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Why the Auscann Group Holdings Ltd share price jumped 25% higher today

The Auscann Group Holdings Ltd (ASX: AC8) share price has been a standout performer on the local market on Thursday.

Its shares rose as much as 25% higher before profit-taking set in. At the time of writing the medicinal cannabis company’s shares are up 12.5% to 76.5 cents.

What happened?

This morning AusCann announced that the Office of Drug Control has granted its partner Tasmanian Alkaloids a manufacturing licence for its Tasmania site.

This means that the medicinal cannabis company is now the only ASX-listed entity to hold all the required licences in Australia to cultivate, harvest, manufacture, and distribute final dose form cannabinoid medicines.

Management believes that the partnership is now positioned to be the predominant supplier of cannabinoid medicines in Australia with future export potential.

AusCann’s managing director Elaine Darby appears to be very bullish on its future prospects, stating that: “The potential Australian medical cannabis market is significant with chronic pain control an initial target for us. There is also real potential for Australia to be an exporter of high quality cost effective cannabis medicines in the future.”

The chronic pain market has previously been estimated by the company to be worth around $5.8 billion a year in Australia.

Is it time to invest?

This is clearly a major positive for the company and arguably gives it a first-mover advantage. However, with so much growth already built into its share price, I intend to hang back and wait to see how its sales generate over the next 12 to 24 months.

If the company’s products can become the standard of care in the chronic pain market then the sky is the limit, but there’s a long road ahead before that becomes a possibility.

Fellow pot stock Hydroponics Company Ltd (ASX: THC) is also up sharply today after signing a licence agreement with National Access Cannabis.

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Motley Fool contributor James Mickleboro has no position in any of the 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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