Despite a revenue in H1 22/23 of DKK 0.3 million (DKK 0.2 million) CS Medica maintains the expectation for the year’s revenue growth of 120-130% corresponding to a revenue of DKK 24 million.
CS Medica: Ticker: CSMED | Price: DKK 6.44 | Market Cap: DKK 84m | YTD price development: -42%.
CS Medica is a Danish MedTech/biotech company focusing on, among other things, the 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.
45% revenue growth
Revenue in the first half of the year (October 2022 – March 2023) was 45% to DKK 0.3 million, which was disappointing compared to the expected growth for the full year of 120-130% corresponding to DKK 24 million compared to DKK 10 million realized last year.
The weaker than expected development is, among other things, due to shortage of goods, production delays, delays in the design of own-label solutions and the company’s low liquidity.
CS Medica maintains its guidance for the year of a revenue of DKK 24 million. This is justified by, among other things, order intake in the first half of the year of DKK 3 million for delivery in Q3 and Q4 (April – September 2023). In addition, sales promotion initiatives have been increased, including a larger sales team, which according to the company has already yielded results, as well as the launch of three new products within VET (products for livestock) and a total of three products within SPORT and HAIR.
Financing secured and in the pipeline
The founders of CS Medica (CEO and CFO) have secured the company’s short-term financial needs with a total loan of DKK 3 million. However, the company continues to focus on the short-term financing of the company to ensure stock and fast delivery of orders.
During the current quarter (April – June), CS Medica expects to receive the first half of the investment from the Chinese JV partner RongShi corresponding to DKK 30 million. The investment is dependent on CS Medica receiving product approval from the Chinese health authorities and will be made through an issuance of shares at a share price of DKK 28.13.
In Q1, CS Medica entered into a joint venture with Chinese RongShi for the production and distribution of CS Medica’s CANNASEN CBD products to the Asian market. CS Medica owns 49% of the joint venture company, where they will assist with know-how on the production itself.
Similarly, CS Medica entered into an investment agreement with the same company for up to 60MDKK in financing at a price of 28.13. However, the financing depends on several factors. CS Medica will receive the first 30 MDKK if 3-5 of CS Medica’s products are approved in China, and the next 30 MDKK if they achieve a turnover of 62.4 MDKK in the 12-month period following the payment of the possible first payment. If they do not reach the turnover target, RongShi will receive 138,642 shares free of charge, so the total investment will be 30 MDKK at a price of 14.065.
Read more about the jointventure and investment agreement with RongShi: CS Medica enters into DKK 60M agreement with 454% premium to share price and a joint venture for production and sales to the asian market with Chinese partner
Positive pipeline development with new approval
CS Medica has a large number of products under development and after the end of the quarter, the company has most recently received approval for CANNASEN Pain Patch in Israel. They have also developed a gel against hay fever, which has also demonstrated good results. During 2023, the company expects to receive approval for an immune booster, pain patch for horses, anti-hair loss shampoo, etc.
Read more about the latest approval in Israel: After positive study, pain patch is now also approved in Israel.
Volatile share price development over the past year – and much more to come in the short term
Over the past year, CS Medica’s share price has risen 16%, while the Kaptial Partners Healthcare Index (KPHC), which tracks all healthcare companies in the Nordic region, has fallen about 25% over the same period.
In the short term, the most crucial event for the share price is the development of the investment agreement with the Chinese partner. If CS Medica receives the investment amount of DKK 30m, we expect a sharp increase in the share price towards DKK 28 – or more than 4x the existing price level. If the investment is not received before July, we expect the share price development to be negative – depending on the announcements from the company.
Read more: The investment case in CS Medica.
Read more: Investment case in CS Medica
The share price development of CS Medica vs. Kapital Partner Healthcare Index the past year