Company, which is explained by the completed acquisition of CannGros. Net sales landed at DKK 0.9m in Q4 2021, which was in line with our forecast. This is a significant milestone for DanCann, which is facing accelerating commercialisation. The acquisition of CannGros adds significant value beyond approximately DKK 5 million in annual sales. (I) DanCann obtains the necessary expertise and approval for critical regulatory processes, such as the license (DMA) to import and distribute medical cannabis. (II) Significant synergies exist in future product development and distribution of already contracted products from DanCann’s established partnerships.

The EBITDA result for the full year landed at DKK -13.6 million, slightly higher than our projections of DKK -12.8 million. Marginally higher other external costs explain this.

The pieces of the puzzle fall into place

The intense period of the last quarters, combined with the expected news flow of necessary approvals and product launches, has created good conditions for DanCann to achieve its ambitious targets. The regulatory tailwinds in Europe strengthen the long-term growth prospects. At the same time, the Company still has much to prove as it enters a new era – commercialisation activities. However, we believe that piece by piece the puzzle is falling into place and that much is in the Company’s hands.

Fair value

We are marginally lowering our forecast for the Company’s turnover for the current year. We have made minor adjustments to the completed and expected investments related to CannGros – which marginally affect the justified value of the Company’s share. However, what has affected our fair value is the tough start to the year for the stock market in general and growth-oriented stocks in particular. As a result, Dan-Cann’s peer group companies have fallen by more than 25% from our last analysis. We calculate a justified value of DKK 7.6 (9.5) per share in a relatively conservative assumption. Our assumptions, forecasts and valuation will be adjusted as the Company reaches future milestones.

DISCLAIMER

Carlsquare AB. www.carlsquare.se. hereinafter referred to as Carlsquare. conducts business with regard to Corporate Finance and Equity Research in which areas it, among other things. publishes information about companies including analyses. The information has been compiled from sources that Carlsquare considers to be reliable. However, Carlsquare cannot guarantee the accuracy of the information. Nothing written in the analysis should be regarded as a recommendation or invitation to invest in any financial instrument, option or the like, Opinions and conclusions expressed in the analysis are intended only for the recipient.

The content may not be copied. reproduced or distributed to another person without the written approval of Carlsquare. Carlsquare shall not be held responsible for any direct or indirect damage caused by decisions made on the basis of information contained in this analysis. Investments in financial instruments provide opportunities for value increases and profits. All such investments are also subject to risks. Risks vary between different types of financial instruments and combinations of these. Historical returns should not be considered as an indication of future returns.

The analysis is not directed to US persons (as defined in Regulation S of the United States Securities Act and interpreted in the United States Investment Company Act 1940) nor may it be disseminated to such persons. The analysis is also not directed to such natural and legal persons where the distribution of the analysis to such persons would result in or entail a risk of a violation of Swedish or foreign law or constitution.

The analysis is a so-called Commissioned Research Report where the analysed Company has signed an agreement with Carlsquare for analysis coverage. The analyses are published on an ongoing basis during the contract period and for a usual fixed remuneration.

Carlsquare may or may not have a financial interest in the subject of this analysis. Carlsquare values the assurance of objectivity and independence and has established procedures for managing conflicts of interest for this purpose.

The analysts Jonatan Andersson, Markus Augustsson and Ulf Boberg do not own and are not allowed to own shares in the Company analysed.