STENOCARE 3.0: Shifting Strategy to Focus on Trading and exit from Production
STENOCARE A/S
NASDAQ FIRST NORTH GROWTH MARKET, DENMARK
TICKER: STENO
This information is information that STENOCARE A/S is obliged to publish in accordance with the EU Market Abuse Regulation. The information was provided by the contact person below for publication on November 26, 2024.
STENOCARE A/S (“Stenocare” or the "Company") is pleased to announce the STENOCARE 3.0 Strategy, which will transform the Company into a leading Trading Company specialising in prescription-based medical cannabis products. Previously, the Company operated in two main areas: trading with approved medical cannabis products (“Trading”) and maintaining a Danish production facility for cannabis cultivation (“Production”). Moving forward, the company will exit its production activities and has signed a conditional agreement with Hedemann Løvstad Ejendomsselskab ApS (HLE) to end the lease contract for the cultivation facility. As part of this agreement, ownership of production equipment will be transferred to HLE. This exit will eliminate approximately 18 million DKK in cost obligations over the next six years. This strategic shift was driven by prolonged and uncertain approval timelines with the Danish Medicines Agency, where it is not possible to foresee a reliable timeline for approval of the facility. By exiting production, the company can now reallocate resources and liquidity towards trading and marketing efforts, enabling it to capture growth opportunities and expand sales globally. This marks a substantial improvement for the company, enhancing its agility and strengthening its position in the evolving medical cannabis products market.
Stenocare is today announcing plans for growing the business by focusing on sales of finished medical cannabis products, that are already approved for sales in many markets as well as the introduction of its new patented medical cannabis oil product, ASTRUM. These products are sourced from high-quality suppliers in Canada and Australia. The new STENOCARE 3.0 strategy will transform the Company into a Trading company and refocus all resources and staff and investments towards succeeding with sales of prescription-based products.
With this new strategy, Stenocare will exit its production activities at the Danish cultivation facility, significantly reducing costs and streamlining the organization. The company has determined that due to the timeline and the funding required, the likelihood of reaching breakeven for the facility is beyond its capabilities. The agreement to exchange the facility with Hedemann Løvstad Ejendomsselskab ApS is conditional upon the company's success in raising capital as announced October 14, 2024. There will be no cash proceeds from this transaction, as Stenocare will be relieved of all related costs for the production facility, including the substantial long-term lease and equipment lease. This is equivalent to a financial obligation of approximately 14 million DKK over the next 6 years, which will no longer burden the company. Additionally, the Company will also have annual savings of approx. 4 mDKK on production staff and operating costs during 2025. In general, this decision has been deemed in the best interest for the shareholders of Stenocare by the board and management.
When the legalisation of medical cannabis began in Europe in 2017, quality and legal requirements were established to mirror pharmaceutical standards. As a result, access to and control over critical elements in the value chain, such as cultivation, extraction, and packaging, became essential. This approach was also part of the STENOCARE 1.0 strategy, which aimed to integrate these capabilities in-house. However, this model proved to be too capital-intensive for most companies in the industry, with only the large international players able to support a fully integrated value chain.
Since 2017, the industry has evolved, and today, each element of the value chain is provided by specialised vendors who benefit from high-volume operations in their areas, leading to better ROI. Consequently, the industry has thereby moved away from having all capabilities in-house and to an outsourcing model, where strategic outsourcing partnerships are the path to running a successful business and making a profit.