Australian Cannabis Index | US Cannabis Industry Prepares for Comeback in 2021

Senate Majority Leader Chuck Schumer will unveil new legislation aimed at legalizing cannabis at the federal level, "in the early part of this year."

Investor sentiment surrounding the US cannabis market continued to rapidly build last week, as it became increasingly clear that the Senate's newly instated Democratic Majority is firmly set on pursuing cannabis legalization at the federal level.

This possibility was further cemented this week, when the Senate Majority Leader Chuck Schumer announced that he would renew efforts to legalize the drug.

We look forward to working with the Senate to refine the bill, advance its core principles, and end the federal prohibition of cannabis once and for all," Blumenauer said. "The missing ingredient in cannabis reform has been Senate action. To finally have the active leadership of the new Senate majority leader, rather than being stuck in McConnell's legislative graveyard, makes all the difference in the world.Oregon Democratic Representative, Earl Blumenauer

This was followed on Friday by a meeting between US Senate leaders and cannabis industry stakeholders to receive feedback on new draft reform legislation that will be officially tabled in the house, "in the early part of this year."

Schumer also released a joint statement earlier in the week announcing the plan—which is also being championed by Senate Finance Committee Chairman Ron Wyden and Senator Cory Booker—while also criticising the repeated failures of marijuana criminalisation.

"The War on Drugs has been a war on people—particularly people of colour. Ending the federal marijuana prohibition is necessary to right the wrongs of this failed war and end decades of harm inflicted on communities of colour across the country," the statement read.  

"But that alone is not enough. As states continue to legalize marijuana, we must also enact measures that will lift up people who were unfairly targeted in the War on Drugs."

"In the early part of this year, we will release a unified discussion draft on comprehensive reform to ensure restorative justice, protect public health and implement responsible taxes and regulations. Getting input from stakeholder groups will be an important part of developing this critical legislation."

This has led to speculation that we may see several of the larger Canadian cannabis producers begin to acquire and merge with American companies to increase their US market share, which has fuelled further interest in the Horizons Medical Marijuana Life Sciences ETF (TSX:HMMJ).

The HMMJ ETF topped out this week 51.72 on the one-year performance chart, significantly outplaying the Australian Cannabis Index, which managed a small rally, climbing back to 38.46 after experiencing a drop last week.

The S&P 500 also suffered over the last fortnight, bottoming out at approximately 3700 on January 29—which was likely caused by the market volatility generated during the GameStop controversy that began last month—although the AORD was up by 1.07% by close of trading Friday.

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

Elixinol Global

The hemp-derived CBD producer, Elixinol Global (ASX:EXL), released its latest quarterly operations update on Wednesday last week, which caused the stock to climb in value before finally reaching 0.20 a share by the close of trading Friday.

During this period the company implemented a number of cost reduction measures to offset revenue decline caused by the COVID-19 pandemic, while also generating an additional $20.5 million in funding via a heavily oversubscribed capital raise.

The December quarter was a critical one for Elixinol. Our long-term funding position was substantially strengthened through an oversubscribed capital raise, providing us the funding headroom to withstand further short-term impacts from the COVID-19 trading environment. As we move further into Q1 FY2021, our focus remains selling into the most COVID-resistant sales channels, maintaining tight cost controls and on achieving continued margin improvement.Elixinol Global Group CEO, Oliver Horn

Hemp Foods Australia also delivered above expectations, after contributing approximately $1.1 million during Q4 FY2020, representing a 22% increase when compared to the same period during the previous year.

During this period the company also worked to reposition itself towards a "higher margin, consumer-led branded nutraceuticals model", with a focus on e-commerce driven sales and high-margin branded products.

This has led to a shift in Elixinol's revenue and margin mix, producing an increase in the company's overall profitability.

According to the Elixinol Global Group CEO, Oliver Horn, there were several silver linings which came through during this period, including positive shifts in the regulatory environment for cannabis and hemp, that were "driven by the United Nations, the World Health Organisation and US Federal Government election."

"Sales through our e-commerce channel grew substantially, contributing 35% of Group revenue, and Hemp Foods Australia, which is less hampered by COVID-19, demonstrated further improvement, also contributing 35% of overall revenue."

"In addition to distribution previously announced with Alliance Healthcare, Wells Pharmacy and Boots Ireland, we also secured extensive ranging with SuperDrug, the UK's second largest pharmacy chain, to whom we shipped first product in the December quarter. Our Essential Hemp branded hemp seeds were also ranged by all Costco stores across Australia."

"Given we enjoy strong relationships with our partners and are still making progress, as demonstrated by our new listing with SuperDrug, which we won despite the challenging COVID environment, we remain bullish about the Company's growth potential," Horn said.

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

Little Green Pharma

Last week there was big news from Little Green Pharma (ASX:LGP), after the company announced that it had been selected as a primary supplier of medicinal cannabis oil for a French national trial of medicinal cannabis, in conjunction with pharmaceutical distributor Intsel Chimos.

The two-year medicinal cannabis trial is being overseen by the French National Agency for the Safety of Medicines and Health Products and will recruit up to 3,000 patients across the course of its duration.

We are very proud of our Partnership's success in the French national tender and see this Tender win as strong evidence of LGP successfully implementing its export-led global sales strategy and demonstrating the benefits of Australian Good Manufacture Practices ("GMP") quality manufacturing in global pharmaceutical markets.Little Green Pharma Managing Director, Fleta Solomon

Additionally, if the trial is successful, it is expected to trigger "the legalisation of medicinal cannabis in France", which was recently estimated to possess a value of approximately €4 billion once the market reaches maturity.

Under the terms of the agreement, LGP will serve as a primary supplier for the study, which should yield a significant first mover advantage, along with heighted brand-recognition in France's nascent medicinal cannabis market.

And it's not hard to see why, as the trial will become the only available legal pathway in France to access medicinal cannabis for the next two years.

"We believe the Trial will demonstrate the Partnership's credibility and reliability to the French medical community, giving both companies a significant competitive advantage once medicinal cannabis is legalised in France," LGP Managing Director Fleta Solomon said.

"I'd like to congratulate both Intsel Chimos and LGP teams for their tireless efforts in developing a world-leading bid for the Tender."

"We trust this marks the beginning of a long and rewarding partnership as we look to grow and cement our reputation amongst French patients and prescribers as a world-class medicinal cannabis supplier."

News of the agreement led to a strong spike in pot stock's value, as shares in Little Green Pharma rose to 0.65 a piece by the close of trading Wednesday.

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

Althea Group

The Australian pharmaceutical producer, Althea Group (ASX:AGH), saw a gradual spike in its stock value over the last seven days—eventually reaching 0.52 a share—after releasing its quarterly update for the period ending 31 December 2020 on Friday last week.

During this period, the company took in record unaudited revenue of $2,721,164—representing a 29% increase on the previous quarter—while UK revenue grew by 168%, which eventually saw sales exceeding $400,000

We are extremely pleased to have closed out such a challenging year on a high note, and equally as pleased to have exceeded $1 million in monthly sales for the first time. With rapid growth and record sales occurring in both Australia and the UK, the Company continues to make great progress executing our strategy and we look forward to a monumental year in 2021.Althea Group CEO, Josh Fegan

There was another a big win from Peak Processing Solutions—which operates as a subsidiary of the Althea Group—after the company entered into an agreement with The Tinley Beverage Company (CSE:TNY) which will see three non-alcoholic cannabis-infused beverages manufactured and distributed into the Canadian recreational cannabis market

In the same month Peak also secured Manufacturing and Distribution Services Agreement with the Canadian cannabis beverage developer, Electric Brands, which will see the company develop two canned beverage SKUs.

"Since Peak received its Standard Processing Licence from Health Canada a couple of months ago, we have been busy ramping up commercial operations at the facility and are in the process of expediting the product launch dates for both new and existing customers," Althea CEO Josh Fegan said.

"Peak has received an influx of enquiries for its industry leading Cannabis 2.0 product development, manufacturing, and distribution services, and has already signed contracts representing forecasted revenue of up to CAD$4.65m over the next 12 months."

"Peak remains uniquely positioned to cater for the big consumer brands seeking to enter the recreational cannabis market and I look forward to updating the market on further agreements shortly."

In December last year Althea also managed to lock down a wholesale supply agreement with MG Biotech Ventures and AfriCann—which is currently expected to generate approximately $650,000 in forecasted revenue—for the importation of a range of Althea branded products for sale and distribution in South Africa.

As a result, Althea has considerably strengthened its balance sheet, which was bolstered further in December 2020, when the company announced the completion of, "a $6M placement to institutional, sophisticated, and professional investors."

"The Company remains fully funded and in a strong financial position to meet its current and future financial obligations across its global operations with approximately $8.96 million cash on hand as at 31 December 2020," the report stated.

"In January 2021, the Company announced the completion of its oversubscribed Share Purchase Plan (SPP), providing an additional $3.78m in funding and not included in the chart below, which summarises cash outflows in the December quarter."

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.