CS Medica has entered into a joint venture and investment agreement with Chinese Inner Mongolia RongShi Hi-Tech Co. Ltd. regarding production of CS Medica’s CANNASEN in China, distribution agreement in Asia and a private placement of up to 60 MDKK in CS Medica.
CS Medica: Ticker: CSMED | Price: DKK 8.0 | Market Cap: DKK 99 million | YTD price development: -27%.
CS Medica is a Danish MedTech/biotech company focusing on i.a. treatment of pain, stress and autoimmune diseases with CBD (non-euphoriant substance from the cannabis plant) as a primary ingredient. The products are sold under the brand name CANNASEN to e.g. pharmacies and retail chains such as Matas, and as OEM to pharmaceutical companies and manufacturers. Several of CS Medica’s products are probably the only CBD products registered as “medical devise” under the European MDD directive, which gives the company a first mover advantage in CBD-based products.
Joint venture with 49% ownership for CS Medica
CS Medica has entered into a joint venture with Inner Mongolia RongShi Hi-Tech Co. Ltd (“RongShi”) for the production of CS Medica’s CANNASEN CBD products and distribution to the Asian market. CS Medica owns 49% of the newly established company, Ringshi Medica (Ordos), Ltd. and contributes with know-how and instructions for the production of CANNASEN. The Chinese partner, in addition to the production itself, is responsible for purchasing land, construction of the factory and coordination of approvals related to the production with a know-how of the local conditions.
The Chinese partner will distribute the CANNASEN CBD and cosmetic products on the Asian market, including China but excluding India. Initially, the cosmetics products will be launched in Thailand and Japan.
Ringshi Medica (Ordos) Ltd has been established with a registered capital of DKK 50.4 million.
Private placement with large share premium
Simultaneously with the joint venture agreement, Mongolia RongShi Hi-Tech Co. invests up to 60 MDKK at a price of DKK 28.13 in CS Medica, corresponding to a price premium of 454% compared to the closing price on Friday of DKK 5.13. the closing price on Friday of DKK 5.08. The issue will increase the number of outstanding shares by 14.76% and is subject to approval by CS Medica’s general meeting.
The investment is divided into two parts. The first 30 MDKK will be paid out when 3-5 CANNASEN CBD products are approved by the Chinese health authorities. CS Medica expects the approvals to take place within 3 months if the products are approved as Class 1 Medical Devices and within 12 months if the products are approved as Class 2 Medical Devices.
The second half of the investment of an additional DKK 30 million is conditional on CS Medica achieving a turnover of DKK 62.4 million in the 12-month period following the payment of the first DKK 30 million. If CS Medica does not achieve a turnover of min. DKK 62.4 million in the 12-month period, Mongolia RongShi Hi-Tech Co. will receive the other half of the shares free of charge, so that the total investment will then be DKK 30 million at a price of 14.065.
The first DKK 30 MDKK will probably not be received by CS Medica until July this year at the earliest, and possibly not until April 2024, and the total investment of up to DKK 60 million will probably not be received until July 2024 at the earliest. CS Medica will therefore still need a capital injection, as the company has previously announced.
Share price increase for CS Medica
CS Medica and Inner Mongolia RongShi Hi-Tech Co. Last year, CS Medica and Inner Mongolia RongShi Hi-Tech Co. entered into an LOI on investment and joint venture, but were unable to reach an agreement, which had a significant negative effect on the share price. Last week, the share price rose 29% and since the announcement of the agreement, the share price has today risen by approx. 50%.
Price development for CS Medica A/S vs. Kapital Partner Healthcare Index over the past year