Health Check: Medical pot play Cann Group sees an earnings turnaround through the haze 

After heavy losses, medical cannabis pioneer Cann Group expects to return to underlying profitability this year.

Pic via Getty Images

Health Check is renowned biotech journo Tim Boreham’s NEW daily wrap covering morning movers and shakers of note in the ASX Healthcare sector, Monday through Thursday.

• From the weeds of despair, buds of earnings hope are emerging at Cann Group
• Opthea proves it reliably can manufacture its advanced drug candidate for the common eye disease wet age-related macular degeneration.
• Singular Health sells a non-core asset and strikes a rent-free deal

Struggling medical pot pioneer Cann Group (ASX:CAN) says it expects to return to underlying earnings profitability this year, having posted a $13.2 million loss in the 2023-24 stanza.

The company also expects to be cash-flow positive in 2025-26.

In a presentation to the Pitt Street Research life sciences conference in Sydney today, the company has outlined a plan to increase capacity at its flagship Mildura facility to the maximum 10,000 tonnes per annum, by 2026-27.

This will ensure “strong revenue growth and profitability at today’s average selling price of $3.45 per gram.”

Claimed to be the most technically advanced indoor facility of its ilk in the southern hemisphere, the Mildura facility is only operating at 20% capacity.

Cann’s range of dried flower, oils, vapes and capsules at least are finding favour with patients, as last year’s revenue grew 12% to $15.73 million.

Cann has its place in the annals of history by being the first Australian company approved by the Office of Drug Control to cultivate medical cannabis, in 2017.

After a bright start, Cann’s fortunes turned to pot amid misfortunes including a $3.6 million scam and a share suspension on March 1 this year, after the auditors opined there was insufficient evidence of enough funding for Cann to continue as a going concern.

The shares were reinstated on June 3 after the company secured a $5 million debt facility with a private credit backer.

Cann also has a $49.4 million construction facility and a $15.6 working capital facility with the National Australia Bank. The maturity of these loans have been extended by 12 months and six months respectively, to May 2025.

The prezzo also cites third-party figures showing 2.24 million Australians are consuming 650 tonnes of cannabis annually, “both legally and illegally”.

The latter use obviously is prevailing, because the legal medical market is put at around 100 tonnes a year. Still, that market is worth $500-700 million a year (at the patient level) and growing at 25% per annum.

Cann shares this morning closed 1.3% higher at 3.8 cents, valuing the company at $16 million. At the heady highs of the ASX pot boom in 2018, the shares hit $4 and the company was worth more than $500 million.

Opthea gets its drug manufacturing down pat as phase III trials continue 

This one is admittedly a bit procedural, but if you can’t make a drug candidate reliably then don’t bother knocking on the regulators' doors.

To this effect, eye diseases house Opthea (ASX:OPT) has produced three consecutive commercial-scale batches of sozinibercept, its candidate to treat wet age-related macular degeneration (wet AMD).

The feat completes the Process Performance Qualification (PPQ) campaign to validate the manufacturing process.

“The successful completion of the drug substance PPQ campaign is an important step towards de-risking the program and a potential biologics licence application filing of sozinibercept in wet AMD,” says Opthea CEO Fred Guerard.

The Opthea quest for US approval is getting to the pointy end, with two phase III trials, collectively enrolling 2000 patients, underway.

Opthea shares surged 6% to 70 cents. After all, anything a drug developer can do to de-risk its program is welcome.

Singular Health becomes more singularly focused

Imaging group Singular Health Group's (ASX:SHG) sales of a non-core 3D printing business not only realises $450,000, but enables the company to reside rent-free at its Bibra Lake premises in Perth.

Singular chief Denning Chong says the “sensible transaction” means that the company can focus on 3Dicom, its software to enable better visualisation of medical images and improve the communication of them among practitioners involved in the diagnosis.

3Dicom is cleared for diagnostic use in the US.

The deal delivers $250,000 upfront (plus the remaining debt), with $200,000 provided by vendor finance repayable in 12 to 14 months.

Singular won’t have to pay rent at its HQ and only 25% of outgoings – an annual cost savings of $100,000.

Put in context, Singular had $1.45 million of cash as of June 30, having generated full-year revenue of $1.364 million (up 122%) and a $4.9 million loss.

Singular shares gained 2% to 9.2 cents.

Originally published as Health Check: Medical pot play Cann Group sees an earnings turnaround through the haze