Should you buy shares in thc asx? What about eve investments or mgc pharma? Read on to find out more.
The Australian cannabis market is gearing up for a groundbreaking 2019. Last year saw the launch of numerous clinical trials for marijuana-based medicinal products from a host of cannabis stocks, as researchers explored a variety of new uses for cannabidiols, including skin care, animal well-being, and bioactive health food.
In response, local cannabis stocks have already begun expanding operations as a means of capitalising on the growing domestic and international cannabis market.
But, despite these promising signs, shares in ASX-listed cannabis stocks spent the last twelve months in a pricing free-fall. Many long-term investors were unwilling to ride out the market fluctuations, leading them to close out their position by dumping stock.
Although this may seem like discouraging news, the downward trend in share prices actually indicates that it the perfect time to invest—or to consolidate your position—as most cannabis stocks are significantly undervalued.
In Part 1 of this review of ASX-listed cannabis stocks we covered 6 companies, including Auscann and Althea. However, there are still plenty more cannabis stocks worth watching in 2019.
Botanix Pharmaceuticals Limited (ASX: BOT) is a biopharmaceutical company with a focus on the development of new treatments for a variety of skin diseases, including acne, psoriasis, and atopic dermatitis.
The company also boasts an exclusive license to Permatrex, a new dermal device which is said to be 10 to 20 times more effective in delivering active ingredients to the skin.
Formerly known as Bone Medical, it was first listed on the ASX back in 2016, raising $3.5 million in funding in the process.
In July 2016 the company elected to officially change its name following the acquisition of an American dermatology company, Botanix Pharmaceuticals. Bone Medical's name change was part of a company-wide pivot to the skin-care sector, following the drug trial failure it's two original flagship products—Capthymone and BN006—which were formulated to treat osteoporosis and rheumatoid arthritis respectively.
Over the last year Botanix has been mired in a research and development-heavy development program, which saw it launch a number of new clinical trials. In June it recruited 360 for a phase II trial of its' BTX1503 drug, which is aimed at treating patients with moderate to severe acne.
According to scientific research conducted by Botanix Pharma—which mirrors similar results found in other studies—cannabidiol can play "a significant role" in treating skin conditions by reducing inflammation and infection, normalising skin growth, and easing the overproduction of oil. The trial's earlier stages have already shown that the formulation is also highly effective at combating black heads, white heads and other skin complications.
At the same time, the company also completed a phase 1b study for atopic dermatitis. The 12-week trial is set to begin by the third quarter of 2019, and will involve approximately 200 patients from dermatology clinics in Australia and the US.
Additionally, another phase 1b study was conducted towards the end of 2018 targeting patients who were suffering from psoriasis.
The co-founder and executive director of Botanix, Matt Callahan, was enthusiastic about the potential applications yielded by the psoriasis trial.
"The unique design of this patient study which allows us to compare multiple drugs in the same patient at the same time, means that the treatment duration can be shortened, while the quality of data can also be enhanced," Callahan said.
"BTX 1308 is our third product to commence a patient study in the last 12 months, which demonstrates our ability to rapidly add new indications to the pipeline, as we can leverage the studies already successfully completed with synthetic cannabidiol in acne and atopic dermatitis."
Shares in Botanix are currently trading at 0.099 cents as of February 1—well below their former value—after hitting a twelve-month low of at the start of January. The stock has only just begun to rally after spending the latter half of 2018 in decline, which saw share prices plummet from 0.185 in May to 0.069 by the new year.
Investors who are hungry for a piece of the increasingly lucrative cannabis-based skin care market would be well advised to keep a close eye on Botanix, as there is already a considerable amount of commercial interest in the company's product pipeline.
This was clearly demonstrated in May last year, after Botanix shares hit a twelve-month high following news that the FDA had approved the second phase of its' acne trial.
The Cann Group
When it comes to the medicinal cannabis market, the Cann Group (ASX:CAN) are dedicated to breaking through the grass ceiling. The company's goal is to become the leading developer and supplier of cannabis, cannabis resin, and medicinal cannabis products in Australia.
Rather than trying to fill a specific niche like some of its competing cannabis stocks—such as targeted clinical applications or over-the-counter skincare products—Cann's team is focused on refining, supplying, and distributing cannabis.
The company favours a vertically integrated business model that handles all aspects of the cannabis market, covering everything from cultivation, clinical evaluation, and research and development, all the way down to packaging and exports.
The Cann Group was also granted the first ever Australian Medicinal Cannabis Research Licence in February 2017, and it is currently building the largest cultivation facility in the country, located in close proximity to Melbourne Airport. The state-of-the-art facility will to be over 37,000 square metres in size, with Australia Pacific Airports Melbourne contributing $100 million to the project via an unquantified lease incentive.
Presently, the Cann Group is one of the most valuable pot stocks listed on the ASX, and in 2018 it managed to post a first full year revenue of $1.5 million. This was a huge increase on the $8,000 it earned the previous year, and includes a robust $560,000 in sales revenue from the domestic cannabis market.
The boost in sales revenue was due in part to a lucrative commercial deal with the Victorian government for paediatric epilepsy trials, and is a welcome turn-around after a half-year loss of $1.5 million in 2017.
Cann has also secured strategic partnerships with a number of other international companies, including the Canadian marijuana giant Aurora Cannabis, the Canopy Growth Corp, and Fundacion Daya.
According to the Cann Group's chief executive, Peter Crock, the new production facility that the company is currently developing will help to scale up production, allowing it to become a global player in the cannabis market.
"As per our ongoing strategy, the facility provides Cann with the necessary scale to compete on the global stage in the medicinal cannabis sector. Our focus is on Australian patients first and foremost, but to be competitive we need to export in the short term."
– Peter Crock
Another factor working in the Cann Group's favour is that—apart from its' main competitor Auscann—the majority of other ASX listed companies are still relatively minor players, many with market caps under $100 million. However, despite its' status as a high value pot stock, the company eventually saw an overall share price decline of 47% in 2018.
The stock also experienced sharp dives in value during October and December, and has only just begun to right itself after experiencing a moderate bounce-back.
As of January 15, the stock is sitting at 2.130. Although this is an improvement on the all-time low it reached in December of 1.715, it is still a significant decline from the price it was selling for in January 2018 of 4.010.
CannPal Animal Therapeutics Ltd (ASX:CP1) is a pet pharmaceutical company with the goal of becoming one of the first cannabis stocks to provide veterinarians with cannabinoid-derived medicine.
In December last year the Sydney-based company launched a phase 1b study of CPAT-01, its' new pain and inflammatory control drug for dogs. The trial involved more than 50 beagles and foxhounds, and managed to avoid the occurrence of any adverse events across all treatment groups.
Following the success of the phase 1b study, CannPal has announced that it is preparing to transition from research and development to a commercialisation phase in the lead-up to the phase 2a trial of the CPAT-01 drug.
According to CannPal's quarterly cashflow report the company is also still relatively well-capitalised, having $4.5 million in remaining funding at the end of December. The report confirmed that CannPal will be fully-funded up to its' phase 2 pilot studies, and currently has a quarterly cash burn rate of $510,000.
The chairman of CannPal, Geoff Star, lauded the forward progress already made by the company's research team during the latter half of 2018.
"I'm extremely happy with the progress that CannPal has made in the December quarter, and particularly the company's progress with our nutraceutical program, while maintaining focus on our lead pharmaceutical," Star said.
"Our strategy has been to remain focused and diligent in the development of compliant animal health products and that work is beginning to pay off as we're getting closer towards getting CannPal in a position to explore commercialisation opportunities in 2019."
"I'm looking forward to the team continuing with the same momentum throughout the new year."
Like many other Australian pot stocks, shares in CannPal spent much of the last twelve months in a state of gradual decline. The stock hit a high in February last year—reaching 0.290 a share—but since then it has more than halved its' value.
However, despite losing over 50% of its' value in 2018, CannPal is still trading higher than several other cannabis stocks such as Botanix Pharmaceuticals. As of February 2019, Cannpal shares are selling for 0.125 a piece.
Eve Investments Limited (ASX: EVE), is a health and nutrition company that invests in technology start-ups that demonstrate global scalability.
The company has built considerable market buzz around a proprietary hemp seed honey that it has been developing with unique bioactive qualities. The Meluka-branded honey is being produced by Medic Honey—which Eve Investments owns a 50% stake in—and is said to have powerful anti-oxidant qualities, as well as other benefits such as boosting immune defence.
Eve Investments is aiming to secure a piece of the increasingly lucrative global medical nutrition market, which is estimated to be worth $52 billion by 2022. Research conducted by the company has shown that its' bioactive honey yields "strong immediate anti?oxidant properties" while also displaying powerful anti?microbial activity.
"This high bioactivity was not reliant on post?harvest ripening and was directly attributed to the natural bioactive properties of tea tree," a spokesperson said.
"[Hemp seed honey] incorporates the health benefits of Hemp Seed which has a concentrated balance of proteins, essential fats, vitamins and enzymes combined with a relative absence of sugar, starches and saturated fats."
"When combined with Medic Honey's quality raw honey it produces a product with truly unique health benefits and an exceptional flavour profile."
Eve Investment's hemp seed honey has already begun reaching American consumers, after it signed off on a distribution deal for the US market last year with California-based company, Naturally Australian Products.
Although commercial interest in Eve's hemp honey has continued to build, investors appear to have underestimated the stock's potential future value. Share prices for the company fell sharply over 2018, and as of February this year the stock is currently sitting at 0.005.
This represents a fantastic opportunity for investors who are confident enough to buy into the dip—allowing them to significantly reduce their cost basis—if they are willing to hold their position through market fluctuations. Conversely, short-term traders who are unwilling to hold a long position may find themselves dumping the stock for a loss at the first sign of weakness.
However, according to Eve's director of investments, Ben Rohr, cannabis and honey could turn out to be a match made in heaven.
"Bees love cannabis and can thrive on a cannabis crop, especially when their flowers are in bloom. In the same way that cannabinoids have been suggested for use to treat PARKINSON'S or Epilepsy—the same benefits that medicinal cannabis is known to have would be present in the honey."
– Ben Rohr
MGC Pharmaceuticals (ASX: MXC) is a biotech firm that is currently developing a number of cannabis-based medicinal products such as "CogniCann", which is intended to treat patients suffering from dementia and Alzheimer's.
The company's manufacturing facility in Slovenia recently received one of the European Union's first approvals to extract and develop Phytocannabinoid active pharmaceutical ingredients (API). This will give MGC a considerable competitive advantage as it pursues full vertical integration in the increasingly crowded biopharma market.
MGC Pharmaceuticals was also the first Australian cannabis company to be granted qualification for all of its' Phytomedicines from the European Medicines Agency, allowing it to apply for drug evaluation and registration of CogniCann, CannEpil, and any other medicinal cannabis products currently being developed.
CannEpil is another cannabis-based medicine developed by MGC that is intended to aid the sufferers of epilepsy regulate their symptoms. A growing amount of medical practitioners have already been granted approval to prescribe the drug to Australian patients.
According to the chairman of MGC Pharmaceuticals, Brett Mitchell, the progress of its' pharma business is "evidence of the tireless work behind the scenes from the entire MXC team and we expect 2019 to deliver significantly more growth and development".
"The achievement of these milestones demonstrates material progress on MXC's pathway to commercialisation and is a testament to the Executive Management's commitment to building a strong company under its seed-to-pharma strategy," Mitchell said.
Once the CogniCann trial is complete, MGC Pharmaceuticals will own the rights to all research findings, and any Intellectual Property (IP) that is developed as a result. The company's eventual goal is to obtain a "worldwide non-exclusive, royalty-free licence" to make use of the trial's IP for commercial and research purposes.
News of the trial's approval caused the price of MGC shares to jump to 4.4 cents, although as of January 31st the stock has dipped back to 0.042. However, the study is due to begin before July, so it seems likely that future updates will lead to additional boosts in share value. The same thing already happened in January 2018, when the manufacturing kick-off for CannEpil caused the stock to spike in value by 10%.
THC Global Group
THC Global Group Limited (ASX:THC) is a medicinal cannabis company with a vertically-integrated business model built around the "farm to pharma" ideal.
The company is focused on the development and distribution of medicinal marijuana, but also has its' hand in a number of other cannabis-relayed enterprises. This includes large-scale greenhouse design, the construction of growing facilities, and the manufacture and delivery of hydroponics materials, equipment, and nutrients.
The company already has several growing sites situated around Australia—with one located northern NSW and the other in Queensland—along with an industry-leading biopharmaceutical manufacturing facility that churns out pharma-grade medicinal products for the international market.
After manufacturing, thc asx products are then distributed globally via a series of commercial partnerships with companies located in North America, Europe, and the Middle East.
The company has already been given permits by the Australian government for its' Queensland-based cultivation and R&D site—which is owned by the thc asx subsidiary, Canndeo—and a domestic manufacturing license allowing for product validation and study trial production is expected to be granted shortly.
THC Global spent much of 2018 in pursuit of strategic expansion opportunities overseas. In December the company successfully acquired exclusive rights to import CBD products into New Zealand. Meanwhile, its' wholly-owned subsidiary, Vertical Canna Inc, managed to secure a piece of the newly booming Canadian market.
An expansion into the Asian market is also expected to take place later this year, with THC Global announcing that it will reveal further details of early-stage partnership negotiations in the coming months.
The CEO of THC Global, Ken Charteris, is convinced that the company's vertically integrated business model and an array of strategic partnerships will allow it to succeed in both the domestic, and international market.
"Q4 2018 has been a pivotal quarter for the company focussing on developing a vertically integrated global cannabis business and marking the company's transition into production mode as its domestic facilities receive final licensing and permitting required," Charteris said.
"We are pleased to see first plants on site at our manufacturing and cultivation site, and look forward to commencing the first stage of our manufacturing activities to support the domestic market with a view to our larger facility being used to pursue export opportunities."
Shares in the company reached a high for 2018 early, when thc asx stock shot to 1.005 a piece in early January. However, since then it has been on a continual downward spiral, with thc asx shares falling in value to just 0.465 apiece as of February this year.
Despite losing more than half its former value last year, thc asx stock is still expected to make a comeback in 2019, with news of future license approvals—or international partnerships—likely to cause a spike in share prices.
Give and Toke
When investing in an emergent industry it's only natural to expect a certain amount of share price volatility. Investor sentiment can wax and wane as the market reacts to new events, which can cloud the long-term outlook. If this happens, it's important to take a step back from the situation and keep an open mindset.
While there is an element of risk involved in every investment, long position traders should not be discouraged from buying into Australian cannabis stocks. Although the local industry is just beginning to build up speed, many pot stocks are still significantly undervalued, giving forward-thinking investors an opportunity to buy into the market before share prices become too high.
Luckily, the Green Fund is here to help you weed out the good from the bad. Next we'll be profiling the 5 best pot stocks that are currently listed on the ASX, so stay tuned for further updates.
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