MGC Pharmaceuticals Ltd.

June Quarter Activity Report and Cash Flow Statement

25 July 2022

ASX, LSE: MXC

Key Highlights:

·      Strong progress across MGC Pharma's clinical pipeline with multiple completed trials results indicating efficacy across our product range, including important positive trial results for leading products CogniCann® and CimetrA™.

·      Strong quarterly sales continue, with A$1.55m in cash receipts during the quarter, and A$6.1m for FY22 (YTD up 134% on FY21).

·      Cost reduction strategy implemented in June quarter including reduction in material R&D costs, with future non-core trials also deferred.

·       Strategic partnerships advanced to further progress MGC Pharma's clinical pipeline across key global jurisdictions.

·       Appointment of new London based Chief Financial Officer and Group Financial Controller.

MGC Pharmaceuticals Ltd ('MGC Pharma' or 'the Company') a European based bio-pharma company specialising in the production and development of phytomedicines, is pleased to provide its Quarterly Activities Report for the three months ending 30^th June 2022.

Roby Zomer, co-founder and Managing Director of MGC Pharmaceuticals, commented: "MGC Pharma remains resolutely focused on advancing its innovative products through the clinical pipeline of product development and continues to progress a number of products towards regulatory approval. This has been supported by strong clinical trial results and partnerships with companies such as Sciensus Rare and AMC Holdings that will help us achieve our goals.

"Getting pharmaceutical products through the regulatory approval process takes time, particularly when the products are phytocannabinoids. I am, however, confident in the team and the strategy that has been developed to help ensure this process and that MGC Pharma's products will be able to make a difference to patients suffering with debilitating conditions."

Company Activities during the June Quarter

Clinical Trial Progress - CimetrA^TM, CogniCann® and Glioblastoma Results

During the June Quarter, MGC Pharma announced a series of positive Clinical Trial results, with the findings indicating strong efficacy across a range of MGC Pharma's products.

Preclinical In-vitro study results announced in June indicate that CimetrA™, MGC Pharma's proprietary Investigation Medicinal Product (IMP), has a wide-ranging application as an anti-inflammatory treatment through the modulation of the production of pro-inflammatory cytokines.

Previous studies have indicated that CimetrA™ is effective in treating the symptoms of COVID-19.  However, this is the first time that CimetrA^TM's mechanism of action has shown that it could also be effective in treating other conditions with the effective blocking of the mRNA expression of IL-32, the pro-inflammatory cytokine related to Rheumatoid Arthritis, Inflammatory bowel disease, Asthma, Psoriasis. and Chronic obstructive pulmonary disease.

The Company also completed a Phase II Clinical Trial for its proprietary dementia treatment, CogniCann®, which has demonstrated its full safety and preliminary efficacy profile. The trial, which was undertaken by the University of Notre Dame in Western Australia, demonstrated that the tetrahydrocannabinol (THC) and cannabidiol (CBD) based product can inhibit the deterioration in the behaviour of patients with dementia. The behaviours were assessed against a Neuropsychiatric Inventory - Nursing homes (NPI-NH) Questionnaire which was developed to help characterise the neuropsychiatric symptoms and psychopathology of patients with Alzheimer's disease and other dementia patients.

Results of the study showed that after 44 days, patients in the Placebo group experienced a deterioration in their condition, based on their NPI-NH score, compared with the stable neuropsychiatric profile of those patients treated with CogniCann®, indicating that the early-stage use of CogniCann® may be beneficial in the treatment of dementia patients.

In collaboration with the National Institute of Biology in Slovenia, MGC Pharma also announced the completion of a successful In-vitro preclinical research study into the use of cannabinoids to treat Glioblastoma multiforme cells, a fast-growing and aggressive form of brain cancer. The results suggest that MGC Pharma's cannabinoid treatment can potentially be used as a treatment in cancer patients without the inclusion of toxic agents. These findings will be the subject of further research studies to determine the efficacy of MGC Pharma's Glioblastoma treatment formulation in a clinical trial setting.

Additionally, during the Quarter the Slovenian Intellectual Property Office (SIPO) granted MGC Pharma a Patent which provides the Company commercial protection over the intellectual property associated with CimetrA™, its unique formation and manufacturing process for a period of 20 years.

During the quarter MGC Pharma also announced the grant of a second patent by SIPO, for its IMP CannEpil® the Company's proprietary treatment for Refractory Epilepsy. The grant of the CannEpil® Patent provides MGC Pharma commercial protection over the intellectual property associated with CannEpil®-IL, its unique formulation and manufacturing process for 20 years.

International Distribution Partnerships

MGC Pharma have signed a number of key product distribution agreements in the EU/UK and USA to advance their clinical pipeline across the globe, expand clinical trials and seek access to key pharmaceutical markets.

During the June Quarter MGC Pharma signed an agreement with Sciensus Rare, an international pharmaceutical company, who specialise in the provision of rare disease medicines through a network of decentralised clinical trials, early access programs and licensed distribution programs.

As part of this agreement Sciensus Rare was appointed the exclusive distributor of CannEpil® and CogniCann® for an initial four-year term in Denmark, France, Italy, Spain, Luxembourg, and the United Kingdom.

In August 2021, MGC Pharma signed a three-year US$24 million Supply and Distribution agreement with AMC Holdings, with minimum orders on a range of MGC Pharma products including CimetrA™ and ArtemiC™. In the June Quarter MGC Pharma and AMC Holdings met with the University of South Florida department heads of medicine to plan the commencement of a US Clinical Trial for CimetrA™, scheduled to commence Q3 2022. The Company's US partners are also well advanced regarding regulatory approvals for the use of CogniCann® and CannEpil® in the USA under existing early patient access schemes, together with ArtemiC™ to commence the sales pipeline into the US healthcare market.

Corporate News

The Company appointed Ms. Angela-Marie Graham as its new London based Chief Financial Officer, as part of its growth plans to move key corporate roles to Europe and the UK. Ms Graham has over 25 years of accountancy experience, specialising in growth businesses in emerging industries, including those within the biopharmaceutical sector. This was combined with the appointment of an experienced Financial Controller and the recently appointed Chief Commercial Officer Robert Clements, both UK based, as the Company establishes its corporate operations in London from Q3 2022.

MGC Pharmaceuticals has continued to make good progress with its Malta production facility to commence commercial production in late 2022, applying for GMP and MIA (manufacturing import authorisation) during the quarter, which is expected to be verified later this year.

June Quarter Sales Update

MGC Pharma has continued its strong revenue growth over the prior quarter in all product and service categories.  IMP Cannabinoid medicine sales grew by 118% against sales from the March quarter, largely attributed to a substantial increase in sales from MGC Pharma's proprietary medicine for epilepsy, CannEpil®. CannEpil® is the only CBD rich medicine both listed and reimbursed in Ireland for a broad range of conditions including treatment resistant epilepsy, chemotherapy induced nausea and vomiting and multiple sclerosis. 

MGC Pharma expects CannEpil® to be a continued leading revenue driver for the remainder of 2022 and into 2023, with the onboarding of new pharmaceutical distributor Sciensus Rare, who are now driving market access and registration submissions for both CannEpil® and CogniCann® in several key EU countries including Denmark, France, Italy, Spain, Luxembourg, and the United Kingdom.

The Company also had a strong contribution to the Group revenue for the quarter from its services division, where its wholly owned clinical research company MediCaNL generated over A$84,000 in sales revenue and A$86,000 in cash receipts and is delivering as a key standalone business unit for the Company, whilst providing the inhouse CRO expertise to minimise the Company's clinical trial costs.  MediCaNL has generated approximately A$500,000 in revenue for FY22.

A breakdown of the Company's group sales revenue for the June quarter of A$1,155k is set out in the table below:

In accordance with Section 6 of the accompanying Appendix 4C, the Company advises that during the June 2022 Quarter, payments to related parties totalling A$262k, relate to the payment of both Executive and Non-Executive Director fees and corporate costs. As detailed in the accompanying Appendix 4C, expenditure for the Quarter includes A$521k on research and development, A$1.43m on manufacturing and operating costs, A$1.27m staffing costs (including director fees) and A$0.83m on administration and corporate costs.

--Ends--

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About MGC Pharma

MGC Pharmaceuticals Ltd (LSE: MXC, ASX: MXC) is a European based bio-pharma company developing and supplying affordable standardised phytomedicines to patients globally.  The Company's founders were key figures in the global medical cannabis industry and the core business strategy is to develop and supply high quality phytocannabinoid derived medicines for the growing demand in the medical markets in Europe, North America and Australasia. MGC Pharma has a robust product offering targeting two widespread medical conditions - epilepsy and dementia - and has further products in the development pipeline. 

Employing its 'Nature to Medicine' strategy, MGC Pharma has partnered with renowned institutions and academia to optimise cultivation and the development of targeted phytocannabinoid derived medicines products prior to production in the Company's EU-GMP Certified manufacturing facility.  

MGC Pharma has a number of research collaborations with world renowned academic institutions, and including recent research highlighting the positive impact of using specific phytocannabinoid formulations developed by MGC Pharma in the treatment of glioblastoma, the most aggressive and so far therapeutically resistant primary brain tumour.

MGC Pharma has a growing patient base in Australia, the UK, Brazil and Ireland and has a global distribution footprint via an extensive network of commercial partners meaning that it is poised to supply the global market. 

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Appendix 4C

Quarterly cash flow report for entities

subject to Listing Rule 4.7B

The payments in 6.1 are payments to directors of the company for their service during the quarter.

Compliance statement

1          This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.

2          This statement gives a true and fair view of the matters disclosed.

                                24 July 2022

Date:                      ...................................................................................

                                    [lodge electronically without signature]

Authorised by:     ...................................................................................

                                Roby Zomer - Managing Director

Notes

1.         This quarterly cash flow report and the accompanying activity report provide a basis for informing the market about the entity's activities for the past quarter, how they have been financed and the effect this has had on its cash position. An entity that wishes to disclose additional information over and above the minimum required under the Listing Rules is encouraged to do so.

2.         If this quarterly cash flow report has been prepared in accordance with Australian Accounting Standards, the definitions in, and provisions of, AASB 107: Statement of Cash Flows apply to this report. If this quarterly cash flow report has been prepared in accordance with other accounting standards agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent standard applies to this report.

3.         Dividends received may be classified either as cash flows from operating activities or cash flows from investing activities, depending on the accounting policy of the entity.

4.         If this report has been authorised for release to the market by your board of directors, you can insert here: "By the board". If it has been authorised for release to the market by a committee of your board of directors, you can insert here: "By the [name of board committee - eg Audit and Risk Committee]". If it has been authorised for release to the market by a disclosure committee, you can insert here: "By the Disclosure Committee".

5.         If this report has been authorised for release to the market by your board of directors and you wish to hold yourself out as complying with recommendation 4.2 of the ASX Corporate Governance Council's Corporate Governance Principles and Recommendations, the board should have received a declaration from its CEO and CFO that, in their opinion, the financial records of the entity have been properly maintained, that this report complies with the appropriate accounting standards and gives a true and fair view of the cash flows of the entity, and that their opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.