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Shares in medical cannabis company MMJ PhytoTech are tanking

Supporters of legalising cannabis march in central London. Jeff J Mitchell/Getty Images

Shares in MMJ PhytoTech dropped sharply after the medical cannabis company announced a first half loss and a successful $5 million equity capital raising.

A short time ago, the shares were down 14.7% to $0.29.

The company is issuing 20,833,333 shares at 24 cents each, a 20% discount to the 15 day average price.

The funds raised will be used to accelerate the company’s entry into the Australian market following the passing of legislation by the federal government legalising cannabis for medicinal purposes.

The funding will also be applied for a phase two clinical study to further test an oral capsule for treating multiple sclerosis.

The company posted a $3.48 million loss for the six months to December. Revenue was $274,000.

Last year Phytotech merged with Canadian company MMJ Bioscience to create a “farm to pharma” global strategy, growing and processing cannabis to create new products.

Since then, the company has generated its first revenues from sales of a cannabis pill. CBD (Cannabidiol) capsules, registered as a dietary supplement in Germany, started retailing in Europe in August for about 3 euros each ($4.70).

Cannabinoids are a class of chemical compounds from the cannabis plant. CBD is the non-psychoactive cannabinoid which is said to have positive health benefits without the intoxicating effect of tetrahydrocannabinol (THC).

MGC Pharmaceuticals, another ASX listed medical grade cannabis business, is working with the University of Sydney’s business school on research and commercial opportunities for cannabis.

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