Why the Cann (ASX:CAN) share price is pushing higher

The Cann Group Ltd (ASX: CAN) share price is pushing higher today following the release of a couple of announcements.

At the time of writing, the cannabis company’s shares are up 2.5% to 79 cents.

Why is the Cann share price pushing higher?

Investors have been buying Cann shares today after it announced a new acquisition.

According to the release, the company has agreed to acquire the Satipharm business from Harvest One Cannabis in an all-scrip deal. The two parties have agreed a total maximum consideration of C$4 million worth of Cann shares, including conditional deferred consideration of up to C$1.5 million.

Satipharm is a Europe-based business exclusively licensed to develop and market the proprietary Gelpell delivery system for cannabinoids.

Gelpell capsules are manufactured by Swiss-based GMP manufacturer Gelpell AG which, with Satipharm, jointly owns the patented delivery technology. The release explains that Satipharm has generated data in support of its claims that this patented delivery technology exhibits improved stability and bioavailability of cannabinoids compared to other formulations.

It currently has existing distribution agreements in place in the UK, Ireland, and Eastern Europe.

Cann’s CEO, Peter Crock, commented: “The technology will allow us to develop more targeted and effective dosage forms of both low dose CBD and differentiated THC prescription formulations of medicinal cannabis. We believe the Satipharm product offers superior efficacy, delivery and stability qualities compared to other products and we expect these unique features, coupled with its presentation in a more familiar capsule form expected of pharmaceuticals, to generate greater confidence from prescribing doctors.”

“The Satipharm acquisition provides an opportunity to accelerate both short-term and longer-term revenues. Over time, we believe we can expand the number of markets into which these products are sold and expand the range of formulations to be targeted at both the OTC and prescription segments,” said Mr Crock.

Speaking of revenues, Cann also provided a revenue update this morning.

How is Cann performing?

Unfortunately, this announcement wasn’t as positive as the acquisition announcement. It turns out that Cann isn’t performing as well as it was expecting.

According to the release, due to COVID-19 related regulatory delays, management has downgraded its revenue guidance materially.

Cann is now forecasting revenues of between $8 million and $10 million in FY 2021. This is down 33% to 46.5% from its previous guidance of $15 million. It also remains subject to relevant regulatory clearances being secured.

Management notes that substantial delays have been incurred in relation to obtaining required regulatory approvals both in Australia and in Germany.

But judging by the Cann share price performance today, the acquisition news appears to have been enough to offset its revenue guidance downgrade.

More reading

• Why Cann, Creso, LiveTiles, & New Corp shares are tumbling lower today
• Why the Cann (ASX:CAN) share price is crashing 10% lower today
• Why the Cann (ASX:CAN) share price is sinking lower today
• Up in smoke! Why ASX cannabis shares are having a bleary day

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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