STENOCARE has informed investors that the completion of its pharma-grade cultivation facility is an ‘important milestone’ on its journey towards profitability, despite reporting no sales and increasing losses in its third quarter.
The Danish medical cannabis producer, founded in 2017, has been selling medical cannabis products since 2018 across Denmark, Sweden and Ireland.
Its approach thus far, according to CEO Thomas Skovlund Schnegelsberg, has been to reject the notion that companies must ‘get big to get ahead’, instead favouring slow but steady investment strategies enabling it to scale up to match demand across the European cannabis market.
However, with the launch of its new fully-automated cultivation facility this summer, Stenocare looks to be positioning itself for much more ambitious growth.
Stenocare recently reported pre-tax losses in the three months to September 30, 2021, of 3.2m DKK (£362,726), rising from 2.5m DKK (£286,230) in the same period last year and 2.3m DKK (£260,500) in the previous quarter.
Stenocare also reported no sales during the quarter, following revenues of 1.5m DKK (£172,000) in Q2 which consisted solely of sales of its THC and mixed-THC-CBD oil to the Swedish market via a partnership with Tamro AB, launched last year.
Despite the losses, which were attributed to ongoing investments in its supply chain and regulatory strategy, Mr Schnegelsberg told BusinessCann that Stenocare is ’in a good place’, adding that the figures demonstrated how ‘lean’ his organisation is able to operate.
“We have made investments slowly but surely over a number of quarters. That approach basically makes sure that we stretch our capital much, much longer than the rest of the industry. And therefore we don’t have the same pressure. I mean, as you can see, we have no debt, we have cash in the bank.”
He also explained that the lack of sales over the quarter reflected Stenocare’s strategy of supplying products in bulk, adding that pharmaceutical distributors want to have as few shipments and move product as few times as possible ‘because every time they touch it that then reduces their margin’.
Stenocare has previously sold products in its home country of Denmark, where it says it previously represented some 85% of the market, but recently pulled its product because its supplier didn’t meet what we would expect from a pharmaceutical point of view’.
Similarly, it came close to having an oil product approved in Ireland, but pulled out due to differences with its supplier, leaving Sweden as its only sales avenue.
According to Mr Schnegelsberg, Stenocare hopes to relaunch products in both of these markets ‘very shortly’.
‘World’s Most Advanced Facility‘
During the period, Stenocare completed the 18-month-long construction of its indoor cultivation facility in Denmark, which it says is ‘probably the most advanced and highest standard medical cannabis indoor cultivation facility in the world’.
Crucially this facility will allow Stenocare to cultivate its own medical cannabis and use it to bring products to market for the first time since its inception.
Prior to this, Stenocare has relied on two separate third-party suppliers from Canada and Israel to create its products, and intends to keep these on to maximise capacity moving forward.
“If you look at the ambition, we have, for the next five years, we want to be in eight to 10 new countries in five years from today. And if we only supply products from our Danish facility to all countries we are in in five years, it will easily be covered by the capacity that we have in the new facility,” Mr Schnegelsberg said.
“The mixture of having the two extra suppliers and their capacity and their product portfolio, together with the Danish facility gives us the capability to scale to a very high volume.”
The facility has reportedly been tested and is able to be put into operation immediately, allowing the company to begin selling both finished products to its supply partners in Sweden and its own licensed products in the ‘near future’.
Stenocare say they expect to be in a position to ship bulk medical cannabis and prepare for the first product approval of their own product in the next 12 months, but are still awaiting licences to operate in several markets, but has not yet disclosed which it is targeting.
Alongside a boost in quantity, Stenocare sees opportunities in the boost in quality its new facility will offer.
“We can control quality, and documentation to a whole new level. And therefore we think that will bring up what we tend to call pharma-grade materials,” he continued.
“So first, we’ll bring our premium products that are very unique to Stenocare and later on, we think that there might be some of the big pharmaceutical companies that will be looking for raw materials for their own products, and they don’t want to risk buying the materials that don’t have the level of documentation and quality that that we can supply.”
Its facility has been constructed to comply with the specifications of the Danish Medicines Agency, which requires cultivation without the use of pesticides, plant hormones or GMOs, alongside uniformity of flowers, control and redundancy measures and the ability to document the individual steps in each grow cycle.
The entire facility is fully operated and monitored by computers, which control everything from irrigation, air pressure and climate control to staff access to individual grow rooms. It will also monitor and process growth data 24/7.
Stenocare also believes its ongoing investment into regulatory strategy is set to ‘redefine what markets it can enter’.
Mr Schnegelsberg noted that Sweden has not yet legalised medical cannabis, but based on the company’s ‘regulatory experience’ it has managed to find partnerships allowing it to get products accepted for sales ‘under a regulatory scheme that is not formalised by medical cannabis law’.
It reportedly spends over a year researching and investing in a country before entering the market, and is confident it can replicate this framework elsewhere.
“This opens up the entire world to sales from Stenocare, because then, we do not need to wait for formal legalisation of medical cannabis in that particular market.”
Elsewhere, Stenocare has launched a partnership with pharmaceutical product development company that has an oil which can boost bioavailability from 12% to as high as 66%.
This would reportedly have numerous benefits for patients, including lower cost for those who require high doses, and less side effects which could encourage more prescriptions from medical professionals.
Main image: Stenocare CEO Thomas Skovlund Schnegelsberg outside its ‘secure’ Danish facility