The Cann Group Ltd (ASX: CAN) share price has plunged 5.15% in early trade after the cannabis cultivator released its half year results last night. Cann Group reported a loss for the half year, but is seeking to transition to near-term profitability.
Cann Group results
Cann Group reported sales revenue of $0.57 million for the half year. The group incurred an operating loss of $8.37 million for the period, up on the $4.89 million loss incurred in the half year to 31 December 2018. Net assets at 31 December 2019 were $69.23 million, down from $77.30 million at 30 June 2019.
Progress on Mildura facility
Cann Group progressed plans to construct its greenhouse facility in Mildura during the half, proposing a staged approach to construction. Stage 1A will increase production capacity to 12,500 kilos annually, with the construction of 2 additional proposed stages dependent on demand growth.
The Mildura site was acquired in June 2019, with the subsequent acquisition of 2 vacant lots adjacent to the property taking place in October 2019. The glasshouse structure was completed as part of the $50 million spent on the project to date. Commissioning is expected to be completed by the end of 2020.
Product launch
Cann Group's first locally sourced and manufactured formulations are due to be launched this quarter. Medicinal cannabis flower packed into 10 gram bottles is undergoing stability testing with resulting data expected to be available soon. Following this, a commercial launch of the product is expected. The product will be made available under the Special Access Scheme and via B2B sales, with potential for export.
In late September, Cann Group took receipt of product from Canadian partner Aurora Cannabis. Cann Group has multiple import and export licenses that allow it to establish a consistent and reliable supply of medicinal cannabis-based medicines, without the risk of product shortages.
Medicinal cannabis resin
Since the end of 2019, Cann Group and manufacturing partner IDT Australia Limited (ASX: IDT) commenced extraction activities for the first batches of medicinal cannabis manufactured by IDT. This represents the first commercial-scale resin extraction from Australian grown cultivars. IDT is to produce medicinal cannabis oil products with a targeted commercial release in late March.
Revised business strategy
In January, Cann Group updated its business strategy in response to the current demand/supply imbalance in global medicinal cannabis markets. The updated strategy focuses on initially meeting Australian domestic demand while export markets continue to be developed. Concurrently, there is a focus on reducing operating expenses while the company transitions to near-term profitability and positive cash flows.
