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Why cannabis company MGC Pharmaceuticals Ltd is up 14% today

One of the best performers in morning trade has been the MGC Pharmaceuticals Ltd (ASX: MXC) share price.

At the time of writing the cannabis company’s shares are up almost 14.5% to 10.2 cents.

What happened?

This morning MGC Pharmaceuticals released an operational and strategy update to the market.

There were a number of positives listed in the comprehensive update which I suspect may have impressed investors today.

The first is that the production of its first CannEpil batch is on track to complete this month. If production of this first batch is successful, management expects its European laboratory and compounding facility to be granted its full GMP Certification.

CannEpil is an adult medical cannabis epilepsy product which management expects to generate revenue of $1 million per annum from its first full year of distribution with specialist Australian pharmaceutical distributor HL Pharma.

Elsewhere, things appear to be going well with the company’s MGC Derma business. As well as launching its products on global online cosmetics store Cult Beauty, its agreement with Korean cosmetics manufacturer Varm Cosmo appears to be moving along.

Varm Cosmo is expected to launch its premium range of CavaLabs Derma products in the coming months, which is utilising the company’s formulations.

The cosmetics market could be a great source of revenue for the company in the future, though at this stage it is unclear whether it will be a fad or something more.

Should you invest?

I think that MGC Pharmaceuticals looks like it could be positioned for a positive 2018 with meaningful revenues being brought in.

However, I wouldn’t be in a rush to invest just yet. I think a lot of growth has been built into its share price already, making it a high-risk investment.

For now I would keep it on your watchlist alongside fellow promising cannabis companies Creso Pharma Ltd (ASX: CPH) and Auscann Group Holdings Ltd (ASX: AC8).

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Motley Fool contributor James Mickleboro has no position in any of the stocks 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 Scott Phillips.

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