Australian Cannabis Index | Philip Morris Weighs Up Cannabis Play

The tobacco juggernaut previously dipped its toes into the cannabis sector roughly five years ago, when it invested in Israeli medical cannabis company Syqe Medical.

The outlook of the Horizons Marijuana Life Sciences Index ETF' (HMMJ) reached a high for the week on Thursday—hitting 87.73% on the six-month performance chart before close of trading—after news broke that tobacco giant Philip Morris International is weighing up a push into the cannabis market.

In an interview with Bloomberg News, Philip Morris CEO Andre Calantzopoulos explained that the company is currently considering a number of variables before entering the marijuana space, including product efficacy, toxicity levels and the potential differences between pursuing the pharmaceutical or recreational-use market.

We are doing all this work and will determine one day what avenues to pursue. But our priority is what we're doing with our smoke-free products, and that's where I would stay on cannabis.Philip Morris CEO, Andre Calantzopoulos

Philip Morris previously dipped its toes into the cannabis sector roughly five years ago, when it invested in Israeli medical cannabis company Syqe Medical. However, the purpose of this deal was to secure exclusive global rights to the company's "high precision" smoke-free technology.

However, the corporation may face pushback in the US from the Democratic party, after Senate Majority Leader Chuck Schumer recently stated that his bill to end cannabis prohibition at the federal level will be designed to empower to small businesses, rather than larger well-established companies.

"We don't want the big tobacco companies and the big liquor companies to swoop in and take over," Schumer said.

"The legislation we have will make sure that smaller businesses, businesses in communities of color, get the advantage because communities of color have paid the price for decades. They should at least get something back."

"We want to move this bill. It's time."

Conversely, the performance of the Australian Cannabis Index fell again last week, while the outlook of Australia's All Ordinaries was edged out by the S&P 500, which recorded a gain of 27.87%.

Keeping this in mind, let's examine some of the ASX-listed shares that drove the market forward last week.

Cann Group

The Australian medicinal cannabis company, Cann Group (ASX:CAN), managed to close out the month with a 2.08% boost to its share price, after announcing the shipment of more than 20,000 bottles of cannabis extract to iuvo Therapeutics.

This week also saw the release of the company's latest quarterly activities report, which showed a $3,988,000 increase in cash flows compared to the previous reporting period.

Recent exports of medicinal cannabis products to Europe confirm the growing opportunity for Australian producers. We look forward to strengthening the relationship with iuvo over the coming few years and delivering more value-added products into the quickly expanding European market.Cann Group CEO, Peter Crock

This was fuelled in part by a 23% reduction in manufacturing costs coupled with an almost 500% uptick in customer receipts, although the lion's share was generated by a payment from the Australian Taxation Office as part of the government's R&D incentive scheme.

The company also continued to increase its local supply to various white label customers and compounding pharmacies during the quarter—which also saw a doubling of units supplied, increasing from 1400 to 3000—while the number of domestic customers also increased.

February saw the acquisition of European-based company Satipharm—which is exclusively licensed to develop and market the proprietary Gelpell cannabinoid delivery system—which will give Cann a platform to apply for registration in the rapidly expanding low dose CBD market, while also fast-tracking the development of novel THC formulations.

Cann subsequently confirmed that it intends to bolster the growth of Satipharm's existing European sales network by ramping up investment in the company's marketing and distribution capabilities.

The Cann Group also experienced a $3.57 million decrease in cash during the quarter as the result of a "cyber security incident" that took place earlier this year.

The company has confirmed that legal action has been undertaken to recover the lost funds, however a resolution to the issue is not expected until late 2021.

Disclaimer: Past performance is not an indicator of future performance.

Elixinol Global

Last week the Australian pharmaceutical company, Elixinol Global (ASX:EXL), published it quarterly activity report for Q1 FY2021, showing a 26% decline on previous reporting period, which is reflective of normal seasonality.

During this period, the company embarked on the "highly value accretive" acquisition of leading German hemp derived CBD player, CannaCare Health, which will allow for fast market entry and immediate, material scale in Europe's fastest growing CBD market.

The first quarter of the calendar year is traditionally softer for retail, while consumers curb discretionary spend after Christmas and holiday trading periods. This seasonal trend was compounded by the continued impact of COVID in two of our key markets: the UK and US, where footfall into physical venues continued to be significantly reduced. Pleasingly, in March we saw green shoots start to appear both in the UK and the US as the impact of economic stimulus packages, easing of COVID restrictions came into effect and increased vaccination rates started lifting consumer confidence.Elixinol Global CEO, Oliver Horn

Operating cash used during the quarter—excluding CannaCare transaction costs—amounted to $3.6m, which has left the company well-funded to continue its expansion plans with approximately $23.3 million in cash and equivalents in its war chest.

At the same time, the company is finalising its repositioning towards a higher margin, consumer-led branded nutraceuticals model. Elixinol's focus on the use of e-commerce for driving sales through the COVID-19 operating environment—along with the sale of higher-margin Elixinol branded products—has also led to improved EBITDA levels across all business units.

"Moving closer to summer and with the UK coming out of lockdown and vaccination programs being implemented, we expect to see an improvement in consumer spend. Our confidence is underscored by recent re-orders commencing in late March from major pharmacy channel customers, Superdrug, Well Pharmacy and PharmaCare," Elixinol Global CEO Oliver Horn said. 

"Now that we have our UK Novel Food Application validated by the UK Food Standards Agency, our products can remain in distribution, and new customer opportunities are opening up with the benefit of this improved regulatory certainty."

"In March we announced the proposed acquisition of CannaCare, whose performance in Germany has been consistent with our expectations, supported by a successful skincare launch. We are now looking forward to presenting this transaction to shareholders at our coming AGM on 17 May and discussing the strategic importance and accretive EBITDA outlook that this acquisition is anticipated to bring to the Group."

Disclaimer: Past performance is not an indicator of future performance.

MGC Pharma

The European-based bio-pharmaceutical company, MGC Pharma (ASX:MXC), released its latest quarterly report on Tuesday last week, showing record quarterly sales which delivered $880,000 in revenue.

The last quarter also saw MGC become the first medicinal cannabis company to list on the London Stock Exchange (LSE), following a successful a £6.5 million placement.

This has been a historic quarter for MGC Pharma, following our listing on LSE, along with record sales for our proprietary pharmaceutical products. MGC Pharma is well positioned for the future, with clinical trials for CannEpil and CogniCannTM due to begin in the coming quarter, alongside phase III clinical trials for CimetrATM, which have the potential to treat the many people suffering as a result of Covid-19.MGC Pharma CEO, Roby Zomer

During this period MGC Pharma also secured a three-year supply and distribution agreement with leading European nutraceuticals producer and distributor, Swiss PharmaCan AG, for the distribution of ArtemiCTM Rescue as a food supplement.

Under the terms of the agreement, Swiss PharmaCan AG will be required to make a minimum purchase order of 40,000 unit of ArtemiCTM Rescue per quarter, with the first shipment having already been fulfilled.

As announced to the market on 10 December 2020, MGC Pharma has also been given access to a cash grant which will cover 80% of the construction costs for its EU-GMP manufacturing facility—up to the value of €3.1 million—which is currently under construction in Malta.

Construction of the facility—which will be primarily used to produce CimetrA and other liquid dose medicines—is now well underway, with close to half of half of the grant money being made available to the company at the end of March.

MGC Pharma has also confirmed that it currently expects construction on the Malta site to be both operational later this year and completed within the current estimated budget.

"MGC Pharma is now in an excellent position to realise its potential and build on the foundations that have been set in the past 12 months, as we remain on target to reach break even this financial year," MGC Pharma CEO Roby Zomer said.

Disclaimer: Past performance is not an indicator of future performance.

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Hugo Gray
Hugo Gray

Hugo Gray is a Melbourne-based journalist with a body of work that covers a diverse range of topics, including immigration law, sex technology, and now the rapidly expanding cannabis industry.