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Why the AusCann share price rocketed higher today

The Auscann Group Holdings Ltd (ASX: AC8) share price has been a big mover in early trade.

At the time of writing the medicinal cannabis company’s shares are up over 10.5% to 47 cents.

What happened?

This morning AusCann announced that its strategic partner Tasmanian Alkaloids has been granted a medicinal cannabis licence and a research and development licence from the Office of Drug Control, meaning the company now has licenses in two Australian states.

Tasmanian Alkaloids is one of world’s largest manufacturers of controlled substances and a producer of medicinal opiates.

Approximately 40% of the world’s opiate crop is produced by the company at its modern manufacturing facility which is fully compliant with Good Manufacturing Practice standards.

AusCann’s managing director Elaine Darby believes that this latest development means the partnership is now well positioned to “progress in our joint strategy to become a leading producer and supplier of high quality medicinal cannabis to Australian patients.”

Should you invest?

As I have said many times before, I think AusCann is a company with significant potential. However, it is still very early days for medicinal cannabis and would be a somewhat speculative investment.

However, I do see an immediate need for the product, especially in the lucrative chronic pain treatment market.

The use of medicinal cannabis in existing pain management regimes involving opiates has been shown to improve pain management and quality of life outcomes according to studies. Importantly, the studies revealed less adverse side effects as well.

So with over 3 million Australians estimated to suffer from chronic pain, there could be significant demand for medicinal cannabis in the future if prescribing physicians can be convinced of the benefits.

In light of this, I’ll certainly be keeping a close eye on AusCann and its other strategic partner Zelda Therapeutics Ltd (ASX: ZLD) over the next 12 months.

If pot stocks aren't for you, then check out these explosive growth shares instead.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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