You're Missing Out: 3 Top Cannabis Biotech Stocks

Like any biotech company, cannabis biotechs offer the opportunity for massive short-term gains.

Many investors love the world of biotech, as often they can return tremendously solid short term gains. It's hard to beat the world of biotech investing when it comes to sheer excitement. They are constantly releasing results such as positive clinical trial endpoints, and game-changing licensing deals that can really drive the share price.

In short, although these early-stage biotechs are still very risky, they really do offer significant upside for investors willing to take the risk.

To try and reduce the risks, we have chosen three that we think to have a massive shot at success. So sit back, strap in and get ready for the biotech boom.

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

Botanix Pharma

Botanix Pharma (ASX:BOT) is an Australian medical dermatology company engaged in the development of cannabinoid-based products for the treatment of a range of skin conditions, and are working to get their first cannabinoid products approved by the FDA.  If successful, they could dominate a multi-billion dollar dermatology market which has seen few new products approved in the last 20 years.

They state that their mission is "to improve the lives of patients suffering from serious skin diseases including acne, psoriasis and atopic dermatitis by providing new treatment options for conditions that currently are inadequately addressed or are treated with therapeutics that are burdened with side effects profiles."

Simply put, this mission is the business. 

BOT is investigating the use of a synthetic active pharmaceutical ingredient (API), known as cannabidiol (CBD), which has a well-established safety profile and is well documented in its ability to impact inflammation and potentially bacterial infection.

All products made by BOT utilise synthetic CBD in conjunction with PermetrexTM skin delivery technology. PermetrexTM is a dermal delivery formulation technology that allows 10 to 20 times more of the active ingredient to get through the skin to better treat the disease. BOT has exclusive rights to this technology for all drugs that treat dermatological conditions.

The first two products off the rank target the treatment of Acne (BTX1503) and Atopic Dermatitis (BTX1204). As it stands right now, there are no cannabis-based products approved for these markets and no-one else is studying the impact of CBD-based products on these conditions.

With acne, there has been no new approved drug for over 20 years.

– Matt Callahan, CEO Botanix pharma

And this is what makes this company so exciting. They are operating in two very big sectors of the medical industry—with a combined Total Addressable Market of over $8 billion. And their products would really stand out in a market were the incumbents consist of generic brands, who to this day, still produce significant side effects and safety issues when used as a long term treatment method, which both skin diseases require.

The initial results from these clinical trials suggest that BOT products deliver efficacy-based results on par with the incumbents—and sometimes even higher—but (and it's a big one) with a statistically significant improvement in the safety profile. Same results, fewer side effects. Which would you rather your teenager use? Its lead asset BTX1503—for the treatment of chronic acne—is currently in Phase II clinical trial that is expected to be completed and reported on by Q3.

Cannabis Industry Biotech

The company's second asset, BTX1204 for the treatment of Atopic Dermatitis (AD), which covers severe eczema, is currently in Phase II clinical trial that is expected to be completed by the end of 2019.

Should BOT deliver successful endpoints on the Phase II trials for their leading assets, then the most likely outcome from there would be a licensing deal with a big global pharma player that would deliver significant upfront cash flow, and medium-term licensing royalties post successful Phase III study outcomes. This outcome was massively reinforced when they announced that the addition of Vince Ippolito to its leadership team, who sold his last dermatology drug to Pfizer for a cool $5.2 billion.

In our most recent report, written only 3 months ago, we placed a buy recommendation on the company with a $0.20 target. At the time, the share price was $0.10, but the company easily moved into that range, and thus in our opinion, could have a long, long way to go. Our favourite biotech, and one that we believe could be a 20 to 30 bagger for investors over the coming 3 to 5 years. A very strong conviction position.

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

MGC Pharma

MGC Pharmaceuticals Ltd (ASX:MXC)another Australian-listed cannabis biotech company, operates a European-based 'Seed to Pharma' model, as they develop, produce and distribute Cannabinoid-based active pharmaceutical ingredients (API).

Their Maltese facility is euGMP certified, which means the entire European continent is now a potential client, as only euGMP-certified medicinal cannabis can be bought and sold in Europe. In addition, the company was also the first to be granted qualification for its medicinal drugs by the European Medicines Agency.

What this means is that the company now has a green light to apply for the evaluation and registration of its lead assets, CogniCann and CannEpil, and any other medicinal cannabis products currently being developed.

CannEpil is a cannabis-based medicine designed to regulate patients with epilepsy, and the company recently announced that the number of patients in Australia being subscribed their products had reached the 100-patient milestone. In addition, they also have a distribution agreement with Canvallate, one of Australia's premier distribution companies.

MGC Pharmaceuticals very recently announced they had received commitments for AUD$4.75 million, and are using some of this capital to pursue a joint-listing on the London Stock Exchange (LSE). Exactly the kind of exposure required with their main operations and revenue coming from the European Union.

We have rapidly advanced the business, delivering material results through ground-breaking research and development, increasing our distribution channels globally, and widening our growing and manufacturing capabilities.

– Co-founder and Managing Director of MGC Pharma, Roby Zomer

They also have the cannabis industry's leading brokerage house – Canaccord Genuity – acting as their equity capital markets partner to assist in the LSE listing. This would make MGC Pharma one of the very first to list on the UK exchange, in a market that is set to explode in the coming years.

The company is leveraging its Australian presence by looking to Asia for growth. Recently MGC Pharma secured a distribution deal with YuShop for their CBD-based nutraceutical range.

YuShop specialises in bring health and wellness products into China. YuShop then provides a cross-border digital commerce platform that allows their clients to import, market and sell to their more affluent Chinese customers. YuShop will provide MGC Pharma access to over 1,500 retail channel partners.

With their euGMP facility, multi-phase clinical studies on their unique medicine cannabis strains, and a first-mover advantage into the multi-billion dollar Chinese health and wellness market. A biotech with multi-channel commercial streams. We really like the story, and have a long-term position in the company.

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

Impression Healthcare

Impression Healthcare (ASX:IHL) started life as a manufacturer and supplier of custom-fit mouthguards and other dental equipment. The company now operates essentially two business units

The Oral devices business unit continues to show strong growth across its product range, which includes sports mouthguards that offer better protection to the teeth, and reduced impact from a concussion. They also manufacture and distribute sophisticated devices to combat sleep apnoea, snoring and bruxism.

The other business unit is a rapidly expanding Medicinal cannabis business with four unique clinical trials in partnership with Swinburne University of Technology, that are complementary to the issues the above-mentioned oral devices are trying to treat.

Cannabis Molecule Cannabis Industry

IHL's cannabinoid drug discovery brand Incannex Pharmaceuticals is a collaboration with an EU-based CBD drug design company, Linnea SA. Linnea will provide the product for the base CBD materials that will underpin the four novel formulations that are currently being used in the clinical trials.

Through its commercial agreement with Cannvalate, Australia's largest network of medicinal cannabis prescribers, IHL also has access to Australian licenses to import, export and distribute cannabis products.

They will be conducting phase 2a of their trials to investigate the effect of their cannabis formulation—known as IHL-42X—that seeks to address Obstructive Sleep Apnoea. The trials will be focusing on outcomes, measures of sleep quality, and patient mood to determine the success of the formulation.

The global Sleep Apnoea devices market was valued at US$5.5B in 2017.

"Obstructive Sleep Apnoea Syndrome is one of the biggest unmet disease burdens in the western world for which there is no current, proven pharmacological treatments. However, if instead of incumbent bully equipment there was a registered medicine which had the potential to reduce the number of apnoeas suffered, this would be an enormous disruption of the sleep device market."

– Impression Non-Executive Director and Chief Medical Officer, Dr Sud Agarwal

However, Obstructive Sleep Apnoea is only one of four areas of research, which include Traumatic Brain Injury/Concussion, Periodontitis (Gum Disease) and Temporomandibular Joint Disorder. In the next quarter, Impression's management expects to commence a clinical trial that will investigate the use of CBD for the treatment of concussion and traumatic brain injuries in sportspeople.

To support and strengthen the commercial opportunities associated with this trial, Impression Healthcare also recently announced an official supplier and concussion research partnership agreement with MMA sports league company, ONE Championship, one of the largest and fastest-growing sporting bodies in the world.

ONE Championship—which has positioned itself as a competitor to the UFC—is the largest global sports media property in Asian history, with a global broadcast reach of 2.6 billion potential viewers over more than 140 different countries.

This gives IHL access to the real-world scenarios associated with contact-sport concussion research. Notably, one of the world's largest cannabis companies, Aurora Cannabis, has done a similar deal with the UFC. We believe this channel holds great commercial opportunity for Impression.

In breaking news in August, Impression Healthcare also appointed internationally recognised key opinion leader in cannabinoid medicines, Dr Sud Agarwal, as the company's Chief Medical Officer and a Non-Executive Director.

The appointment adds significant medical, scientific and cannabis-related expertise to the company's senior management team, and will aid in Impression Healthcare's current and future research.

We are very favourable of this move, as it brings both experience and gravitas to the IHL offering, and lays a solid foundation for meaningful and commercial clinical trials. Another Australian biotech to have on your radar. We have a position and remain very bullish.

Mark Bernberg
Mark Bernberg

Mark Bernberg is a long-time cannabis investing enthusiast and founder of The Green Fund, Asia Pacific's preeminent media house, positioned at the forefront of the global cannabis industry.

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