Amendments Proposed To Australian Cannabis Regulation; A Look At 5 Cannabis Stocks

Amendments Proposed to Australian Cannabis Regulation

Cultivation and production of cannabis under a licensing scheme in Australia was given a go-ahead in the year 2016. Australia is now considered as the fastest-growing market for medicinal cannabis, globally. Experienced medical professionals, supportive R&D tax scheme and good rules are among the major factors that are contributing towards making Australia a lucrative hub for the flourishing global cannabis industry.

It seems that soon more businesses would enter the market, as regulation in the country related to cannabis is likely to become less complex. Recently a report into the Narcotic Drugs Act (ND Act) was submitted in the parliament, suggesting major amendments to the cannabis licensing regime in the country. The main recommendation from the report, which acknowledged the current complex regulations, is to amend the act to establish a single licensing scheme for medicinal cannabis production.

Currently, under the Narcotic Drugs Act 1967 (ND Act), applications can be filed for three types of licences, including

• The licence for the cultivation/production of medicinal cannabis
• The licence for production/cultivation for medicinal cannabis research work
• The licence for the production of narcotic drugs, which covers cannabis

Let us look at five ASX-listed cannabis stocks.

IDT Australia Limited

Pharmaceutical manufacturing company, IDT Australia Limited (ASX: IDT), which is fully licenced for medicinal cannabis operations, is based in Boronia, Australia. The company is working towards expanding its footprint as a centre of excellence in GMP medicinal cannabis production on a global scale.

FDA Lifts Warning Letter

On 4 September 2019, the company updated the market regarding the removal of the US Food and Drug Administration (FDA) Warning Letter that it had received in May 2018. The agency’s Division of Drug Quality II had issued the Warning Letter Close?out Letter.

The removal of the warning letter gave a big relief to the company, as well as significantly boosted its reputation in the marketplace. Meanwhile, IDT Chief Executive Officer Dr David Sparling stated that the warning letter resolution improves the company’s ability to drive business growth, particularly in global markets.

Stock Performance

The stock of IDT closed the day’s trading at $0.145 on 13 September 2019, with ~236.36 million outstanding shares and $35.27 million market cap. The 52-week high and low value of the stock is at $0.245 and $0.125, respectively. The stock has generated mixed returns of 16% in the last one month and -12.12% in the last three months.

Cann Group Limited

Cann Group Limited (ASX: CAN) is an established, ethical leader in the emerging medicinal cannabis industry of Australia. CAN received a cannabis research licence in February 2017 and the first medicinal cannabis cultivation licence in the country in March 2017.

FY19 Result Highlights

On 27 August 2019, the company announced its results for FY2019. Few highlights from the announcement are as below:

• Revenue from ordinary activities grew to $4.25 million in FY2019 from $1.50 million in FY2018
• Loss before income tax reported at $10.9 million
• Net tangible assets per ordinary share were $0.5443
• Entered partnership with IDT Australia for manufacturing support in relation to cannabis products
• Five-year offtake agreement signed with Aurora Cannabis
• Purchased Mildura site with large-scale cultivation facility under construction at the site

Source: Company’s Report

Stock Performance

The CAN closed trading in the red zone on 13 September 2019, settling at $1.735%, down 0.287% from its previous close, with a market cap of $246.74 million and ~141.8 million outstanding shares. The 52-week high and low value of the stock is at $2.950 and $1.525, respectively. The stock has generated mixed returns of 9.43% in the last six months and -13% YTD.

THC Global Group Limited

THC Global Group Limited (ASX:THC) is engaged in offering access to medicinal cannabis products of high quality to patients in Australia. The company has commercial partners that operate across four continents.

Medicinal Cannabis (Source: Company’s Website)

Cannabis Cultivation Site

On 5 September 2019, the company announced that it had secured an agreement to lease a 66,000m² existing hydroponics greenhouses property and an additional agricultural land of 180,000m² for medicinal cannabis cultivation in Bundaberg, Queensland. THC Global will file an application with the Australian Office of Drug Control (ODC), requesting the office for the property to be an additional cultivation site under the current cultivation licence held by its subsidiary Canndeo Limited.

H119 Highlights

On 30 August 2019, the company announced its financial results for H1 2019. Below are few highlights:

• Revenue from continuing operations increased by 67% to $2,136,894.
• The company reported a loss from continuing operations after tax attributable to members of $5,765,724
• Cash and cash equivalents stood at $5,389,612

Stock Performance

The stock of THC closed the day’s trading at $0.455 on 13 September 2019, down 1.087% from its previous close, with a market cap of $62.46 million and approx. 135.78 million outstanding shares. The 52-week high and low value of the stock is at $0.660 and $0.410, respectively. The stock has generated negative returns of 21.37% in the last six months and 2.13% YTD.

Creso Pharma Limited

Creso Pharma Limited (ASX:CPH) is a global cannabis player, which is known as the first company to import medicinal cannabis into Australia. The company is engaged in the development of cannabis and hemp-derived therapeutic, as well as nutraceutical and lifestyle products.

CPH Products (Source: Company Website)

Voluntary Escrow Release Update

On 4 September 2019, the company gave a market update regarding the release of shares from the voluntary escrow. A total of 2,053,027 fully paid ordinary shares and 303, 027 performance shares are scheduled for release on 20 September 2019.

H119 Highlights

On 26 August 2019, Creso Pharma reported its H1 2019 results, unveiling

• Revenue from ordinary activities of $924,026, up 403% from $183,654 in FY18
• Net loss attributable to members stood at $6,126,098
• Cash and cash equivalents reported at $3,578,130

Stock Performance

The stock of CPH settled the day’s trading at $0.365 on 13 September 2019, down 1.351% from its previous close. With ~151.54 million outstanding shares, the market cap of the company stands at $56.07 million. The 52-week high and low value of the stock is at $0.650 and $0.300, respectively. The stock has generated mixed returns of 8.82% in the last six months and -31.48% YTD.

AusCann Group Holdings Limited

AusCann Group Holdings Limited (ASX:AC8) is an Australian pharmaceutical company, engaged in the production and cultivation of medicinal cannabis products. The aim of the company is to provide high-quality cannabinoid medicines to patients.

Source: Company’s Report

On 12 September 2019, the company announced that it would host a live audio Investor Webinar on 25 September 2019. Under this webinar, Mr Ido Kanyon (CEO) would provide an overview of the company’s strategy and latest activities.

Investor Presentation

On 11 September 2019, AusCann Group released an investor presentation. Few highlights from the presentation covering FY20 strategic priorities are as below:

• Complete the construction of new product development facility in Western Australia.
• Boost proprietary hard-shell capsules portfolio
• Finish Phase 1 clinical trials for proprietary hard-shell capsules
• Start development of new proprietary cannabinoid-based dose-form configurations targeted towards various unmet medical needs
• Engage with key opinion leaders to run investigator-sponsored studies
• Boost manufacturing to improve efficiency and cost-effectiveness

Stock Performance

On 13 September 2019, the stock of AC8 traded flat at a price of $0.370, with ~317.05 million outstanding shares and approx. $117.31 million market cap. The 52-week high and low value of the stock is at $1.160 and $0.295, respectively. The stock has generated negative returns of 2.63% in the last six months and 41.27% YTD.

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