Australian Cannabis Index Prepares for a Rebound as HMMJ Surges Ahead

Little Green Pharma was also identified as a key player to watch, after the company secured in $2.2 million in 2020, accounting for 30.5% of total industry revenue.

While the Australian cannabis market may have taken a hit during the 2020—as the global coronavirus pandemic disrupted investor confidence throughout the globe—a recent study from IBISWorld has predicted that revenue in the medical marijuana manufacturing sector will grow to $31.2 million in 2021.

This increase is expected to be driven by the recent decision from the Australian government to authorize over the counter CBD sales in December 2020, coupled with a growing body of research from the global healthcare community supporting the usage of cannabis in a healthcare setting.

The strict regulatory framework regarding the manufacture of medical cannabis products has limited the sector's growth over the past five years. However, the recent determination by the TGA to allow over-the-counter CBD products to be sold without a prescription is expected to drive significant revenue growth in the years aheadIBISWorld Senior Industry Analyst, Will Chapman

The report also singled out Little Green Pharma (ASX:LGP), as a key player to watch, after the company managed to take in $2.2 million in 2020, which accounted for approximately 30.5% of the sector's total revenue.

According to the Senior Industry Analyst for IBISWorld, Will Chapman, an increased global focus on clinical research will most likely encourage domestic lawmakers and healthcare specialists to expand the range of conditions that are currently treatable with medical cannabis.

Additionally, the introduction of medicinal marijuana to the Pharmaceutical Benefits Scheme (PBS), along with "advances in medical cannabis technology", is expected to further legitimize the potential of cannabis-based treatment.

"Domestic production is still ramping up and rising demand for medical cannabis products in both domestic and export markets is anticipated to support strong growth in 2021. It will take time for new medical cannabis products to be approved, but medicines derived from cannabis will eventually appear on pharmacy shelves," Chapman said.

"Overall, medical cannabis manufacturing revenue is projected to rise at an annualised 79.1% over the five years through 2025-26, to $575.2 million. IBISWorld anticipates employment in this industry to reach 1,500 by 2025-26. The sector already includes several notable players, and others have begun operations as recently as November 2020.

As a result, the Australian Cannabis Index stayed steady this week, reaching 12.59 by close of trading Friday, while keeping pace with the AORD and S&P 500, which reached 13.41 and 17.85, respectively.

However, the true winner was the Horizons Marijuana Life Sciences Index (TSE:HMMJ)—which is considered by many to be the benchmark for the North American cannabis industry—which was up 55.68 on its six month performance.

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

Creso Pharma

Stock in the ASX-listed cannabis company, Creso Pharma Limited (ASX:CPH), fluctuated mildly throughout the week, before reaching an equilibrium of 0.24 per share on Thursday.

The stock hit a high of 0.27 last week, after the company's management released a market update regarding the Democratic victory in the US senate runoff elections, which many believe will have a considerable impact on global cannabis market. 

The recent election result is a historic moment for the cannabis industry in the USA and these developments leave Creso very well placed to capitalise, should cannabis ultimately be decriminalised in the US through the passing of the MORE Act. Creso has established distribution footprints in place, as well as an established product suite that it is able to quickly rolled out to satisfy large unmet demand from US customers. Our proximity to the US, through our wholly-owned subsidiary Mernova, provides a significant advantage for the Company and we look forward to any potential legislative changes that will unlock the US market.Creso Pharma Non-Executive Chairman, Adam Blumenthal

And there was more good news from Creso Pharma this week, after the company announced that it had successfully delivered a second shipment of cannaQIX products—after satisfying the necessary import and export procedures—to Pharma Dynamics South Africa, which operates as a subsidiary of Lupin International (NYSE:LUPIN).

Pharma Dynamics currently distributes Creso Pharma's hemp-based products throughout South Africa and is in the process of working to extend its distribution to Namibia, Botswana, Zimbabwe, Swaziland, Lesotho, Angola, Mozambique, and Uganda.

"We are excited about the completion of this second order from Pharma Dynamics, which has underpinned a very successful launch of cannaQIX® under the Cannamics brand in South Africa," Creso Commercial Director Jorge Wernli said.

"cannaQIX® has been developed using Good Manufacturing Practice standards and is standardised and user-friendly. Strength and formulation allows for precise dosage control and the lozenge form is more palatable than many other oils on the current market. We have no doubt that it will continue to be well received by consumers in South Africa."

"We are very proud of having accomplished this delivery in spite of the current restrictions in place, mainly due to the COVID situation. We are looking forward to further growth throughout South Africa and other territories together with Pharma Dynamics."

Creso Pharma have also stated that they are confident the deal will lead to additional opportunities in the African market in the coming months, as it continues to work with Pharma Dynamics to "establish a broader footprint" and increase the size and volume of subsequent purchase orders.

The order also generated considerable enthusiasm from investors, as it provided another significant cash influx to the company's already robust balance sheet, which had reached over $6 million prior to the end of 2020.

And although it has only been a little over a fortnight since 2021 began, Creso have already managed to rake in an additional $1.7 million from stock options, which should provide it with the necessary capital to continue expanding into new markets. 

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

Eve Investments

The stock price for EVE Investments (ASX:EVE), demonstrated remarkably little fluctuation over the last seven days—remaining relatively stable at 0.009 each—despite recording a trading volume in excess of 31 million shares.

The company also announced that medical technology firm Omni Innovation—which is 38% owned by EVE Investments—had signed on to a binding term sheet with Myopharm Limited, to secure the rights to its glycaemic control product for diabetes sufferers.

The new licencing agreement for Omni Innovation's pre-meal drink is very encouraging. We are excited to see Myopharm take on the licence in these territories and roll out its prescription channel model for this unique, scientifically validated product.Eve Investments Managing Director, Bill Fry

Under the terms of the agreement, Myopharm will be given access to a 15-year license allowing for the manufacture, marketing, and distribution of Omni Innovation's flagship diabetes control product throughout Australia, Europe, the UK, and mainland China.

EVE's cannabis products are also currently sold in the US—which generated over half of the company $2.1 million group revenue intake during the September 2020 quarter—however interest from the Chinese and Taiwanese market is also beginning to rapidly expand. 

"The interest in our products from Chinese and Taiwanese consumers was particularly pleasing and bodes well for the introduction of our other products into these regions," EVE Investments Managing Director Bill Fry said.

"In addition, the success of our native raw honey product on Amazon is paving the way for our other honey products and the probiotic concentrates on this channel."

"This is a key strategy we aim to replicate across all regions where we utilise Amazon."

Earlier this week EVE also provided the market with a distribution update on its US activities, as its Meluka Australia branded Organic Raw Native Honey products have been accepted for sale in the Whole Foods product catalogue.

Meluka's products will be initially distributed throughout the Northern California market—constituting approximately 40 Whole Foods stores—before being rolled out to additional markets in future.

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

AusCann

The Australian pharmaceutical producer, AusCann Group Holdings (ASX:AC8), saw its stock price reach 0.20 per share this week, as investor enthusiasm remained strong after a shake-up in senior management the previous week.

Following the resignation of its erstwhile chief executive officer, Nick Woolf, AusCann announced that it had appointed Layton Mills—the founder and managing director of CannPal Animal Therapeutics' (CP1)—as the new CEO of the company.

The combination of AusCann and CannPal has clear synergies including multiple revenue streams and the leverage of data in the animal health space for the development of human medicines and vice versa. Both companies have established a strong network of alliances that should accelerate success. I look forward to working with Mr Mills during his onboarding and supporting the acquisition and implementation over the next six months. I believe that the medicinal cannabis industry in Australia has significant growth potential and the combined company will be well placed to benefit from this.AusCann CEO, Nick Woolf

The move comes after AusCann announced that it would acquire CannPal in late 2020—via a scheme implementation deed—due to the company's experience and long-term growth potential in the pet care sector.

Under the terms of the agreement, 100% of the company was acquired—at a share price of 18.4 cents each—for a total of approximately $17.5 million. 

"Since Nick joined us in August 2020 he has been instrumental in moving forward the development of a robust pipeline with advancement of studies of the existing hard-shell capsules based on the Neuvis platform, initiating formulation work of a novel CBD only variant and engaging an experienced US-based team to develop additional product candidates addressing unmet health needs," AusCann Chairman Max Johnston said.  

"In addition to this, Nick has also taken significant steps toward making AusCann more cost effective and efficient in utilisation of its assets and operations. We thank him for all his efforts in taking AusCann forward during his tenure whilst also progressing the proposed acquisition of CannPal."

"I am pleased that Nick has agreed to provide continuity during the prospective transition and wish him well in his future endeavours."

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.