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How did ASX cannabis shares perform last quarter? 

Bottles and vials of hemp oil in a row next to a spoon filled with hemp seeds representing asx cannabis shares
Image source: Getty Images

The market for cannabis-based products has continued to grow in 2020 despite the impact of the COVID-19 pandemic. The the quarter ended 30 September was no exception, with online sales jumping. Cannabis products are becoming more mainstream and healthcare professionals are increasingly embracing their benefits. This means competition in the Australian cannabis sector is increasing as industry players look to secure distribution channels and patient access. That said, this last quarter saw mixed results for ASX cannabis shares. While some reached new records, others struggled as shareholdings shifted. 

In significant industry news, the Therapeutic Goods Administration (TGA) made an interim decision to down-schedule CBD. The amendment would allow Australian patients to purchase CBD products upon consultation with a pharmacist, without the need for a prescription, from 1 June 2021. If the interim decision becomes final, this will provide another potential source of revenue for ASX cannabis shares.

With that in mind, let’s take a look at how ASX cannabis shares performed in the last quarter. 

Althea Group Holdings Ltd (ASX: AGH) 

Althea continues to go from strength to strength, launching online sales in Australia in July. This fast-tracked response to COVID-19 drove record revenue and patient numbers for the month. Total patients passed 8,000 with 740 patients prescribed Althea products for the first time. Unaudited revenue of $692,091 was recorded. A total of 628 Australian healthcare professionals had prescribed Althea products as at 31 July 2020. 

Althea’s online platform, Althea Concierge, has been updated to cater for online sales. Used in conjunction with telemedicine, Althea Concierge allows doctors to prescribe Althea medicinal cannabis products which are delivered directly to the patient’s door. This eliminates the need for multiple visits to the doctor and pharmacy while complying with regulatory requirements. 

Althea engaged with the TGA throughout the consultation process on the down-scheduling of CBD. CEO Josh Fegan said:

We see it as one of the biggest developments in our industry to date. The interim decision reflects the significant shift in community and government attitudes towards medicinal cannabis.

Althea launched a CBD preparation last year, so is well positioned to take advantage of this market opportunity. 

Althea subsidiary Peak Processing was granted a Canadian cannabis licence last month, and commenced operations immediately. Peak manufactures Cannabis 2.0 products on behalf of third parties such as cannabis-infused edibles, beverages, concentrates, and topicals. The plant will also supply medicinal products to Althea’s pharmaceutical operations, greatly reducing the cost of goods sold. 

Cann Group Limited (ASX: CAN) 

Cann Group saw major shareholder Aurora Cannabis Inc exit its position this quarter. The Canadian cannabis producer sold its 11.84% shareholding in Cann Group despite listing Australia as one of its “primary market opportunities” as recently as February. Aurora did not participate in Cann Group’s July capital raising, where the company raised $24.3 million to provide working capital. The Cann Group share price tanked in the aftermath of the raising, losing some 50% of its value.

Cann Group says Aurora’s exit has no impact on its business plans. It remains focused on developing a supply base with B2B customers and expanding manufacturing capacity. The company says it has secured multiple new offtake and supply agreements which will support short term revenues and de-risk expansion plans. Expansion of the company’s Mildura facility has been central to Cann Group’s growth strategy, but has hit a number of snags. 

An oversupply in the cannabis market late last year forced Cann Group to take a staged approach to construction of the Mildura facility. COVID-19 then slowed progress of potential funding options as well as the practical timing of construction. The company remains in discussions to secure a debt facility to fund the first stage of the expansion. More than $50 million has been spent on the project, which is intended to increase production capacity to 12,500 kilos annually. 

In FY21, Cann Group is forecasting revenues of $15 million, underpinned by existing supply contracts. New commercial supply agreements have recently been secured to supply product to the UK, Germany, and other European countries. Germany is Europe’s largest medicinal cannabis market, with 2019 sales exceeding all other European markets combined. Cann Group also has agreements in place to supply medicinal cannabis to pharmacies and hospitals in Australia through a distribution arrangement with Symbion Health.

Ecofibre Ltd (ASX: EOF) 

Ecofibre completed its acquisition of TexInnovate in the September quarter. The acquisition is aimed at accelerating the transition of Ecofibre’s Hemp Black business from R&D to commercialisation. The Hemp Black business focuses on developing textiles and materials from hemp, which has natural antimicrobial and conductive properties. TexInnovate is a portfolio of 5 businesses with expertise across a range of high-performance textile disciplines. 

The Hemp Black business pivoted rapidly at the onset of COVID-19, re-prioritising efforts from athleisure wear to PPE in response to global demand. By the end of FY20, Hemp Black had delivered $2.4 million in PPE sales. Ecofibre is aiming to embed Hemp Black’s technology across a range of industries, including high-performance apparel, personal protection, military, healthcare, and travel. 

Ecofibre’s Ananda Health business, which sells CBD products in US pharmacies, has been performing strongly, increasing profit before tax by 63% in FY20 to $20.8 million. The Ananda Food business, which sells hemp food products and nutraceuticals, has recorded steady growth, but profits have been slower than expected. Ecofibre has not provided FY21 revenue or profit guidance, but says it will consider paying a dividend for FY21. This is based on the company’s cash position, confidence in delivering profitable growth in Ananda Health, and a pathway to profitability for Hemp Black and Ananda Food. 

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As of 2.11.2020

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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