MGC Pharmaceuticals Ltd

Appendix 4E and Unaudited Preliminary Financial Report for 30 June 2021

1^st September 2021

ASX, LSE: MXC

MGC Pharmaceuticals Ltd ('MGC Pharma' or 'the Company') is pleased to provide its Preliminary Final Report (Appendix 4E) for the year ended 30 June 2021 in accordance with ASX Listing Rule LR4.3A.

Details of reporting period and the previous corresponding period

Results for announcement to the market

* The calculation on net tangible assets per ordinary share includes right-of-use assets and lease liabilities.

Commentary on results

·      2021 delivered a year of significant business growth, with strong phytocannabanoid sales amounting to ~$2.0million, being an increase of 69% from the previous year. Sales of ArtemiC amounted to ~$705k, with the balance relating to revenues derived from consulting services provided by its wholly owned subsidiaries MedicaNL and Medicinal Cannabis Clinics (MCC). There was also considerable progress in advancing clinical trials which is evidenced with $1.9million incurred on R&D activities.

Review of Operations

Highlights

Research & Development

·      Completion of phase II ArtemiC™ Clinical Trial in December 2020, which delivered excellent results by meeting all primary and secondary endpoints, demonstrating a full safety profile with no drug related adverse events

·      Recruitment of patients into the CimetrA™ Phase III clinical trial commenced at Rambam Health Care Campus and Nazareth Hospital EMMS in Israel in June 2021

·      Following research into the treatment of glioblastoma showing MGC's proprietary formulation, CBG, impairs the major hallmarks of glioblastoma progression, commencement of the study into the use of SNEDD nano technology for the treatment of aggressive glioblastoma brain cancer

·      Ethics committee approval from Schneider Children's Medical Centre of Israel for MGC Pharma's proprietary epilepsy treatment, CannEpil® to commence a Phase IIb clinical trial

·      Enrolment of patients at the University of Notre Dame in Perth, Western Australia for MGC Pharma's CogniCann® phase II clinical trial on patients with dementia and Alzheimer's disease

Pharma operations

·      Record cumulative sales of phytocannabinoid products in FY 21, with 12,457 units sold worldwide, amounting to ~$2.0million in revenues

·      €3.1million ($4.9million) government grant secured from Malta Enterprise with construction underway on fully certified Good Manufacturing Practice (GMP) facility in Malta, for the production of ArtemiC™

·      CannEpil® has been added to the Primary Care Reimbursement Service in the Republic of Ireland making it free of charge for Irish patients prescribed the treatment under its Medical Cannabis Access Program

Licences, approvals and distributions agreements

·      Agreements signed with IM Cannabis Corp for the distribution of CannEpil® in Israel.

·      Master supply and distribution agreement secured with leading European nutraceuticals producer and distributor, Swiss PharmaCan AG for a minimum of 40,000 units of ArtemiC™ Rescue per quarter

Corporate

·      MGC Pharma became the first medicinal cannabis company to list on the London Stock Exchange following a successful £6.5million (~A$12million) IPO placement, strongly supported by UK funds

·      Acquisition of global pharmaceutical clinical research company, MediCaNL, to deliver MGC Pharma significant cost synergies and expedited clinical trial processes

Research and development / clinical trials

Phase II ArtemiC™ Clinical Trial

During the year MGC Pharma released further results from its Phase II clinical and preclinical studies on ArtemiC™ which support ArtemiC™ being effective for addressing cytokine over production in all tested Covid patients. The Preclinical Trial was performed in the SIA preclinical Lab (Good Laboratory Practice (GLP) certified) in Israel. The ARDC model is the recommended preclinical animal model for cytokine storm, for the prediction of the human model of Covid-19 patients. The trial delivered strong results across a full safety profile with no drug-related adverse effects and is an immensely positive result for the treatment of Covid-19 globally.

Recruitment of patients into the CimetrA™ Phase III clinical trial

MGC Pharma received Ethics Committee approvals from Rambam Health Care Campus, Haifa and Nazareth Hospital EMMS in Israel and began data collection under the Phase III clinical trial to evaluate the efficacy and safety of ArtemiC™ as a treatment for moderate hospitalised patients diagnosed with Covid-19, and to provide additional data for claims on the product as an Investigational Medicinal Product (IMP).

As part of the Phase III clinical trial, the classification of the product has changed from a food supplement to an IMP. As a result, the product name under the Trial has changed from ArtemiC™ to CimetrA™. CimetrA™ becoming an IMP will include changing the drug carrier to a new polymeric drug carrier GraftBio™ (SNEDD - Self Nano Drug Delivery), with a view to potentially being registered as a drug in the future. The trial will ultimately enrol a total of 252 patients and will be conducted over a 28-day period.  The company is confident that the clinical trial will show CimetrA™ to be an effective treatment against the symptoms of Covid-19.

Successful research into the treatment of glioblastoma

Working in collaboration with the Slovenian National Institute of Biology and Neurosurgery Department at the University Medical Centre, MGC Pharma has expanded the research program on the use of cannabinoids in the treatment of aggressive glioblastoma brain cancer to include testing the effect of both MGC Pharma proprietary treatments cannabidiol ('CBD') and cannabigerol ('CBG') following successful clinical trial results.

The results from 18 patient tumour samples show for the first time that the Company's proprietary formulation, CBG, exerts a superior effect in impairing the major hallmarks of glioblastoma progression, i.e., fast proliferation and invasion, and particularly enhancing glioblastoma cell death. CBG has shown it can destroy therapy-resistant glioblastoma stem cells, which are the root of cancer development and extremely resistant to various treatments of this lethal cancer.

The expanded In-vitro cannabinoid study on glioblastoma treatment is focused on testing cannabinoid formulations on fresh glioblastoma tumour tissues, obtained from patients after surgical removal of the tumour to determine the optimal cannabinoid preparation for the effective treatment of the remaining cancer. The aim of this research is to develop novel formulations and define the clinical protocols for clinical trials for the treatment of high-grade brain tumours with cannabinoids.

Ethics Committee approval for Phase IIb clinical trial for CannEpil®

In May 2021, MGC Pharma announced the receipt of Ethics Committee approval for its Phase IIb randomised, double blind, placebo controlled clinical study for CannEpil®, a phytocannabinoid derived IMP, designed to treat Drug Resistant Epilepsy with a high CBD, low THC formula. The clinical trial for CannEpil® will take place at the Schneider Children's Medical Hospital in Israel and will focus on the safety and efficacy of CannEpil® as an add-on treatment for children and adolescents with treatment resistant epilepsy, also known as refractory epilepsy. The trial is targeting the recruitment of more than 100 patients which began in July. This trial involves healthy volunteers and aims to demonstrate the safety of CannEpil® in order to provide supportive data to the regulatory authorities.

Enrolment of patients for CogniCann® Phase II clinical trial

CogniCann®, a formulation of phytocannabinoids that has been developed with the specific aim of treating Alzheimer's and dementia, and is undergoing a Phase II clinical trial at the University of Notre Dame in Perth, Western Australia with 21 patients currently enrolled as at 25 May 2021. The trial is designed to evaluate the potential behavioural benefits of CogniCann® on patients with dementia and Alzheimer's disease. The randomised double blind, crossover, placebo-controlled Clinical Trial will enrol 50 patients over its duration and is expected to last until Q4 2021.

Pharma operations

Phytocannabinoid product sales growth

Throughout FY21, MGC Pharma experienced strong growth in its phytocannabinoid product sales. As at the end of 30 June 2021, the Company had sold a total of 12,457 prescribed units of its standardised affordable cannabinoid medicines across Australia, UK & Brazil, a record for the company.

Figure 1: 12 Month Cumulative Phytocannabinoid Product Sales to June 2021

http://www.rns-pdf.londonstockexchange.com/rns/2959K_1-2021-8-31.pdf

Additionally, post the financial year end, MGC Pharma has implemented new commercial initiatives which are aimed at enhancing sales growth in the Company's key Australian market. These include entering a Contract Sales Team Agreement with A. Menarini Australia Pty Ltd. (Menarini), the Australian arm of global pharmaceutical company, Menarini Group, who will provide eight additional sales personnel to the team and the launch of a new form factor, MGC THC 20 whole flower.

MGC Pharma expects to see strong revenue growth of its phytocannabinoid products in the coming months on the back of these commercial changes, particularly within the Australian market.

Figure 2: Phytocannabinoid Sales by Product for the FY21

http://www.rns-pdf.londonstockexchange.com/rns/2959K_1-2021-8-31.pdf

Maltese GMP facility completion scheduled for October 2021

In Q2 FY 21, the Company was awarded a ~$4.95million (€3.1million) grant from Malta Enterprise to renovate and extend the Company's existing Clinical Research Organisation facility in Malta to include a fully functioning GMP certified manufacturing facility for ArtemiC™. Building work commenced in December 2020, and has made good progress, with construction expected to be completed in October 2021. The commissioning of the Malta facility to full operational capacity will be completed in 2022.

The facility will enable the company to immediately increase ArtemiC™ production volumes and reduce logistics costs via the Malta facility due to its optimal geographic location and shipping access.

CannEpil® made available for patients in Ireland

MGC Pharma's proprietary cannabis derived epilepsy Investigational Medicinal Product (IMP) CannEpil® was added to the Republic of Ireland's Health Service Executive (HSE) following the incorporation of the Medical Cannabis Access Programme (MCAP) into the HSE's Service Plan.

CannEpil® will be available free of charge to patients under the Long-Term Illness Scheme, GMS (Medical Card) Scheme, and the Drugs Payment Scheme on a named patient basis, and is an important step in providing refractory epilepsy patients access to CannEpil® across Europe and improving their quality of life.

Corporate

Listing on the London Stock Exchange

In February, MGC Pharmaceuticals successfully completed a £6.5million (circa AUD$12million) placement to become the first medicinal cannabis company to list on the London Stock Exchange. 

The fundraise was supported by high quality UK institutions, and supported by family offices and high net worth investors. It will enable MGC Pharma to fund further clinical trials and scientific research into the use of medicinal cannabis, expand its range of proprietary products and bolster its manufacturing capacities to meet the rapidly increasing global demand.

Acquisition of MediCaNL - Driving efficiencies in medical research

In April 2021 MGC Pharma acquired MediCaNL Israel 2019 Ltd (MediCaNL), an Israeli company operating in, and providing specialist services to the pharmaceutical sector for the development of new medicines. MediCaNL offers clinical and preclinical trial services, as well as providing assistance with clinical trials, including supplying research data from past Phase I to IV studies. Consideration for the acquisition totalled $6,000,000 of MGC Pharma shares (based on a price of $0.067 per share).

As part of the acquisition, MediCaNL will continue to work with its existing clients and its current 40 projects and clinical trials. It will enable MGC Pharma to streamline the process of bringing medicines and products to market by increasing its clinical trial capacity and making clinical trial performance and design an insourced activity. The acquisition will also deliver significant and ongoing cost savings to the Company, with MGC Pharma undertaking a number of Phase I, Phase II, and Phase III clinical trials.

As part of the agreement, Dr Nadya Lisovoder, CEO of MediCaNL Inc, who had been working with MGC Pharmaceuticals over the past two years, has joined permanently as our first Chief Research Officer.

Events subsequent to year end

Subsequent to year end, the Company had the following events for disclosure:

On 12 August 2021 the Company held a General Meeting to approve performance rights issued to the Directors. As these performance rights were agreed to be issued during the financial year, they have been expensed over the relevant service conditions within the current year.

On 26 August, the Company executed a US$24million ($32.9million) supply agreement with AMC Holdings Inc of MGC phytomedicine products over three years, with a minimum of US$3million within the first year.

Outlook

MGC anticipates significant growth in the coming year, both of its sales of existing product and in its clinical pipeline.  Via its existing relationships and through new distribution and access agreements in existing and new geographies, MGC will be increasing sales as well as facilitating awareness and clinical activities supporting the company's product lines enroute to Market Authorization.

MGC has taken significant steps towards becoming a global biopharma Company with a focus on phytocannabinoid and plant-based treatments, available to patient populations in need around the world. Our research and development agenda, coupled with our robust clinical platform, sets us at the forefront of this significant emerging segment of the global pharmaceutical market. MGC intends to ensure our position over the coming years by continually bringing products to markets with full market authorization and in keeping with global regulations, offering cost effective treatments to patients with underserved indications the world over.

Dividends and distributions

The Board has not declared dividends or made dividend payments in the periods 30 June 2021 and 2020. The Company does not have any dividend or distribution reinvestment plans in operation.

Details of subsidiaries over which control has been gained or lost

During the year MGC Pharma had the following changes to its corporate structure:

1 January 2020: Incorporated a wholly owned Australian subsidiary Medicinal Cannabis Clinic Pty Ltd, to house all of the assets acquired relating to the telehealth clinic acquired from Cannvalate Pty ltd, as announced to the market on 23 November 2020.

·      21 April 2021: Acquired 100% of the Israeli operating entity, MedicaNL Israel 2019 Ltd, being a pharmaceutical clinical research organisation

In the prior year there was an increase in the percentage holding of Panax Pharma s.r.o from 80% to 86.67%.

Audit Status

The consolidated financial statements are in the process of being audited. It is anticipated that the independent audit report will include an emphasis of matter on going concern.

Financial Report

The following financial report included in this Appendix 4E does not include all notes of the type normally included within the annual financial report and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and operating, financing and investing activities of the consolidated entity as the full financial report. The financial report should be read in conjunction with any public announcements made by MGC Pharmaceuticals Limited in accordance with the continuous disclosure obligations of the ASX Listing Rules. The accounting policies applied are the same as those noted in the most recent interim financial report and previous annual report.

Consolidated Statement of Profit or Loss and Other Comprehensive Income

For the year ended 30 June 2021

The above consolidated statement of profit and loss and other comprehensive income should be read in conjunction with the accompanying notes

Consolidated Statement of Financial Position

As at 30 June 2021

The above consolidated statement of financial position should be read in conjunction with the accompanying notes