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Why shares of Medlab Clinical Ltd have risen 37% in 2018

Shares of Medlab Clinical Ltd (ASX: MDC) had an excellent start to 2018 with the company’s share price rising 37% to $1.07 following last week’s announcement that it has received a licence from the Victorian state government to sell its cannabis-based medicine NanaBis and NanaBidial.

The licence will also allow Medlab to sell these products in other Australian states and is the next step in the company’s path towards commercialisation of its cannabis-based medicine.

The company’s NanaBis product will be sold under the Therapeutic Goods Administration’s (TGA) Special Access Scheme to patients with specific needs. NanaBis is projected to be available for sale in late February 2018.

A clinical trial to be conducted at Royal North Shore Hospital in Sydney has also been approved. NanaBis will be administered for advanced cancer pain which 130,000 Australian residents are diagnosed with each year. Seriously ill oncology patients will be enrolled in the trial and administered NanaBis to assist pain management instead of being treated with opioids.

Medlab has recently renewed its Federal annual licences for continued cannabis importation which allows for a substantial increase in the amount of cannabis the company can import.

Management has estimated that the annual finished-product commercial value of its allowable cannabis importation is approximately $30 million in an estimated Australian market worth $250 million.

In the 2017 financial year, the company saw its revenues grow by 70% to $4.4 million. The strong growth in revenues was due to the 118% rise in sales to $3.27 million from the company’s nutraceutical business. Despite soaring revenues, the company has not reached profitability after posting a $3.8 million loss in FY17.

At current prices, the company has a market capitalisation of approximately $194 million with $1.2 million in cash at the end of September. Medlab is just one of the pot stocks listed on the ASX that have enjoyed an excellent start to 2018, with the likes of Creso Pharma Ltd (ASX:CPH) and Zelda Therapeutics Ltd (ASX:ZLD) also enjoying gains of 16% and 29% respectively.

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Motley Fool Contributor Tim Katavic has no financial interest in any company mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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