game-changing deal James Mickleboro | October 20, 2017 | More...

game-changing deal
James Mickleboro | October 20, 2017 | More on: MXC



One of the biggest movers on the market on Friday has been the MGC Pharmaceuticals Ltd (ASX: MXC) share price.

At one stage the medical and cosmetics cannabis company’s shares were up as much as 82%. At the time of writing its shares have given back some early gains and are 53% higher at 5.8 cents.

Why have its shares rocketed higher?

This morning MGC Pharmaceuticals announced that it has signed a binding terms and conditions supply agreement with South Korea-based Varm Cosmo.

The agreement will see MGC’s Derma division supply five of its cannabidiol cosmetic products in white-label form to be sold to consumers as part of Varm Cosmo’s cosmetics range.

According to the release, the agreement includes a minimum agreed purchase quantity of 15,000kg per month, which is expected to generate approximately $40 million in annual revenue for the MGC Derma division.

MGC Derma is a 51:49 with cosmetic manufacturer Dr. M. Burstein Ltd.

The two parties are expected to sign a binding sale agreement in the coming 31 days and will look into expanding the product range and supply volumes accordingly.

Should you invest?

Considering the South Korean beauty market is estimated to be worth US$13 billion per annum and facial skincare products are believed to account for 51% of the market, MGC could certainly be in a strong position to profit if these cosmetic products are well received by consumers.

But at this stage it is impossible to know how the products will fare in the market.

Whilst I’m optimistic that this is the start of something very special, I would suggest investors keep MGC on their watchlist for now alongside other promising pot stocks such as Auscann Group Holdings Ltd (ASX: AC8), Cann Group Ltd (ASX: CAN), and Creso Pharma Ltd (ASX: CPH).