Before I start, I am obliged to remind our viewers that this is not advice only general commentary from my extensive research in this area.
Short Intro on medicinal cannabis
Medicinal cannabis, unlike HEMP and recreational, already has the legislative framework for pharmaceutical companies to prescribe to patients. Medicinal cannabis (CBD) is from both the Indica (High THC – narcotic effect) and the Sativa plant (Low to zero THC – no narcotic effect). CBD oil can significantly relieve the pain associated with multiple sclerosis, chronic pain, cancer, and even control epileptic fits.
Despite the legislation giving the green light and the community being on board with the health benefits, the medicinal cannabis market is still slow to take off. Primarily, because doctors need more evidence on the long-term side effects (such as liver inflammation) of CBD oil.
Intro on AusCann (AC8)
AusCann is an Australian pharmaceutical company that delivers high quality, economical, and clinically validated cannabinoid medicines to patients. AusCann aims to use medicinal cannabis to treat neuropathic and chronic pain.
Moreover, AusCann has a strategic business structure. Primarily, because they cover all aspects of the medicinal cannabis supply chain. From cultivation and production, through to manufacturing and selling clinically validated cannabinoid medicines to patients. Now let’s look at AusCann’s stock price movements and projection for the future.
AusCann Stock movements
AusCann (ASX: AC8) is currently trading at 0.33 cents a share. Throughout January of 2018, AusCann’s share price surged from 0.80 cents to $1.85. The increase was in response to the Federal Government, allowing the exportation of manufactured cannabinoid medicines. AusCann saw the federal government’s decisions as a win.
Primarily, because the company already had the necessary licenses to grow and manufacture cannabis but was waiting for the legal green light. For example, AusCann established a Therapeutic Goods Administration (TGA) licensed manufacturing facility for cannabis via their partnership with Tasmanian Alkaloids. Also, AusCann’s share price spiked to the $1.74 (May 2018), after a falling period between February and April. The share price increased for two reasons. Firstly, the expansion of AusCann’s Canopy Growth partnership. Secondly, AusCann’s establishment of a cannabis scheme in Chile.
AusCann Stock Analysis
AusCann engaged in a strategic partnership with Canopy growth in 2016. Canopy is one of the largest producers of cannabis worldwide. AusCann benefits from Canopy’s expertise in the cultivation, manufacturing and exportation of CBD medicine. On the 24thApril 2018, AusCann received an import permit, allowing the company to import cannabis oils from Canopy Growth. This import permit had the following benefits
- AusCann instantly began to supply cannabis to the Australian market
- AusCann and Canopy started to develop a medical outreach program for key leading doctors in each pain area to provide them with the necessary training
- AusCann began supplying Spectrum cannabis (Canopies international medical brand) which increased market distribution in Australia
In November 2016, AusCann created a joint venture with Fundacion Daya to form DayCann. The purpose was for DayCann to become the leading medical cannabis group in Latin America. Then on 28thof March 2018, Daya, by working with the Chilean National Institute of Public Health (ISP), established a special access scheme (SAS). SAS allows patients in Chile to access the first locally produced cannabis in the south American country. In turn, doctors could prescribe the medicine, and DayCann began to profit off the Chilean medical market.
Despite the stock price surging in 2018, AusCann has experienced a slight decrease and now consistent opening and closing points between 0.44 and 0.32 cents (February 8Th– October 4th, 2019). AusCann’s wait for clinically proven results on their hard shell capsules is the reason for the stock price levelling off.
AusCann’s future projections
AusCann does have upside potential in the medicinal cannabis market. However, market success will only occur if AusCann can clinically validate their hard shell capsules to market. Firstly, the Chronic pain market represents 3.24 million Australians. In which only 20,000 are currently accessing medicinal cannabis. This market gap provides AusCann with a desirable incentive to clinically validate their Cannabis-chronic pain capsules to capitalise on this profit opportunity.
Moreover, AusCann, through their partnerships, have established an effective business structure to deliver their cannabis medicine to market. Starting with the product development, as the company have access to Canopy Growth’s plant genetics. To the raw materials. Where AusCann has secured shipments of cannabinoid concentrate from MediPharm labs. In addition to the Dayacann venture that produces high-quality cannabis plants in Chile.
To then obtaining both Good Manufacturing Practice (GMP) and Therapeutic Good Administration (TGA) certifications to manufacture in Australia. To then having a distribution agreement with Australian Pharmaceutical Industries (API). Finally, AusCann has excellent educational programs and training for medical practitioners regarding cannabis use.
Despite AusCann’s establishment across the medicinal supply chain there are some fundamental negatives preventing market success. First and foremost is their lack of sales revenues. However, this harsh financial reality should come as no surprise. Primarily, because AusCann has no clinically validated products and is relatively speculative now. Second to that AusCann’s managing director Elaine Derby has resigned. Her resignation could raise a red flag, as she constantly campaigned the potential of AusCann to the media, suggesting the potential might not be as big now.
To conclude, AusCann is a penny stock with significant connection across the entire medicinal cannabis supply chain. However, until AusCann can clinically validate their hard-shell capsules to market, then their lack of sales revenue will continue to be a fundamental negative. Investors must watch the results of AusCann phase 1 clinical trial for hard shell capsules in 2020. Primarily, because a positive result would see the share price skyrocket.
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The information above should not be taken as financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
Written by Associate, Patrick McLoughlin