ODI Pharma AB (“ODI Pharma” or the ”Company”) published on February 27th the company’s Q2-report for 2024/2025. The following are some key points that we have chosen to highlight in connection with the report:
- Net sales affected by import restrictions again – stronger quarters expected ahead
- Runs a lean organization
- Rights issue strengthened the cash position
- New market restrictions expected to benefit ODI Pharma
Increased Import Quota is Expected to Accelerate Sales in the Coming Quarters
ODI Pharma’s Q2-report in the Company’s broken fiscal year showed net sales of SEK 0m (0). As Analyst Group stated in our last equity research report on ODI Pharma, sales have been affected by import restrictions set by the Polish government, where the import quota for medical cannabis in the country for 2024 initially were set at 6 tons, which was reached with several months left of the year. This led to that the polish government increased the estimated annual demand for cannabis, hence also the quota, by an additional 5.3 tons in October 2024.
However, the updated quota is applied from January 2025, why sales were affected during the second quarter. Nevertheless, during the first months of 2025, ODI Pharma has experienced an increased order intake following that the import quota has been raised, why we expect stronger quarters ahead.
Runs a Lean Organization Towards Profitability
The EBIT result amounted to SEK -2.3m (1.1), where the comparison periods result was positively affected by the sale of the skincare brand kandol. Total operating expenses amounted to SEK -2.4m (-1.8), an increase of 31%. Most of the operational expenses was attributable to external expenses amounting to SEK 2.2m, which was affected by costs for external service providers. Analyst Groups assumes that a main driver of the cost increase are the transaction-related costs for ODI Pharma’s rights issue conducted in December.
ODI Pharma continues to operate with a tight organization which the business model allows, paving the way for profitability as sales is expected to grow in the coming quarters. However, the strategic recruitments of Malcolm Allan to the board and Jan-Mark Edewaard as CEO is expected to increase operational expenses. During the calendar year 2024, ODI Pharma’s personal expenses amounted to SEK 1.6m, which underlines the tight organization. The recruitments are expected to increase personal expenses by approximately SEK 1m in 2025. Nevertheless, Analyst Group believes that both appointments possess relevant experience to contribute to the Company’s upcoming growth initiatives in the European medical cannabis market.
Financial Position Strengthened Through Rights Issue
The cash position at the end of December amounted to SEK 5.4m, compared to SEK 5m at the end of September and was strengthened through a rights issue with net proceeds of SEK 1.6. With the import restrictions gone and the new raised import quota in Poland for 2025, we expect sales to increase and, with the low cost base, ODI Pharma to show profitability. With an asset light business model, where earnings and cash flow are expected to correlate well, Analyst Group currently assess the cash position to be sufficient, but highly dependent on a scale up in sales.
New Market Restrictions Not Expected to have Effect on ODI Pharma’s Sales
The Polish medical cannabis market has shown strong growth since 2017, albeit from low levels. Nevertheless, 2023 was a breakout year, when approximately 4,600 kg of medical cannabis was sold in the country, compared to approximately 1,200 kg in 2022 and 400 kg in 2021. For 2024, the demand for medical cannabis was estimated at approximately 6,000 kg at the beginning of the year, which also set the import quota for the year. However, due to high demand, the quota was reached with several months remaining in the year, prompting a near doubled quota for 2025 to approximately 11,300 kg – this figure reflects the Polish government’s estimation of annual demand for medical cannabis. Consequently, the market remains in a phase of strong growth with increasing demand, which ODI Pharma is expected to capitalize on.
However, the rapid market growth has raised concerns from Poland’s Ministry of Health regarding non-medical use following many prescriptions from online clinics. Since November 2024, new regulations which states that private clinics can no longer offer remote consultations for cannabis prescriptions, and that national health physicians only can provide remote consultations and prescriptions for patients who have previously had an in-person consultation.
Nevertheless, Analyst Group do not expect the new regulations to have any effects on ODI Pharma’s business, as the Company’s business model does not rely on online clinics. Even though the overall market growth is expected to slow down, as already seen in prescription numbers which has decreased from 68,000 in October to 28,000 in December 2024, this is expected to harm competitors and make ODI Pharma gain market share. The Company has an exclusive collaboration agreement with Synoptis Pharma, part of the NEUCA group, a market leader in the wholesale distribution of pharmaceutical products in Poland and has approx. a 30% market share in all pharmaceutical sales in Poland, which is why we view the news positively from ODI Pharma’s perspective.
To summarize, Analyst Group views the second quarter as a transitional period, where sales were limited by import restrictions that have been lifted after the turn of the year. Going forward, we expect momentum to pick up for ODI Pharma, as the polish market experiences rapid growth, which ODI Pharma is expected to capitalize on through the collaboration agreement with Synoptis Pharma, a market leading pharmaceutical brand in the polish market.
We will return with an updated equity research report of ODI Pharma.
