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ASX cannabis shares see mixed recovery

ASX cannabis shares have staged a mixed recovery since March. The Althea Group Holdings Ltd (ASX: AGH) and Cann Group Ltd (ASX: CAN) shares have had strong comebacks but the Auscann Group Holdings Ltd (ASX: AC8) price has been softer.

Coronavirus has no doubt had an impact on the cannabis industry with patients likely to be reliant on medicinal cannabis in times of stress, and crisis. 

Data from the Therapeutic Goods Administration (TGA) show prescriptions of medicinal cannabis remained steady during the coronavirus. The TGA approved more than 7,300 Special Access Scheme applications in March and April, up from 6,700 in January and February. With this in mind, we take a look at how ASX cannabis shares are performing. 

Althea Group cannabis shares

The Althea share price has recovered nicely from its March low, currently trading at 36 cents. The cannabis share is well up from its 16 cent low although below the January peak of 50 cents. 

Althea announced a 3-year supply agreement with Nimbus Health GmbH, a pharmaceutical wholesaler with a 25% cannabis market share in Germany, which boosted its May share price.  

Nimbus will sell and distribute Althea’s full suite of products in Germany under the Althea name. Althea will receive 50% of the net sale profits. In Germany, 120,000 patients have been prescribed medicinal cannabis to date with this number expected to grow to 1 million by 2024. 

In Australia, Althea finished the most recent quarter with 5,803 patients (increasing from less than 500 a year prior) and 509 healthcare professionals prescribing its products. This led to an increase in revenue. 

Revenue for the quarter containing March was up 39% from December. March’s revenue alone was the best month on record, increasing by 30% since February. This was achieved despite multiple challenges during the quarter including the Christmas holidays, bushfires, and the onset of COVID-19. 

Althea CEO Josh Fegan said:

“Against all odds the March quarter was a great success for Althea. Revenue certainly exceeded our expectations, whilst strong patient and prescriber growth continued. Gross profit margins have improved due to restructuring of commercial arrangements, with cash collection also now faster.”

Althea recently completed work on its Canada extraction and manufacturing facility; Peak Processing Solutions. Peak aims to leverage Canada’s legalisation 2.0 to allow the sale of cannabis-infused food, nutraceuticals, and cosmetics. Althea believes Peak is well-positioned to become a leading manufacturer for consumer brands looking to supply recreational cannabis and infused products. 

Auscann Group 

The Auscann share price remains near record lows for the year. It is currently trading at 16 cents up marginally from its 14 cent low in March and well below its January peak of 36 cents. Auscann was removed from the All Ordinaries Index (ASX: XAO) last week as part of the rebalance of S&P/ASX Indices.

Auscann released its prescription hard shell capsules in Australia earlier this year. The capsules are available to patients through the Therapeutic Goods Administrations’s special access scheme and authorised prescriber scheme. 

The company recently began its first clinical pharmacokinetics evaluation for 2 formulations of an orally administered THC/CBD combination. Dosing of the first volunteers has been completed. 

The study will assist medical professionals in prescribing its hard shell capsules and inform the dose selection. Auscann CEO Ido Kenyon said, “we are very excited to be progressing this important study to provide evidence-based information to medical professionals about our unique hard sheep capsule.”

Auscann finished the last quarter in a strong capital position with $24.7 million in cash and no debt. The March quarter recorded gross cash outflows of $2.7 million with net cash outflows for the quarter at $1.4 million due to the receipt of an R&D tax incentive refund of $1.2 million and $92,000 interest received. 

Construction of the Perth-based product development site was completed late last year with $4.5 million spent on the facility and additional capital spent on R&D equipment. The facility provides Auscann with a state-of-the-art centre to develop cannabinoid-based medicines. 

Cann Group 

Cann Group cannabis shares have staged a comeback from the March meltdown, up 50% from its low. Nonetheless, at 92 cents it remains well down from its January high of $1.69. Cann Group was also removed from the All Ordinaries Index last week.

Through new supply agreements executed with UK and European partners, the Cann share price did receive a boost last month. With import restrictions easing, European medical cannabis markets are expanding and wholesalers are building future inventory. 

New Zealand also holds a Cann supply agreement after medicinal cannabis regulations came into effect on 1 April. Cann Group CEO Peter Crock said, “these agreements represent important progress as we execute on our strategy to be a producer of choice for both the Australian domestic market and markets elsewhere.”

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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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