A Deep Dive Into The Australian Cannabis Market

A Deep Dive Into The Australian Cannabis Market

Like Really? Boxing legend Mike Tyson is developing his own marijuana holiday resort, the Tyson Ranch near Desert Hot Spring. The resort will include a music festival venue, a luxury hotel, the world’s longest lazy river, Tyson University and glamping tents.

But why did we touch upon this at the very onset? The cannabis industry is flourishing across the globe as the medicinal and recreational varieties of cannabis continue to attract consumers. The industry has put the pedal to the metal in Australia with the number of patients approved for medicinal cannabis prescriptions rising rapidly. The number of doctors and specialists prescribing Cannabis has been growing, which calls for rapid cultivation by farmers. The industry will also help boost the job market in Australia.

About Cannabis Legalization

The legalisation of Cannabis around the world for medicinal as well as recreational purposes has gained much popularity over the last few years. While the usage of the drug has been completely legalised in most states of the US, some countries are still battling to attain permits for usage of Cannabis for recreational purposes. The legalisation will help the government to regulate cannabis cultivation, preventing the farmers from damaging the environment.

The legalisation of Cannabis comes with various benefits in the form of job creation and better medical treatments. Consistent efforts are being made towards decriminalisation of Cannabis, which portends a need to assess the future growth prospects of the Cannabis industry.

Cannabis Legalization in Australian Market

In Australia, the cannabis cultivation for medicinal and related scientific purposes bagged the approval under the Narcotic Drugs Amendment Act in 2016. The Act enabled cannabis producers to apply for a license to legally grow cannabis for medicinal use in Australia. However, the overseas export of cannabis products for medical use was legalized by the Australian government in January 2018. The cannabis is legalised in Australia at the Federal level, but the legalisation for personal use is still on hold. It is expected that the legalisation of cannabis would eliminate the cannabis black market that is earning a multi-billion dollar per year.

Cannabis Approvals in Australia

The cannabis approvals have been rising in Australia since legalisation. The body that regulates the therapeutic goods in Australia, the Therapeutic Goods Administration (TGA) recently released data on the number of new medical cannabis approvals held since June 2018 in Australia. The data indicated that since the Federal Government legalized the cannabis for medicinal use, over 7700 approvals have been made till May 2019.

The below chart shows the number of approvals provided in each month since June 2018:

Australian Players in Cannabis Market

The growing demand for cannabis across the world post legalisation, has opened the doors of opportunity for players operating in the cannabis market. Some of the global players like Canopy Growth Corporation, The Scotts Miracle-Gro Company, Canopy Rivers Inc., Akerna Corp. and Charlotte’s Web Holdings, Inc are also contributing towards the expansion of the industry.

The Australian companies like Cann Group Limited (ASX: CAN), AusCann Group Holdings Ltd (ASX: AC8), THC Global Group Limited (ASX: THC), Creso Pharma Limited (ASX: CPH), Elixinol Global Limited (ASX: EXL) and Medlab Clinical Ltd (ASX: MDC) are also expanding their footprint in cannabis space.

Global Presence of Australian Players in Cannabis Market

As the opportunities are surging in the fast-growing cannabis market, the Australian companies are expanding their presence across the globe. Many companies have already extended their operations with several partnerships and distribution agreements.

The below chart shows the countries in which the above-mentioned Australian companies have spread their operations:

Operational Highlights of Australian Cannabis Players

Let us now have a look at the recent developments made by the above-cited companies on the operational front in the figure below:

Now let us have a look at some recent updates of these ASX-listed stocks in some detail:

Cann Group Limited

Cann Group Limited (ASX: CAN) is engaged in the cultivation of cannabis for medicinal and research purposes. The company recently issued 1,000,000 fully paid ordinary shares for a price of $0.37 per share as a result of the exercise of Underwriter Options. It recently fabricated the first supply of medicinal cannabis resin grown and produced in Australia to the Victorian Department of Health and Human Services.

In its recently released quarterly results for March 2019, the company updated that it had entered into a non-binding Heads of Agreement to acquire a site within the Mildura region for the purpose of constructing a state-of-the-art greenhouse for large scale cultivation and production of medicinal cannabis.

During the period, the company entered into an agreement with Aurora Cannabis Inc to offtake the medicinal cannabis produced at Cann’s existing and planned expansion facilities till 2024. The period also witnessed an investment of $250,000 in independent medicinal cannabis clinic group, Emerald Clinics, to support the ongoing national rollout program of its clinics.

AusCann Group Holdings Ltd

AusCann Group Holdings Ltd (ASX: AC8) manufactures clinically validated cannabinoid medicines. In a recent announcement, the company updated investors on a change in the substantial holding of Canopy Growth Corporation, wherein the voting power of the shareholder has increased from 11.13% to 13.28%.

The quarter ending March 2019 saw the appointment of Ido Kanyon as the new CEO. During the period, the company completed acquisitions and entered into a set of agreements for business growth. The company entered into an agreement with Canada’s MediPharm Labs for the supply of cannabis resin. The purpose of the agreement was the development and production of its first line of hard-shell capsules leading to a stronger raw material supply chain. The agreement will also support the development of safe and consistent quality cannabinoid medicines.

During the quarter, the company’s joint venture DayaCann continued its advancement in Chile with the commencement of first cannabis cultivation activities anticipated later this year. The quarter was also marked by the acquisition of R&D facility site in Perth, Western Australia for a consideration of $5.25 million.

THC Global Group Limited

THC Global Group Limited (ASX: THC) is currently engaged in the provision of high-quality medicinal cannabis products to patients across Australia.

The company recently updated that it has received a medicinal cannabis manufacturing license. The license allows THC Global to freely conduct research and undertake the production of medicinal cannabis products in Australia. The company also has an agreement in place with EVE Investments for the usage of medicinal cannabis. Canndeo Limited, a wholly-owned subsidiary of THC Global, also received a license for manufacturing of cannabis recently.

During the March Quarter 2019, the company commenced cultivation activities at Queensland Strain R&D and Cultivation Facility. The period also saw the acquisition of a property in Nova Scotia, Canada, being developed into a cannabis production facility. $3 million of capital was raised via a Share Purchase Plan along with an additional amount of $420,200 from the conversion of THCO Options.

Creso Pharma Limited

Creso Pharma Limited (ASX: CPH) is an Australian firm engaged in the development of pharmaceutical-grade cannabis. In a recent announcement, the company updated that the business is to be acquired by PharmaCielo Ltd. PharmaCielo Ltd is a parent company of PharmaCielo Colombia Holdings S.A.S., the largest producer of cannabis and fully licensed producer of medicinal cannabis oil products in Colombia. The consideration to be paid for the transaction is $122 million at $0.63 per share.

                   

Potential Patients in Colombia (Source: Company Reports)

The acquisition of Creso will involve two schemes of arrangement, one between Creso Pharma and its shareholders and the other between the company and its option holders. While the shareholders will be entitled to 0.0775 shares of PharmaCielo for every Creso Pharma share, the option holders will get 0.0185 PharmaCielo shares for one listed option in Creso Pharma.

During the March Quarter 2019, the company adopted an approach of global expansion through collaboration and agreements across Australia, Europe and North America. The company lately inked an agreement with Hempmate AG for the development of CBD hemp products. A letter of intent was signed with Ceyoka Health Private Limited in the month of January to expand the presence of medical cannabis across Sri Lanka. The period also saw signing of an agreement with Medleaf Ltd for establishing a combined cannabis business in New Zealand.

Medlab Clinical Ltd

A medical life sciences company of Australia, Medlab Clinical Ltd (ASX: MDC) recently informed about the human Ethics approval received by the company for a second NanaBis™ trial. Known as an Observational Study, the trial will support MDC in the acceleration of its regulatory progress.

In May this year, the company also executed a Heads of Agreement with Mega Lifesciences Public Company Limited, headquartered in Thailand for the further global distribution of NanaBis™.

Elixinol Global Limited

A global leader in the cannabis industry, Elixinol Global Limited (ASX: EXL) is engaged in the cultivation and manufacturing of medicinal cannabis products. Besides this, the company sells hemp food and wellness products and hemp-derived CBD dietary supplements.

On 11th June 2019, the company informed about its strategic partnership with RFITD Holdings, LLC, via a Colorado-based entity Infusion Strategies, LLC. Under the partnership, Infusion Strategies will work towards increasing the Elixinol’s exposure to different industries like food and beverage, CBD-infused dietary supplement and nutraceutical, via distribution to RFI’s customers.

Financial Performance of Australian Cannabis Players

With a glimpse of the operational performance of the cannabis players, let us now get a look at the financial performance of these players.

The table below demonstrates the performance of the above-stated companies in FY18 and the respective YTD return generated by the stocks on ASX as on 27th June 2019:

Looking into the Future of the Cannabis Industry

Since the legal market for Cannabis is rising rapidly, future growth of Cannabis will be driven by innovations in the space, including an improvement in the agricultural technology to boost the productivity of cannabis plants. The advancements can be in the form of light technology and tissue culture, which will help provide premium quality yield. Through the introduction of vaporizer pens, oils and tinctures, patients will have better alternatives for ingestion than smoking. In addition, the extraction of concentrates from cannabis plants will also help drive the consumer products industry by incorporating the drug in various products, including creams, bath soaps and skin care products. Overall, the cannabis industry has abundant untapped potential and is poised to attract huge attention from investors.


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6 Cannabis Stocks under Investor’s Limelight…

Cannabis companies that sell both medicinal weed and recreational pot. Marijuana stocks to look at. Marijuana mergers and acquisitions. Dispensary data analytics. Upcoming marijuana IPO’s Those phrases have become increasingly common as marijuana legalization spreads.

Global spending on legal cannabis is expected to grow 230% to $32 billion in 2020 as compared to $9.5 in 2017, according to Arcview Market Research and BDS Analytics. As of June 29, 2018 the United States Marijuana Index, despite a lot of uncertainty around regulations, has over the past 1 year gained 71.49%, as compared to about 12% gain seen by the S&P 500.

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