GCIKanabo Group anticipates further revenue in 2022 and beyond
[source: Kanabo Group]
(KNB ) has hailed the progress made throughout the year ended 31 December 2021 and says it expects 2022 to be “another year of transformation growth” for the business.
The London-listed medical cannabis R&D company remained predominantly pre-revenue during the period recording an operating loss of £3.4m. Included in the £3.4m of operating expenses were research and development, sales and marketing costs of £0.2m and £0.6m respectively.
The UK-based medicinal cannabis company reported a pre-tax loss of £4.6m over the period, largely as a result of the exceptional reverse-acquisition costs of Kanabo Research Ltd.
As revenue from the sale of products rose to £0.073m in FY21, Kanabo said it anticipates CE accreditation from the EU for its VapePod medical device this year, an indication that a product is deemed to meet EU safety, health and environmental protection requirements which would pave the way for accelerated sales in Germany and other European markets.
Kanabo’s balance sheet remained strong in FY21 with cash and cash equivalents at £4.5m as at 31 December 2021, following a net cash outflow of £2.1m from operating activities and around £7.2m raised through share, warrants and options issuance in the 12 month period.
On the operational side, Kanabo launched its first medical cannabis product in the UK in July 2021, demonstrating its fully operational supply chain from flower to production and through its extensive distribution network outlined at the time of re-listing at the start of the period.
This first shipment of medical cannabis cartridges not only marked a key milestone for Kanabo, but moreover for the medicinal cannabis industry across the UK, it wrote today.
An agreement with PharmaCann Polska established Kanabo’s first EU medical cannabis production line, with an initial production capacity of up to 36,000 cartridges per month.
A further agreement with Pure Origin to manufacture, package and deliver its wellness product line has introduced a production line with an initial capacity of 44,000 units a month.
Following the period-end, Kanabo Group signed a Memorandum of Understanding with Forbe Ltd, thereby also taking the Company into the emerging CBD markets in the Israeli market.
Kanabo expects this to position it as a CBD market leader in this high growth market where the regulatory landscape for the sale of CBD products is on an increasingly positive trajectory; at present, Israel’s deregulated market is estimated to be worth up to US$475 million by 2025.
Post-period, Kanabo completed its strategic acquisition of The GP Service for £13.5 million, the objective of which is to rapidly grow an existing digital and telemedicine business while establishing a fully compliant channel to market for the firm’s products for medical patients.
Kanabo Group believes that it is now in a position to grow the primary care tele-medicine business. Given the current market environment, the Company says it is well positioned to deliver attractive growth in revenue and margin as a result of this acquisition during 2022.
It acknowledged that the full impact of this acquisition will be realised once it can use this online channel to prescribe medicinal cannabis within a compliant digital framework.
As a result, Kanabo intends to invest in additional sales capacity to develop this recurring revenue stream to offer advanced telemedicine services to medium to large enterprises.
As cannabis legislation evolves rapidly, Kanabo says it is making “significant progress” in regard to product development with the CE Mark for its proprietary Vapepod expected this year. The certification will mean that its products meet “all health, safety, and environmental protection standards” and will thus pave the way for VapePod sales across the UK and EU.
CEO of Kanabo Group, Avihu Tamir: “Since the beginning of 2021, we completed the reverse takeover transaction and successfully raised £6m as one of the first cannabis-related businesses to list on the London Stock Exchange.I believe 2022 will be another year of transformation growth as we work toward achieving CE accreditation for our vapePod and develop our vertically integrated business with investment and complementary acquisitions.”
“I am therefore confident Kanabo can expect to deliver significant revenue from the sale of CBD and medicinal cannabis over the next 12 months, well beyond anything the Company has seen to date and remains well positioned to become one of Europe’s leading compliant providers of both wellness CBD services and medicinal cannabis products in the UK and EU.”
View From Vox
Recent data from Morningstar has shown that assets managed by cannabis funds shrunk by 45% to $2.6 billion in the 12 months to March, down from $4.6 billion in the year prior. Despite this, Kanabo Group still remains one of the best performing shares on a relative basis with cannabis stocks on London’s main market falling between 60% and 80% over the past year.
In recent weeks, Kanabo has offered a proposed alternative growth strategy to replace its proposed acquisition of Materia. The alternative strategy, which is one that won’t expose its shareholders to further dilution, received support from the market and provided some light relief for Kanabo investors, with the shares lifting to 4.21p on the day of the announcement.
The new partnership is expected to support Kanabo’s commercialisation of medical cannabis products in the UK and Germany with direct access to Materia’s EU-GMP production facility.
Alongside its focus on product commercialisation, Kanabo is also focused on expanding its patient access to medicinal cannabis in the UK - these plans have already come into fruition with its recent £13.5m acquisition of the primary care telemedicine provider The GP Service.
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