Two Cannabis Stocks - THC and MXC - Spike On Recent Updates

Medical cannabis is becoming popular in the pharmaceutical industry, with more and more countries legalising cannabis for its use as a medicinal product. Growing number of research bodies are supporting the use of cannabis and cannabis-based products for medical purposes, owing to their ability to treat illnesses like epilepsy, multiple sclerosis and Parkinson’s disease, as well as relieve insomnia, pain, spasticity and anxiety. However, there is still debate across the globe on legalising the product.

In Australia, different states and territories have different legislative approaches to the product. Though cannabis is considered as the widely used illicit drug in the country, the Australian Parliament cleared legislation in February 2016, allowing cannabis cultivation for medicinal and associated research programs. Cultivation of cannabis for other purposes is illegal in Australia. Moreover, its medicinal based products are given to only specific patient groups, that too under strict medical supervision. Reviews related to use of cannabis have been completed and are under progress for patients (children and adults) with epilepsy, in addition to multiple sclerosis, chronic pain management, palliative care nausea and vomiting from HIV/AIDs therapy and chemotherapy.

Let us have a look at what spiked the stocks of two major Australian players operating in the medicinal cannabis sphere on 13^th June 2019.

THC Global Group Limited (ASX:THC)

Medicinal cannabis products provider THC Global Group Limited (ASX:THC) owns a production facility for medicinal grade cannabis extracts in Australia. In addition to its presence in Australia, Canada and New Zealand, the company works in collaborations in the European, Asian and Middle Eastern markets.

THC Global Group Limited stock surged 20% to A$0.53 during early morning hours on 13^th June 2019 after the company announced that its 100%-owned subsidiary Canndeo Limited secured a manufacturing licence from the Australian Office of Drug Control (ODC), highlighting the company’s position as a leading player in the country’s medicinal cannabis sector. A major milestone for THC, the grant has been obtained for the manufacturing of cannabis resin’s and cannabis extracts and tinctures. Canndeo will now be able to seek approval for its own plant material that it can use in its newly licenced production plant.

With this licence, the company completes its vertical integration model, Farm to Pharma. The manufacturing licence gives THC a thumbs up for the cultivation of its own proprietary strains, as well as cannabis plant material processing and production of cannabis’ extracts and tinctures. The company can now produce cannabis-based products for the domestic and international markets, as it also holds an export licence.

The new licence grant brings the total cannabis production licences held by the company and its subsidiaries in Australia to three – a Cannabis Research Licence allowing for the research activities, a Manufacture Licence enabling manufacture of medicinal cannabis products and a Medicinal Cannabis Licence (Cultivation). THC now targets to develop a new generation of proprietary medicinal cannabis products, secure its revenue guidance via off-take deals and expand its existing international tie ups. Moreover, the company is on scheduled to undertake product validation production towards the fourth quarter of 2019.

Stock Performance:

THC stock closed the day’s trade at A$0.485 up by 10.227% as compared to its previous day’s close. The market capitalisation of THC is A$59.29m with 134.75m shares outstanding. THC shares have delivered negative 24.14% and 11.11% returns in the past one year and six months respectively.

MGC Pharmaceuticals Ltd (ASX:MXC)

Based in Europe, MGC Pharmaceuticals Ltd (ASX:MXC) is a bio-pharmaceutical company, with major focus on the development and commercialisation of cost-effective and high-quality cannabinoid derived medicines. The company caters to medical markets such as Europe, Australasia and North America.

MGC Pharmaceuticals' stock price zoomed nearly 5% on 13^th June 2019 morning to A$0.054, closing the day at A$0.052 with outstanding shares of 1.21 billion. The sudden surge in the company’s stock price can be attributed to its announcement with ASX, under which it gave positive pharmaceutical operation updates.

Below are the major updates given by the company, enabling it to achieve its target of becoming a leading global provider of medical cannabis:

Update on Distribution Agreements:

As per the company’s update on 13 June 2019, MXC is set to receive first material revenues worth AU$95,000 from Health House International Pty Ltd in June 2019, as it completes the initial purchase orders worth AU$200,000 of cannabinoid-based pharmaceutical products to the two distributors. As part of the distribution agreements, which give increased market exposure to MXC’s products including CannEpil™ for epilepsy and CogniCann™ for dementia, the remaining amount will be released upon products delivery. The order is part of a strategic distribution agreement inked between MXC and the two distribution companies (Health House International Pty Ltd and Cannavalate Pty Limited) based out of Australia (as announced on 2^nd May 2019).

Additional Order:

Supported by positive patient feedback on MXC’s products and repeat prescriptions, the company has secured another order, which will add another A$100,000 to its revenue in the first quarter of FY20. Relative affordability and high level of consistency between product batches are some of the main benefits of main MXC’s products, leading to repeat prescriptions and new orders.

Update on CogniCann™ Phase II Clinical Trial:

For the second phase clinical trial of CogniCann™, the company has received a higher than expected number of applications for participation from potential candidates, which means the company would be able to complete the study in the second quarter of 2020. The trial completion will be one year ahead of schedule, representing a major step to speed up commercialisation for the company. The trial is aimed to test the benefits of CogniCann™, a phytocannabinoids based medicine certified by GMP, in patients suffering from dementia and Alzheimer’s disease. The trial will have 50 participants aged 65 years and above, with each patient being tested for 18 weeks. The trial will be carried out in addition to a series of pre and post treatment surveys and focus groups, in order to make an assessment regarding the knowledge and perceptions of family members and care givers towards the treatment use. MGC Pharmaceuticals is working with the University of Notre Dame on the Phase II clinical trial.

Phase II Clinical trial for CogniCann™ in collaboration with University of Notre Dame advancing ahead of schedule due to unanticipated high levels of interest from potential candidates to participate in the trial

Upon completion, MXC will get to own all Intellectual Property and results. A global nonexclusive, royalty free licence would be required by researchers to use the product’s IP for non-commercial research purposes covering research publications.

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