Read the full update here:

Equity Research, DanCann Pharma

On 2 December, DanCann announced that they will formally obtain EU-GMP certification for its production facility Biotech Pharm1 at the end of 2022. Lacking the certification has been the key-threshhold in initiating its production phase for cannabis Bulk-products and API´s. Hence, we view that obtaining the approval for the certification reduces a layer of risk in the commercialization trajectory. We adjust the overall risk in DanCann by removing the risk attributable for the approval.

In our DCF, we calculate a fair value per share of DKK 1.9 (DKK 1.8 per share), and in our multiples-based valuation, we use an EV/Sales 2023 multiple of 2.6x, resulting in a fair value per share of DKK 1.63 (DKK 1.1 per share). By combining our DCF and the multple-method in an average, we calculate a fair price per share of DKK 1.77 (DKK 1.5 per share).

Why is the EU-GMP approval crucial?

DanCann´s business model includes three key sources of revenue streams:

1) Production and exports of Cannabis bulk and API´s from own facility.

2) Imports and distribution of medicinal cannabis products on the local Danish market, as well as neighboring countries.

3) In-licensing of approved medicinal cannabis products.

Since its founding, DanCann has always envisioned production and exportation of internally developed cannabis bulk-products and API´s as the main growth prospect f or the company. With the approval soon in place, the company is now able to produce its first commercial batches. Within the pipeline for DanCann´s exportation business, the company has binding agreements with a total value of DKK 81 million or more, including the recently signed deal with StorkPharm worth DKK 41 million and the deal with WEECO worth DKK 40 million. In addition to the binding agreements, DanCann has also signed a LOI-agreement with Swedish Aerum Pharma pertaining exclusive rights to distribute DanCann Pharma´s own products on the Swedish market, worth SEK 37 million at minimum.

With the approval in place at the end of 2022, DanCann is now able to begin shifting focus to capitalizing on its agreements. According to the founder and CEO Jeppe Krog Rasmussen, sales from the company´s own facility is expected to convert the binding agreements into revenues of DKK 80 million by 2025.

Carlsquare published the latest update on DanCann Pharma on 7 November 2022, with a justified value of DKK 1,5 per share. Read the full research update here.

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