Bellwether for Cannabis Stocks: A Lens on Developments of Cannasouth Limited

  • May 04, 2020 NZST
  • Team Kalkine
Bellwether for Cannabis Stocks: A Lens on Developments of Cannasouth Limited

On Friday, 1 May 2020, the New Zealand government released the final legislation on the recreational use, sale and production of cannabis for which a referendum will be held as part of the general election in September. Moreover, the government described that the intention of the legislation is to alleviate the illicit market, encourage public health, and safeguard the quality control on the cannabis formulations.

The Medicinal Cannabis Agency oversees the scheme for the use of cannabis for medicinal purpose and guarantees that the medicinal cannabis products meet the minimum quality requirements. Medicinal Cannabis Agency of New Zealand also provided information for the cannabis industry mentioning that the medicinal cannabis scheme permits for the cultivation of cannabis at a commercial level for therapeutic application. The scheme also allows the manufacturing as well as the supply of cannabis-based constituents, starting material as well as cannabis-based medicinal products.

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New Zealand Medicinal Cannabis Scheme

The scheme came into force on 01 April 2020 with the beginning of the drug misuse regulations in 2019. The scheme is intended to enhance access to quality medicinal cannabis formulations for patients. According to the scheme, the medicinal cannabis products are only available to patients on prescription from a physician or health care professional.

The manufacturers and importers of cannabis are required to give proof to the Medicinal Cannabis Agency that they regularly meet lowest standards of quality before the supply of the products. Moreover, those who want to work in the industry require to hold a medicinal cannabis licence or work for a company holding a licence.

This licence will specify the types of events that a licence holder might carry out, like commercial cultivation of cannabis or manufacturing and supply of medicinal cannabis products.

In this backdrop, we will acquaint you with an NZX-listed cannabis player that is actively working to accelerate its growth- Cannasouth Limited

About the Company:

A biopharmaceutical R&D company, Cannasouth Limited (NZX:CBD) is established in the Waikato heartland of New Zealand. Cannasouth is engaged in the commercial development of the medicinal cannabis compounds such as Cannabidiol, Tetrahydrocannabinol (THC) and other associated chemical constituents that are present in the cannabis plant.

The Company is working with the aim of developing next-generation cannabinoid medicines to provide support to the health outcomes of patients and to enhance the quality of life.

Cannasouth Limited Raises NZ$6 Million to Speed Up Growth Plans

On 4 May 2020, the Company revealed that its recently closed Share Purchase Plan (SPP) raised a total of NZ$5.69 million through the issue of 14,973,721 new ordinary fully paid shares. Under the SPP, Cannasouth got surplus acceptances of NZ$690,014, and the Board has agreed to place those additional acceptances. Moreover, the Company has also raised an additional NZ$334,839 from numerous wholesale investors.

In total, the Company has raised approximately NZ$6 million through the capital raising programs, which represent the issuance of 15,854,876 million new ordinary shares (fully paid) at a per-share issue price of NZ$0.38.

Addition to this, the Company anticipates that the new shares would be allotted to the shareholders on or around Thursday, 7 May 2020.

White Label Products Agreement

Cannasouth has announced that the Company has entered into a supply agreement with MediParm Labs Australia for distributing the white label medicinal cannabis formulations into the local market under the newly declared Medicinal Cannabis Scheme by New Zealand Ministry of Health. MediParm Labs is a subsidiary of Canadian company MediPharm Labs.

With this agreement, both the companies will have exclusive rights, throughout the two-year tenure, to the medicinal cannabis formulation along with the dosage forms set out in the contract for the New Zealand market.

Moreover, the agreement provides Cannasouth with the exclusive rights for the next two years to the formulation along with the dosage forms of medicinal cannabis that are established by MediPharm.

This agreement endorses an essential step for Cannasouth in meeting an early business objective for the year that comprises manufacturing pharmaceutical-grade medicinal cannabis products available to patients in New Zealand as quickly as possible.

MediPharm will supply the cannabis formulations with the brand name of Cannasouth. As the agreement program is in its ground stages, currently Cannasouth is not able to give any revenue valuations for these cannabis products sales. Cannasouth stated that the arrangement persisted provisional on the regulatory consents and insurance.

Mr Lucas also stated that patients in New Zealand are eagerly awaiting competitively-valued, high-quality new medicinal cannabis-based drugs to be made accessible as per the medicinal cannabis scheme. And the Company is gratified to accomplish the initial critical step in the process of developing medicinal cannabis products.

In the meantime, the experienced team of researchers of Cannasouth will continue research and development in phase two product development strategy for developing the next-generation medicinal cannabis formulations.

Moreover, the agreement is contingent on Medicinal Cannabis Agency of New Zealand’s approval that the formulations adhere to the quality standards along with the licensing requirements, and Cannasouth verifies that Medipharm’s testing and manufacturing operations are in line with the industry standards and appropriate regulatory requirements as per the Company’s quality assurance program. The Company also disclosed that it is conditional on confirming specific insurance arrangements.

During the year ended on 31 December 2019, Cannasouth made considerable progress in developing its business. The quick highlights are:

  • Cannasouth established a joint venture (JV), Cannasouth Cultivation Limited (CCL), for growing as well as the processing of cannabis.
  • Cannasouth Cultivation Limited initiated the construction of a new facility in the Waikato region, and this facility is for environmentally sustainable and scalable commercial cultivation of cannabis.
  • The Company secured funding for research projects from Callaghan Innovation. Cannasouth’s research now covers Tissue Culture, RNA & DNA Genomics, Drug Discovery, Formulation and Neuropathic Pain.

 

Outlook For 2020: The new regulations establish crucial requirements for the development of medicinal cannabis-based products. The good manufacturing practice (GMP) will be the quality benchmark for the sale of medicinal cannabis-based formulations in the market of New Zealand as well as to export the finished products to other nations. Cannasouth sees a number of milestones to be delivered by 2020, subject to Ministry of Health approvals, including:

 

 

On 4 May 2020, the shares of CBD rose by 8.70 per cent to close the day’s trade at NZ$0.500. The Company has a market capitalisation of NZ$52 million.

 


Disclaimer
The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. The above article is NOT a solicitation or recommendation to buy, sell or hold the stock of the company (or companies) under discussion. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site.

 

   
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