Cannabis – A Commodity & Five Related Stocks: EXL, THC, CAN, AGH & AC8

According to the market reports, the global spending on cannabis would increase in a few years’ time. Canada legalised cannabis last year, and it is still illegal in some states in the USA. Though, some of the US states have made it legal for both recreational and medicinal purposes.

Nevertheless, cannabis is a commodity, and the prices depend upon various factors like supply, demand etc. In addition, investing in commodities also require good knowledge of weather conditions, environment etc. In the present time, the cannabis industry has not matured properly, and there exists a lot of space for development. A

Also, cannabis for medicine purpose is also making progress around the world. In the UK, a pilot program is scheduled to commence soon to enrol approximately 20k patients for the treatment through medicinal cannabis. These companies are supplying the products to conduct clinical trials etc.

Cannabis products for recreational purpose might be more profitable. In the US, around ten states have legalised cannabis for recreational purposes, while twenty-three states have cannabis legal for the medicinal purposes. Cannabis has also impacted the tourism industry, wellness and beauty and is not just limited to edibles. Investors must lookout to invest in the companies that have competitive advantages over others in the market.

As the industry is growing rapidly, the companies might be making strides to achieve competitive

In Australia, the cannabis industry is growing rapidly, and regulators are working well to accommodate the rapid overhaul of the industry. The government of the country has also exhibited interest in the process, and it is actively ramping up the capability of medicinal cannabis. The cultivation for medicinal cannabis started in the year 2016, under the Narcotic Drugs Amendment Act in 2016.

Let us now have look at the four Cannabis related stocks:

Elixinol Global Limited (ASX: EXL)

Australian cannabis company, Elixinol Global Limited (ASX: EXL) is engaged with the selling of hemp derived CBD dietary supplements, hemp food and wellness products and more. The company has three main subsidiaries- Elixinol USA, Hemp Foods Australia and Nunyara.

On 16 July 2019, the company reported on the leadership and group structure update to execute its future growth plans. Accordingly, Elixinol has appointed Stratos Karousos as the Chief Executive Officer, effective immediately, and Paul Benhaim would be taking up the role of Chief Innovation Officer. Further, Mr Benhaim would remain in the Board, and Linda McLeod would be stepping down from the Board to maintain a non-executive majority. Meanwhile, the company would start its search for a new non-executive director, and Ms McLeod would continue to serve in her capacity.

Diversified Portfolio (Source: Investor Presentation, May 2019)

Group Structure: Reportedly, the group intends to expand the Global Executive Office in Sydney. The objective behind it, is to provide stronger unified planning and support to the company and to allow numerous regional offices to concentrate on the strategy related to the operation and its execution. Besides, the company intends to provide detail on the proposed structure in the June quarterly update.

Distribution Agreement: On 04 July 2019, the company announced the signing of the agreement by its wholly owned Dutch subsidiary, Elixinol BV. Accordingly, the exclusive distribution agreement was signed with MedVec International GmbH (Distributor) for pharmacy and para pharmacy channels in Germany.

As per the release, the agreement allows the distributor to sell the Elixinol products and white label products through the distributor’s network of existing sales network in the pharma space. Also, the agreement could be extended for a further three years. Importantly, the exclusivity is based on the achievement of minimum sales targets and failing to achieve targets would result in a co-exclusive agreement. Besides, the distributor would be hired co-exclusive for the pharma channels in Switzerland and Austria regions.

Meanwhile, the distribution agreement is consistent with the strategies announced by the company on 05 February 2019, with an objective to capitalise on the opportunities presented by the European hemp and cannabis market.

On 17 July 2019, EXL’s stock was trading at A$ 3.93 (at AEST 12:58 PM), down by 1.75%. Over the past year-to-date period, the stock has generated a return of +59.11%.

THC Global Group Limited (ASX: THC)

THC Global Group Limited (ASX: THC) is an Australian company, involved in the business of cannabis cultivation, production and more. The company hosts world class cannabis cultivation facilities, bio-pharmaceutical manufacturing capability, and it has all the major licenses to operate the business.

Fully Integrated Business (Source: Company Presentation, July 2018)

Reportedly, the company received the second license in less than one month; this was a Manufacture License for Southport Manufacturing Facility, which was granted by the Australian Office of Drug Control. Subsequently, the company estimated annual production of over 12,000kg, which involves the production of Active Pharmaceutical Ingredient (API) consistent with Good Manufacturing Practices (GMP). Moreover, the company also expects to produce medicinal products like oils, tinctures and capsules through the additional extracts.

As per the release, the company’s product from the Southport Facility would be available for clinical and study trials in Australia and abroad. Further, the license would enable the company to develop the next generation of medicinal cannabis products. Importantly, the company expects revenue generating medicinal cannabis production by early 2020.

On 17 July 2019, THC’s stock was trading at A$ 0.58, up by 1.754% (at AEST 1:08 PM). Over the year-to-date period, the performance of the stock has given a return of +12.77%.

Cann Group Limited (ASX: CAN)

Cann Group Limited (ASX: CAN) is a cannabis focused company. It has established R&D facilities in Australia, and it is also pursuing a fully integrated business backed by collaborative agreements and resource to establish a reputable position in plant genetics, breeding and more.

Delivery of the First commercially grown Medicinal Cannabis

The company has been scaling up its revenue potential. In May 2019, the company reported on the delivery of commercially grown cannabis to Victorian Government. Accordingly, Cann Group’s Southern Facility in Melbourne extracted the resin from the dry cannabis flower products. Also, an agreement with Agriculture Victoria enables the company to extract resin through a CO2 extraction method to produce whole plant extract, and the product is further formulated for suitable patient use.

Manufacturing Capabilities (Source: Investor Presentation)

Quarterly Report: According to the Quarterly release, the company signed an offtake agreement with Aurora Cannabis to supply GMP processed extracted resin and manufactured medicinal cannabis products to Aurora until 2024. Also, the agreements involve a price review mechanism, which enables to add more product forms, as these are developed by Cann Group. Importantly, the supply was subject to regulatory approvals for both companies, and strictly for medicinal purposes.

On 17 July 2019, CAN’s stock was trading flat at A$ 2.1 (at AEST 1:17 PM). Over the year-to-date period, the performance of the stock has resulted in the yield of +2.5%.

Althea Group Holdings Limited (ASX: AGH)

Althea Group Holdings Limited (ASX: AGH) is engaged in medicinal cannabis space with capabilities of producing, supplying and exporting. It is also involved in providing education and necessary service to the patients and health care professionals.

Education (Source: Company’s Presentation, June 2019)

On 25 June 2019, the company announced its selection by Drug Science Medical Cannabis Working Group to supply medicinal cannabis to the UK. Accordingly, the company would enable Drug Science to increase the number of patients prescribed with medicinal cannabis treatment in the UK.

Reportedly, ‘Project TWENTY21’ by Drug Science is the first of its kind pilot for medicinal cannabis. Also, it would be launched by 18 July 2019 with an objective to enrol 20k patients before the end of 2021. Initially, the pilot would target the patients in which existing treatment has failed; this includes chronic pain, anxiety, multiple sclerosis, tourette’s syndrome and PTSD with a focus on the veteran community.

It was also reported that the pilot would collect all the data throughout treatment, which would underpin the application to health authorities in an expectation of a regulatory system for medicinal cannabis in the UK. Besides, the patients would be hosted at My Cannabis Access Clinics across multiple locations in the UK.

On 17 July 2019, AGH’s stock was trading at A$1.2 (at AEST 1:25 PM) down by 1.25%. The performance of the stock in the year-to-date period reflects in the return of +333.96%. Meanwhile, over the past three months and one month, the return of the stock has been of +139.58% and +64.29%, respectively.

AusCann Group Holdings Limited (ASX: AC8)

AusCann Group Holdings Limited (ASX: AC8) is a pharmaceutical company with expertise and capabilities in the medicinal cannabis value chain. Some of the capabilities include the sale of cannabinoid pharmaceuticals, cultivation and production.

AC8’s Supply Chain (Source: Investor Presentation, March 2019)

Inking of Supply Agreement: Recently, on 1 July 2019, the group announced a supply agreement inked with Tasmanian Alkaloids (TasAlk) regarding the purchase of cannabis resin. Besides, TasAlk is the one amid biggest producers of controlled substances, which include alkaloid raw material for serving the purpose in medicines in the Tasmania region. Also, the portfolio of TasAlk would now include medicinal cannabis, along with the cultivation, manufacturing and analytical testing to be available by early 2020.

As per the release, the company had previously entered into a strategic alliance with TasAlk for the cultivation, manufacturing and distribution of cannabis products in 2017. Now, AusCann intends to increase the capability to provide reliable, dose-controlled medicinal cannabis to healthcare practitioners. Also, TasAlk has specialised in supplying to the pharma industry with plant derived raw material Active Pharmaceutical Ingredient (API).

As per the fresh agreement signed recently, TasAlk would be responsible for supplying high-quality cannabis raw material to develop reliable and consistent cannabinoid-based pharmaceuticals. Further, the agreement is consistent with the company’s approach to de-risk the supply chain with several suppliers of GMP resin.

On 17 July 2019, AC8’s stock was trading at A$0.385, up by 1.316% (at AEST 1:27 PM). During the past three months period, the return of the stock has been of -8.99%.


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