The company sent its share price climbing by 8.00% following the release of a market update on its Brazilian distribution deal with ONIX Empreendimentos e Participações.
The European based 'Seed to Medicine' bio-pharma company, MGC Pharmaceuticals (ASX:MXC), provided the market with a material update concerning its binding amendment with ONIX Empreendimentos e Participações to supply and distribute cannabis based medicine in the Brazilian market.
The company today confirmed that the agreement will feature an initial one-year minimum order requirement of 20,000 units. This will have an estimated value of at least A$1.65 million and also includes an immediate down payment of A$107,000 (€65,000).
From year two of the agreement this amount will increase to 50,000 units per annum, which will generate an additional A$4.1 million (€2.5 million) for the company.
This binding extension of our existing agreement with ONIX is a clear commitment of minimum order volumes over the next seven years, and confirmation that ONIX are the partners we are looking for in the region. This is a significant milestone for MGC Pharma and will have an immediate positive impact on the Company's cashflows.MGC Pharmaceuticals Co-Founder and Managing Director, Roby Zomer
The distribution agreement is set to run for a period of seven years—with the option to extend by an additional five years by mutual agreement—and is expected to deliver a breakeven cashflow at 5,000 units per month within 24 months.
According to the Co-Founder and Managing Director of MGC Pharmaceuticals, Roby Zomer, ONIX will purchase bulk orders of CannEpil, CogniCann and products from the company's recently launched Mercury Pharma line, which is expected to considerably strengthen MGC Pharma's operating cashflows.
"The expected revenue contribution of the Amended Agreement is estimated to be a minimum of A$1.65 million in the first year, and A$4.1 million in each subsequent year," Zomer said.
"Importantly, the Amended Agreement, in combination with our current Australian sales is expected to deliver our stated operating breakeven cashflow target of 5,000 units per month by the start of 2021, excluding any sales increases from our current or new markets in the future."
"This agreement is a significant step forward for the Company and a milestone in our development to establish a successful bio-pharma business."
All purchase orders received will include a material deposit paid upfront—which can be as much as 50% of the total order—while the remaining balance will be paid to MGC within a 30-day period following product delivery.
ONIX's exclusive right to distribute MGC product in Brazil will also be subject to the company's continued compliance with the minimum order volumes set out in the agreement.
The Founder of ONIX, Marcelo Galvão, was also enthusiastic about the partnership, as the company believes that MGC's product range is leagues ahead of its competition.
"We are very pleased to sign this agreement with MGC Pharma. With a population of over 210 million, Brazil has a large pharmaceutical market," Galvão said.
"Anvisa, the Brazilian National Health Surveillance Agency, has very high standards, and requires products to be produced under EU Good Manufacturing Practice guidelines,"
"The ability of MGC Pharma to meet Anvisa's strict requirements is a significant validation of MGC Pharma's products and capabilities as a leading bio-pharma company, firmly placing MGC Pharma ahead of many of its peers in entering the Brazilian market."
To learn more about MGC Pharma visit their Company HQ here.
Disclaimer: Past performance is not an indicator of future performance.
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