Zelda therapeutics, althea and mmj asx are just a few of the top pot stocks to watch in 2019.
Australia's cannabis industry is on the verge of a green rush. Although the sector is still relatively nascent, Australian cannabis stocks have already begun to ramp up activity thanks to a rapidly expanding patient base, and a legislative landscape that is gradually beginning to liberalise.
Last year the government also gave the official green light to marijuana exports, opening up the growing international market to Australian companies. Meanwhile, numerous clinical trials were launched testing the effects of medicinal cannabis on a variety of wide-ranging conditions, including insomnia, epilepsy, autism, and multiple sclerosis.
And, while the industry seems poised for significant growth in 2019, most Australian cannabis stocks are still highly undervalued thanks twelve-month market-wide downturn.
2018 saw shares prices of cannabis stocks decline as investors became more nervous about the high-risk nature of pot stocks—a common trend for any emergent industry—causing some sections of the market to succumb to a panicked selloff.
However, this also presents a golden opportunity for savvy investors looking to buy into the cannabis market, as last year's share price wipe-out has left many stocks valued at a fraction of their previous worth. Several companies are already showing increasing promise as we look ahead to 2019, and seem well-positioned to capitalise on the Australian—and international—cannabis market.
This is a two-part series, and we'll start with the biggest cannabis stocks currently operating on the ASX.
AusCann (ASX:AC8) is undoubtedly one of the most prominent competitors in the Australian medicinal cannabis market.
The company has already acquired the full set of licenses necessary to grow and manufacture cannabis-based medicines, and is in the midst of purchasing a new research and development facility in Perth.
The cost of the R&D site will take a $5.25 million bite out of AusCann's $40 million in funding, and represents the latest step in a broader strategy shift. In September last year, the company announced that it would be moving away from the pot growing sector, and instead pivot towards the development of cannabis-based medicinal products.
"The facility will focus on AusCann's cannabinoid pharmaceutical product pipeline, supporting the development of both innovative formulations and dose forms," a spokesperson said.
To achieve this the company will be employing a vertically integrated strategy, beginning with cultivation and production, all the way through to the eventual manufacture and distribution of products.
While AusCann's share price did decline by 72% in 2018, they have recently begun to rebound in value following the announcement that DayaCann—which Auscann jointly owns with Fundación Daya—has commenced growing operations as part of a lucrative deal with Canadian medical cannabis developer, Khiron Life Sciences Corp.
Under a agreement that was finalised in October last year, DayaCann will provide cultivation and manufacturing services for Khiron. The product provided will be used for clinical medicinal trials in the Chilean market, and will result in a series of staged payments to DayaCann of $1.67 million.
The news that DayaCann has commenced growing activity caused a spike in the value of Auscann stock, leading the company to experience a one-month gain of close to 30%. However, AusCann's shares are still only sitting at 64.4 cents, which is a far cry from its' position in 2018, when the stock peaked at $1.77.
The company is also still looking for a new CEO, after the previous managing director, Elaine Darby, resigned late last year. She announced her departure following Auscann's strategic shift from pot grower to a medicinal developer in September.
According to Darby, Auscann needed a different kind of leader to steer the company as it moves away from the increasingly expensive and overcrowded growing sector.
The Althea Group's (ASX: AGH) mission is to corner the market on the importation, cultivation and supply of medical cannabis for patients Australia-wide.
After an IPO that saw the company raise $19.65 million in funding, it has since managed to push its' initial market capitalisation of $40.6 million all the way to $121.8 million. This puts it in the same league as some of the industry's biggest players, including AusCann and the Cann Group.
The Melbourne-based company has a three-stage business strategy focused on sales driven growth, scalable domestic production, and early revenue generation. It also intends to pursue strategic partnerships with companies such as the Canadian low-cost medical cannabis producer Aphria (TSE:APH), which owns a 25% stake in Althea.
Since Althea was founded in 2017 it has already managed to get five branded medicinal products on the market. Its' dedication to patient care also led to the development of the Althea Concierge, a web-based platform and mobile application intended to support access to medicinal cannabis.
In January this year, the company reached another milestone, after its' 300th patient was prescribed Althea medicinal cannabis.
According to the CEO of Althea, Joshua Fegan, the company is "extremely pleased with the results to date, given that over 70% of all products dispensed were provided to patients within the last 3.5 months."
"Importantly, our sales are now accelerating and have not come through clinical or observational trials, but by doctors making an informed decision to prescribe Althea's products to patients paying out of pocket."
"Althea's immediate focus is on continuing to educate doctors and rapidly building our patient base," Fegan said.
Althea has also announced that it will be embarking on a research collaboration with Cannabis Access Clinics for the purposes of increasing doctor's understanding and achieving quality patient outcomes using medical cannabis.
The agreement is big news for Althea, as Cannabis Access Clinics is one of the largest medicinal cannabis clinic networks in the country, with 8 locations across Australia and New Zealand.
"The collaboration with Cannabis Access Clinics provides an opportunity for Althea to share our expertise with their prescribers. Althea remains open to similar arrangements with other emerging destination clinics, as it complements our overarching strategy of reaching and providing education to as many doctors as possible."
– Joshua Fegan
Bod Australia (ASX: BDA) is a skin care and health product company that has been making waves thanks to its' patented "world-first" wafer system.
After launching a phase one clinical trial in July last year, by October Bod had managed to successfully dose its' proprietary phytocomplex cannabis extract—known as ECs315—in a sublingual wafer. This means that unlike other cannabis-based medicines, the ECs315 extract can be delivered via a wafer that is dissolved under the tongue.
The CEO of Bod Australia, Jo Patterson, was enthusiastic about the results of the company's clinical trials, calling them "outstanding".
"It is a major leap forward in developing a proprietary sublingual wafer that could have broad commercial appeal," Patterson said.
"Following success with the clinical trial, Bod will retain the rights to a unique, easily reproducible finished product with worldwide patent protection, underpinned by a global brand we are developing."
"We are also broadening our use of the proprietary WaferiX technology and pursuing additional research initiatives which test the ECs315 extract on specific conditions such as post-chemotherapy nausea and vomiting," she said.
Bod also produces a pharmaceutical-grade CBD oil called MediCabilis, and in November last year, it secured a deal with discount pharmacy giant, Chemist Warehouse, to distribute the medicine nationally. This followed the September negotiation of a similar agreement with Priceline for its' MamaCare pregnancy supplement.
While Australian cannabis stocks experienced an overall downturn last year as investors became skittish about the high risk involved, Bod managed to remain immune from the decline in share value for most of 2018.
The share value even reached a new all-time high of 0.660 in June—thanks to a series of new distribution deals, strong product uptake, and a growing range of products—before plummeting to 0.380 by December.
However, it has already begun to rebound in value, reaching 0.460 as of January 2019. The company also posted a record revenue of $1.22 million during the last quarter of 2018, including sales figures of $766,000.
Founded in 2015, Creso Pharma (ASX:CPH) has already developed, registered, and commercialised several cannabis-based pharmaceutical products for both human and animal health care in Australia, Slovakia, and Switzerland.
Aside from the development of cannabis-based medicine, Creso Pharma also has its' hand in hemp growing operations, outsourced CBD extraction, and the sale of CBD-based products.
The biotech company's strong focus on Cannabidiol—also known as CBD—has left it well positioned to move in on the growing pet market, which is estimated to be worth $72 billion in the US.
CBD-based products have become increasingly popular in recent years as an alternative to both over-the-counter and prescription medication. Reports from veterinarians indicate that CBD also yields a number of positive health outcomes in older age, such as more balanced behaviour, increased well-being, and a reduction in tiredness and fatigue.
Animal health is just one of five areas that the company's business model focuses on, along with lifestyle products, nutraceuticals, topicals, and therapeutics. It is currently in the process of developing new medicines through its' R&D base in Switzerland, while also maintaining growing and cultivation facilities in Columbia and Canada.
While Creso Pharma stock started 2018 on a high of 1.210, it proceeded to shed most of its value over the following twelve months, making it a highly opportune time to buy in. After hitting a low of 0.340 by year's end, it subsequently experienced a minor bounce-back in January, climbing to 0.480 in less than a month.
The boost in share prices followed the announcement of a new three-year supply agreement with the Canadian branch of TerrAscend Corp. The deal will require TerrAscend to purchase a minimum of 100 kilograms of cannabis per month, which will account for a significant portion of Creso Pharma's production capabilities.
The CEO of Creso Pharma, John Griese, described the company's efforts as an attempt to build "a diverse global enterprise".
"Few cannabis stocks are currently commercial in countries across Europe and even less have established proprietary branded products such as Creso's CBD-based Nutraceuticals cannaQIX® and anibidiol® in human and animal health,' he said.
MMJ Group Holdings
Formerly known as MMJ Phyotech (ASX:MMJ), the business was originally two separate companies—MMJ Group Holdings and Phytotech Therapeutics—before merging into one entity in 2015.
Previously, Phytotech Therapeutics was a global cannabis investment company aimed at researching, developing and commercialising cannabis-based medicinal products. The company was subsequently acquired by mmj asx as part of its attempt to secure the Canadian market's cannabis supply chain.
However, in June last year, the company elected to offload Phytotech Therapeutics onto Canadian cannabis producer, Harvest One—which mmj asx has a 30% stake in—for $8 million. The decision was made as part of a company-wide change in direction, which will see mmj asx reposition itself as a minority cannabis investor in its portfolio of cannabis stocks.
According to the CEO of MMJ, Jason Conroy, the sale of Phytotech Therapeutics will benefit its shareholders as it will free up time and capital to pursue other investments, while still allowing the company to main their connection via Harvest One.
MMJ have already secured shareholdings in a number of other related cannabis stocks, including an Australian medical cannabis researcher, Martha Jane Medical, and a cultivation company, Weed Me Inc. It also owns shares in a cannabis-focused retail store chain, Fire & Flower Inc, and a pot-infused drink business named BevCanna.
Last year the company invested approximately $5 million in MediPharm Labs, the owners of the largest medicinal cannabis oil production facility in Canada.
This should prove to be a high profitable investment for the MMJ Group, as MediPharm is already in line to heavily capitalise on Canada's growing medicinal cannabis oil market. This is due in part to the company's newly pioneered CBD extraction technique, which has led to the development of superior medicinal products.
MMJ experienced the same downturn in share value that affected almost all of the Australian cannabis stocks for much of 2018, which saw it begin the year on a high of 0.590, before falling to 0.190 by December. While the stock has already climbed to 0.265 in the new year, it is still significantly undervalued, selling for less than half of what it was worth twelve months ago.
Zelda Therapeutics (ASX: ZLD) is a biotech company that is developing new cannabis-based medicines aimed at the treatment of a variety of medical conditions.
In November, the company was granted approval to conduct Australia's first clinical trial aimed at treating chronic insomnia sufferers with a medicinal cannabis formulation. The study will be conducted by the University of Western Australia's Centre for Sleep Science, and will involve a randomised, placebo-controlled, crossover trial of 24 patients.
The company expects to receive preliminary results from the study as early as the first quarter of 2019, and has said that the trial will help prove the efficacy of Zelda Therapeutics cannabis proprietary cannabis formulation.
Their research team also launched a pancreatic cancer study last year to explore the impact of Zelda's cannabis formulations in conjunction with chemotherapy agents.
According to the executive chairman of Zelda Therapeutics, Harry Karelis, there is a growing body of evidence that suggests cannabinoid extracts may halt the growth of cancer and make the body more receptive to chemotherapy drugs.
"The data to be generated by this new program has the potential to open new avenues of treatment for a cancer with very low survival rates."
– Harry Karelis
The company also recently partnered with drug delivery specialists, SUDA Pharmaceuticals, to develop an oral spray that will make use of "pharmaceutical-grade cannabinoid derivatives" to treat patients suffering from epilepsy, nausea, and multiple sclerosis. If the project is successful, then Zelda will have a 24-month option to negotiate the rights to an exclusive licensing deal with SUDA over its's trademarked OroMist technology.
While shares in Zelda Therapeutics are down approximately 60% compared to this time last year, the company still managed to avoid the usual January sell off that affected many of the Australian-listed cannabis stocks and has started 2019 on a high. The shares are currently selling for 5.4 cents as of January 29, making them one of the cheapest pot stocks on market.
You're Ganja Have a Good Time with cannabis stocks in 2019
Although nothing can ever be truly certain when it comes to investing, we believe that these cannabis stocks are well-placed to capitalise on the growing worldwide cannabis market. And, those who choose to get in now will have the chance to take advantage of share highs that are still yet to come.
If you're an investor that's looking to go green in 2019, then watch this space for the next set of Australian cannabis stocks that we'll cover in Part 2 of this series.