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Why these 2 ASX cannabis shares are flying higher this week

Shares in Cann Group Ltd (ASX: CAN) and Althea Group Holdings (ASX: AGH) are flying higher this week. Despite both ASX cannabis shares finishing in the red yesterday, they have posted significant gains over the past week.

Cann Group shares have lifted 48% from 64 cents last week and are currently trading at 96 cents. Shares in Althea are up more than 15% from 39 cents last week and are currently trading at 45 cents. 

Why has the Althea share price lifted?

Althea announced yesterday that more than 4,000 patients had been prescribed Althea medical cannabis products in Australia, as at 31 December. The company’s month-on-month growth rate is accelerating – an average of 36 new patients were added each business day in December, which is an increase of 58% over November. 

Althea listed on the ASX in September 2018 at an issue price of 20 cents and reached highs of over $1.20 last July, before falling to 34 cents in December. Althea imports and distributes medical cannabis products in Australia and the UK. In November, Althea entered a memorandum of understanding to supply Althea products for sale and distribution in Germany. 

What sent Cann Group Shares higher?

Cann Group shares were placed into a trading halt on Monday afternoon following a price query from the ASX. Shares in the Group had rocketed 28% on Monday on speculation of an announcement.

Yesterday, Cann Group announced that extraction activities are underway for its first batches of medicinal cannabis resin. The resin will be used by manufacturing partner IDT Australia (ASX: IDT) to produce medicinal cannabis oil products and will also be available for purchase as an active pharmaceutical ingredient. 

Once formulated and packed the cannabis oil products will undergo stability testing, with commercial release targeted for late March of this year. The extracted resign will be formulated into a full range of medicinal cannabis finished dosage form products including high THC, high CBD, and balanced formulations. The finished products will be made available to Australian patients and prescribers via the Special Access Scheme and will be positioned for export to overseas markets. 

CEO Peter Crock said, “This puts us a step closer to launching our own locally sourced and produced range of medicinal cannabis treatments to satisfy both domestic demand and to help develop valuable export pathways.”

Foolish takeaway

Cannabis shares can be highly volatile – just yesterday Cann Group’s share price went from being up 25% at one point, to close out the day down 4.02%. Despite this, both companies have had double-digit share price growth in the past week.

These latest price increases follow a tumultuous 2019, which saw investors worldwide dump weed stocks as early forecasts failed to eventuate. Regulatory tailwinds and growing public acceptance may improve sentiment toward the sector in 2020. 

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Motley Fool contributor Kate O'Brien 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 Scott Phillips.

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Kate O'Brien