ASX cannabis shares faded from the spotlight in 2020 as the coronavirus pandemic took over. But the Australian medical marijuana companies have been working through COVID-19 disruptions as they look to scale their businesses. Some have been quietly growing patient numbers while others seek additional funding to pursue their strategic agendas. We take a look at how ASX cannabis shares are performing.
3 ASX cannabis shares in the spotlight
Althea Group Holdings Ltd (ASX: AGH)
Althea saw growth in patient numbers falter due to COVID-19 disruptions early in the pandemic. Average new patients per business day fell from more than 36 in December to less than 22 in April. But the rate of growth has since rebounded with 583 new patients added in June, meaning Althea finished the financial year with 7,295 patients. Sales, which were lower than expected in April and May, rebounded in June, which became the company’s highest revenue month on record.
Last month, Althea launched online sales of its medicinal cannabis products. Using the Althea Concierge app, patients can purchase products online and have them delivered directly to their doors, eliminating the need to visit a doctor or a pharmacy. Althea CEO, Josh Fegan, said “The ability for contactless sale is probably the biggest development yet for medicinal cannabis in Australia. You need to have a lot more than just a quality product in the highly regulated prescription cannabis space and Althea’s ongoing investment in technology provides us with a premium value proposition that we believe none of our competitors possess.”
Interactions with healthcare professionals were fewer during the June quarter due to COVID-19 restrictions. In order to mitigate this, the team pivoted to virtual meetings where possible. The Althea concierge app also continued to play a role in providing virtual training and supporting health care professionals with product information and patient treatment plans. At the end of FY20, close to 600 health care professionals were prescribing Althea products.
Althea achieved unaudited revenue of $1.59 million for the June quarter. This was a new record and up 5% on the March quarter despite COVID-19 disruptions. Unaudited revenue over the full year was $4.97 million, a 547% increase on FY19. At 30 June 2020, Althea had $10.4 million cash on hand, leaving it fully funded and in a strong position to meet its financial obligations. The strong increases in revenue despite the impacts of the pandemic have seen the Althea share price rebound strongly from its March low. This ASX cannabis share is currently trading at 35 cents, up 118% from its 16 cent low, but still 27% below its high for the year.
Cann Group Ltd (ASX: CAN)
Cann Group is in the medical marijuana cultivation and manufacture business. The business faced headwinds in the form of a global oversupply of cannabis earlier in the year. This combined with the coronavirus pandemic caused the Cann Group share price to fall from a January high of $1.69 to a March low of 61 cents. A July capital raising saw the share price fall further, with shares now trading at 49 cents. Cann Group raised $24.3 million of capital at an issue price of 40 cents per share, however the company’s major shareholder, Aurora Cannabis Inc (Canada), did not participate. Nonetheless Cann Group says it believes Aurora remains committed to the strategic relationship.
The coronavirus pandemic has slowed the company’s progress in obtaining debt financing for the build of its Mildura growing facility. The build also requires engagement with specialist contractors based in Europe who are unable to enter Australia. Cann Group believes demonstrating an established revenue stream will strengthen its position in relation to securing external funding for Mildura. To this end, Cann Group has secured commercial supply agreements for cannabis products and dried flower for sale in Australia and to export markets including the United Kingdom and Europe. A distribution agreement is in place to deliver products to hospitals and pharmacies throughout Australia. An offtake agreement is also in place with Aurora enabling Cann Group to supply Aurora with products through to 2024.
The ASX cannabis share can supply a broad range of products from specific cultivars in unique finished product formulations. Manufacturing arrangements with IDT Australia Limited (ASX: IDT) ensure products meet standards required for distribution in a range of markets. Cann Group is pursuing additional supply contracts with third parties in Australia and overseas. A growing revenue base and expanding supply arrangements will considerably strengthen the business case for the Mildura expansion, which the company remains strongly committed to.
Auscann Group Holdings Ltd (ASX: AC8)
The Auscann share price collapsed in March, falling to a low of 14 cents after trading as high as 36 cents in February. The share price has yet to recover from this fall, with shares currently trading at 15 cents. The company produces controlled dosage THC/CBD capsules and received its first orders during the June quarter. Product was supplied to Australian patients under the special access scheme.
Recruitment and dosing was also completed during the quarter in a phase one study of the products. The study will provide information to inform dose selection and assist in prescribing the hard shell capsules. CEO, Ido Kanyon, said, “We are very excited to be progressing this important study to provide evidence-based information to medical professionals about our unique hard shell capsule. This is the first of many studies planned by AusCann to better understand and prove the benefits of using controlled dose medicinal cannabis for medical treatment.”
Auscann recorded net cash outflows of $5.5 million during the June quarter, primarily due to product manufacturing and operating costs. $3.1 million was spent securing high-quality raw material for R&D and manufacture. Research and development costs of $1.1 million were also incurred mainly in relation to the clinical trial. At the end of FY20, Auscann had a cash balance of $19.2 million which will support the continued progress of its growth strategy.
What’s next for ASX cannabis shares?
The coronavirus pandemic has had a mixed impact on ASX cannabis shares. Demand for cannabis products had been growing strongly prior to the pandemic. Experts report that medicinal cannabis products get to about 1% to 2% of the population. Based on current Australian patient numbers, there is still significant growth to be seen. The key for these ASX cannabis shares will be capturing demand, both at home and abroad.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of June 30th
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.
- Temple & Webster share price on watch as sales surge 74% – August 31, 2020 9:46am
- ASX Stock of the Day: Pointsbet share price surges 77% on NBC deal – August 28, 2020 2:10pm
- Australian Finance Group share price down 4% despite strong results – August 28, 2020 10:57am