Why these ASX cannabis shares are starting the week on a high

MGC Pharmaceuticals Ltd (ASX:MXC) and THC Global Group Ltd (ASX:THC) are cannabis shares to watch this week. Here's why…

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The MGC Pharmaceuticals Ltd (ASX: MXC) share price is starting the week on a high.

In morning trade the cannabis company's shares are up 3% to 3.8%. They were up as much as 8% at one stage.

Why is the MCG Pharma share price on a high?

Investors have responded positively to an announcement this morning which revealed that it has entered into a supply agreement with THC Global Group Ltd (ASX: THC).

According to the release, MGC Pharma will provide THC Global with an immediate supplementary source of medicinal cannabis products. These products will then be packaged and made available to patients under its Canndeo brand.

THC Global expects these products to launch in Australia and New Zealand during the first quarter of calendar year 2020.

The agreement also provides for the two companies to collaborate on the future supply of active pharmaceutical ingredients (API) extracts as well as other finished products. This includes product from THC Global's Southport Facility.

MGC Pharma's managing director and CEO, Roby Zomer, was pleased with the agreement.

He said: "We are pleased to partner with THC Global to produce and supply white label Canndeo branded phytocannabinoid products. With the ever-growing use of phytocannabinoids for medicinal purposes, MGC Pharma is well placed to work with companies such as THC Global to manufacture quality and cost effective phytocannabinoid products."

"We expect that further discussions between MGC Pharma and THC Global on mutual exports of product to respective international markets will be beneficial to all going forward, particularly as we develop our ~15,000m2 GMP compliant pharma production and research facility in Malta," he added.

THC Global licence update.

Shortly before the market open THC Global requested a trading halt.

According to the release, it requested the trading halt pending an announcement relating to the receipt of a licence to manufacture therapeutic goods from the Australian Therapeutic Goods Administration.

This would be a big positive for the company and could mean it shoots higher along with MGC Pharma when it returns to trade.

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 Scott Phillips.

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