DanCann Pharma A/S: Future strategic direction

COPENHAGEN, Denmark, 26 October 2023 – DanCann Pharma A/S (SS: DANCAN) (OTCQB: DCPXF) ("DanCann Pharma" or the "Company"), a Danish company powered by cannabinoids, hereby provides detailed comments on its new strategic direction through a comprehensive press release.

Introduction: The DanCann Pharma 2023-2025 focus

Historically, the Company had a broad approach within the market for cannabinoids, involving various aspects of the value chain, including cultivation, production, harvesting of raw materials, and packaging, as well as the sale and distribution of final products.

Cultivation, and this part of the value chain, was a necessity for many when the Pilot Programme was established, and it was also the choice for DanCann Pharma at that time. This mainly due to the fact, from a political perspective, that the option for the import of cannabis bulk was not a possibility.

As part of the strategy, DanCann Pharma has obtained all the necessary certifications, including GACP and GMP, to operate effectively.

The market for the production of cannabis bulk has become highly competitive, and this competition is expected to increase, especially in mass markets, as new markets become proficient in the regulatory aspects of its production.

With a focus on profitability, capital efficiency, and a more streamlined and asset-light business approach, the plans for the next 12-24 months will solely involve the importation, packaging, sale, and distribution of final products. This strategy leverages the Company's strong regulatory expertise under the Pilot Programme in the Danish market, where the Company sees its justification, with a focus on this area in the upcoming period.

This plan is to further grow the already profitable activities within the CannGros subsidiary and is considered far more robust by the management and the board of directors.

As part of the new direction, the company has identified the following three key areas as focus:

• Market access, sourcing, and distribution.
• Regulatory and medical affairs.
• Medicinal cannabis targeting the endocannabinoid system (ECS).

The Company will for the next 12-24 months not invest further in heavy projects with substantial assets but instead focus on market access, sourcing, and distribution. There will be specialized emphasis on cannabinoids and medicinal cannabis targeting the endocannabinoid system.

The portfolio to be built and its corresponding pipeline will encompass both generic and proprietary IP products, aiming to ensure a comprehensive and extensive product portfolio. Additionally, the Company intends to provide medical equipment that complements the products and their uptake.

The Company will handle aspects throughout the EU-GxP sphere and manage the importation of medicinal products and narcotics. It will oversee packaging, warehousing, logistics, shipping, labeling, and batch release.

The Company’s customers will continue to be partnerships with the major wholesalers in the country, facilitating the swift delivery of its portfolio to all pharmacies across the nation.

The Company operates within the Danish market, leveraging its strengths in business development, supply chain management (sourcing and distribution), regulatory and medical affairs, as well as market access.  

Market Guidance: Target for breakeven in 2025

The strategy for the period 2022-2025 is centered around delivering best-in-class results. The Company will prioritize its regulatory efforts, raise the bar on its financial performance, and drive further value creation for its shareholders and patients.

This strategy is founded on an asset-light business plan designed for optimal capital efficiency. It reflects the commitment to a sustainable future, one that benefits both the patients and the Company’s financial well-being.

The targets:

1. Revenue growth: The goal is to achieve revenue growth, exceeding 300% within the specified period.

2. Product expansion: This growth will be primarily driven by the introduction of 4-6 new products as part of the Pilot Programme with medicinal cannabis.

3. Breakeven target: The strategic plan assumes that the Company will attain the breakeven point by the year 2025.

In the above statement, it is estimated that the Company will achieve a total market share for Rx cannabis- and cannabinoid medicines of approximately 20-25% by 2024. Additionally, the company expects that through the introduction of several new products, it aims to attain an estimated market share in the same market of around 30-40% by 2025, depending on the market's development and size at that time.

For further market information, please see above in this press release.

CEO, Jeppe Krog Rasmussen, comments:

“Our new financial target for 2025 is ambitious, yet realistic. We are targeting a revenue growth exceeding 300%, and with that, attain the breakeven point by the year 2025. This is not an aspiration or wishful thinking; it is a clear and explicit target with a firm timeline – and we are committed to meeting it.

We have established a clear plan and hold a strong ambition to reconstruct the Company's reputation and restore the trust that may have been eroded due to the unsuccessful strategic directions taken early on in our journey, incurring significant costs."

And continues:

“We will now implement those changes to become aligned with our true mission.

Today, we turn to the numbers to tell our story. It's a testament to a more robust business model. Our strategy and focus are rooted in a far more streamlined asset-based approach, where profitability and returns take center stage.

I remain hopeful that we can rebuild from here, leveraging the immense potential that I know resides within us.”

Market outlook

With the primary focus set on the Danish market, where the Company have already established a strong presence, its strategic approach entails a phased expansion plan. Initially, the emphasis lies in gaining a substantial share of the market rather than solely driving its growth. This deliberate approach allows the Company to solidify the position in the industry before venturing into broader horizons.

To execute this strategy, the Company have set its sights on introducing 3 to 5 new products over the course of the upcoming year. However, the exact number of new products may be contingent upon the Danish Medicines Agency's approval processes. Anticipating the first product to receive approval in May to June 2024, the Company aim to submit our initial application in December.

It's worth noting that the Danish market currently boasts a retail revenue of approximately DKK 50-60 million attributed to prescription-based cannabis medicine. This represents the current landscape the Company operate in, providing a substantial opportunity for growth and a solid foundation for the market expansion strategy.

The market has previously seen products similar to those the Company intends to introduce. Thus, the explanation of its guidance is rooted in a methodical data-driven approach based on historical trends, while considering competitive factors.

With the introduction of new products in the Pilot Programme, especially oral extracts, which are also available in the magistral scheme, it has been observed that the Pilot Programme has attracted a significant number of patients from the pool. This trend was observed both in the spring/summer of 2019 and is the same trend that is being seen again and has been seen since the spring of 2023.

Additionally, in line with the Company's successful product launches and market share expansion, it will continuously drive the evolution of the market. This will be achieved through educational initiatives and medical affairs efforts, marking a notable focus. Notably, this sector has remained relatively untapped from a Danish perspective in terms of interest and involvement, making it a prime area for growth and development.

Patients in Denmark: Number of unique users per quarter from cannabis- or cannabinoid-based Rx medicines:

Patients in Denmark: Number of unique prescriptions per quarter from cannabis- or cannabinoid-based Rx medicines:

Total revenue (MDKK) on quarterly basis from cannabis- or cannabinoid-based Rx medicines:

Total revenue (MDKK) on quarterly basis from cannabis- or cannabinoid-based Rx medicines from each sector:

Update on MYCB1 partnership

MYCB1 and DanCann Pharma entered into an exclusive agreement earlier this year for the distribution and sale of MYCB1's products in Scandinavia. Substantial work has already been completed in this regard, and the development and preparation of the first two applications to the Danish Medicines Agency are well underway. The first application is expected to be submitted in December.

As a critical component of the Company's future, the Company is providing an update on the progress and its high expectations for this partnership.

Currently, the Company is distributing Bedrocan®, Bediol®, and Bedica® products in both flower and granular formats to Danish medical wholesalers and pharmacies. These products are manufactured by Bedrocan International. MYCB1 utilizes these products as their source material in their delivery formats, including the products DanCann Pharma intends to introduce under the Danish Pilot Programme in an oral delivery format.

MYCB1's prescription-only medications are produced by MYCB1 GmbH, a German company located in Steinheim, which sources the raw material from Bedrocan International, a Netherlands-based supplier of GMP-grade medicinal cannabis. Furthermore, MYCB1 GmbH is also certified with GMP by the European Medicines Agency. In other words, a product with EU-GMP compliance from start to finish.

With its fully compliant GMP extracts, these products are highly expected to be suitable for the Danish Pilot Programme market, and the Company believes that these products have the potential to transform the landscape of prescriptions, and redeem some of the unrealized potential in the Pilot Program with medicinal cannabis. Due to the Company's, as well as the Danish Medicines Agency's, familiarity with Bedrocan International as a manufacturer and supplier to the Danish market through the Company's distribution, it is with great confidence that the Company anticipates a successful product launch.

This confidence is based on the extensive quality assurance provided by Bedrocan's GMP flowers and granules, which are further processed at MYCB1's GMP facility in Germany. This ensures an unparalleled level of transparency and guarantees qualified and standardized products for the market.

The Company is currently finalizing the product application and as previously mentioned, expects to submit the first application in December, with anticipated approval in the second quarter of 2024.

Extraordinary General Meeting

In conclusion, the Company informs that an extraordinary general meeting is expected to be convened with the purpose of changing the Company's purpose to that of an investment company. This is in order to build a structure where DanCann Pharma A/S will own subsidiaries with activities under it.

It is also planned that the Company's production facility will be placed in a subsidiary named "BP1 ApS," which is currently in the process of being established.

Since the last update

Since the Company's last press release regarding its new direction, it has executed according to the announcements and rightsized the organization as previous communicated. This has also reflected in the adjustment of the board of directors, which is now tailored to three members from the previous five members. Louise Bertelsen Forman and Alexander Schoeneck are leaving the board as part of the plan. Their departure is a joint decision, with the best interests of a lean and slim-fit board of directors in mind for this new setup.

Chairman of the Board, Carsten trads, comments:

"I would like to take this opportunity to thank both Alexander and Louise for their contributions to DanCann Pharma.

The Company is facing a new future, and I have great confidence that we can succeed with the new set board, and, in doing so, act in an agile and swift manner in our decision-making within a new and fast-moving industry."

The results of these changes will already become apparent in H2-2023 and will come into full effect at the beginning of the new year, where the Company will operate with a lower cost base and a leaner organization and financial structure.

Sources for the market data:

• Medstat
• E-Sundhed

About DanCann Pharma A/S

DanCann Pharma A/S (SS: DANCAN) (OTCQB: DCPXF) was founded in 2018 and is a Danish biopharmaceutical Company powered by cannabinoids.

DanCann Pharma A/S (SS: DANCAN) is listed on the Spotlight Stock Market in Copenhagen/Stockholm and side listed on OTCQB Venture Market in USA (OTCQB: DCPXF). For more information, visit: www.dancann.com

For further information, please contact:

Jeppe Krog Rasmussen, CEO

E-mail: jkr@dancann.com

Forward-looking-statement:

Some statements in this release may contain forward-looking information. All statements, other than of historical fact, that address activities, events, or developments that the Company believes, expects, or anticipates will or may occur in the future (including, without limitation, statements regarding potential acquisitions and financings) are forward-looking statements. Forward-looking statements are generally identifiable by use of the words "may", "will", "should", "continue", "expect", "anticipate", "estimate", "believe", "intend", "plan" or "project" or the negative of these words or other variations on these words or comparable terminology.

Forward-looking statements are subject to several risks and uncertainties, many of which are beyond the Company's ability to control or predict, that may cause the actual results of the Company to differ materially from those discussed in the forward-looking statements. Factors that could cause actual results or events to differ materially from current expectations include, among other things, without limitation, the inability of the Company, to obtain sufficient financing to execute the Company’s business plan; competition; regulation and anticipated and unanticipated costs and delays, the success of the Company’s research strategies, the applicability of the discoveries made therein, the successful and timely completion and uncertainties related to the regulatory process, the timing and outcomes of regulatory or intellectual property decisions and other risks disclosed in the Company's public disclosure record on file with the relevant securities regulatory authorities.

Although the Company has attempted to identify important factors that could cause actual results or events to differ materially from those described in forward-looking statements, there may be other factors that cause results or events not to be as anticipated, estimated or intended. Readers should not place undue reliance on forward-looking statements. The forward-looking statements included in this presentation are made as of the date of this presentation and the Company does not undertake an obligation to publicly update such forward-looking statements to reflect new information, subsequent events or otherwise unless required by applicable securities legislation.

This disclosure contains information that DanCann Pharma A/S is obliged to make public pursuant to the EU Market Abuse Regulation (EU nr 596/2014). The information was submitted for publication, through the agency of the contact person, on 26-10-2023.