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Why this ASX cannabis stock is sinking 20% lower today

The Auscann Group Holdings Ltd (ASX: AC8) share price is crashing lower this morning after the cannabis medicine manufacturer reported a half-year loss. AusCann achieved a number of key milestones during the half as it works to commercialise its cannabinoid-based medicines. 

At the time of writing, AusCann shares have fallen 19.61% to be last traded at $0.205.

AusCann’s 1H20 results 

AusCann reported revenues from ordinary activities of $245,953, down 45%. Expenses also decreased, falling to $3.68 million from $4.9 million in the prior corresponding period (pcp). A loss for the half-year of $3.42 million was recorded, down from the previous period’s loss of $4.44 million.  

Net assets decreased to $38.26 million at 31 December 2019, down from $41.67 million at 30 June 2019. The cash balance at the end of the half-year was approximately $26 million, leaving AusCann well funded to reach key milestones. Capital will be focused on the core research and development (R&D) program including clinical evaluation, product manufacturing, and commercialisation. 

Progress during the half 

During the half, AusCann was focused on the development, manufacture, testing and release of its cannabinoid-based medicines in preparation for clinical evaluation and commercialisation.

A major milestone was achieved in December with the successful development, manufacture, and testing of AusCann’s proprietary cannabinoid-based hard shell capsules. Testing results validated AusCann as a commercial producer of reliable, stable, and standardised pharmaceutical products. 

Construction of R&D facility 

AusCann completed the construction stage of its product development facility in Perth during the half. Construction was completed on time and on budget with $4.5 million spent to date. Additional expenditure is scheduled for R&D equipment (within the original $6 million budget). The building will provide AusCann with a state of the art R&D facility. 

Supply chain agreements 

Two key contractual agreements were signed during the half which fortify AusCann’s supply chain. A raw material supply agreement was signed with Tasmanian Alkaloids for the supply of material for Auscann’s cannabinoid-based medicines. A supply agreement was signed with Aspen Pharmacare to provide packaging services. 

Future objectives 

Going forward, AusCann is focused on four strategic objectives:

  • Introducing its reliable and standardised cannabinoid-based pharmaceutical products to market; 
  • Educating prominent physicians and medical opinion leaders in Australia about the unique characteristics of AusCann’s cannabinoid-based products;
  • Gathering data-driven results from clinical evaluation and physician feedback regarding the health outcomes of AusCann’s pharmaceutical treatments; and
  • Publishing these results to build clinical evidence to support the benefits of Auscann’s products. 

AusCann is well funded to pursue its objectives. It has proven its ability to manufacture its hard-shell cannabinoid capsules on a commercial scale and is now in a position to pursue commercialisation of its medicines. 

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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