Shares in the ASX cannabis sector have had another difficult time in December, as most majors come in well behind the benchmark.
Investors are still crowding out of positions in ASX cannabis stocks at a fairly sturdy pace since our last update. Meanwhile, the S&P/ASX 200 Health Care index (XHJ) has been overly volatile throughout December, but is up strongly this past week.
Nevertheless, most of the ASX cannabis industry remains down as the broader healthcare industry churns along. Moreover, commentary on the sector is light, and a quick read of the charts show just a few names sprouting through the green to fawn their leaves this Christmas.
Now with a less visible walkway out of the grips of COVID-19, markets are again behaving wildly and investors are reshuffling positions once more to stay sheltered in the event of a storm.
Add in language from the US Federal Reserve and the Reserve Bank of Australia (RBA) in tapering their bond-buying programs faster than expected, thus signalling potential rate hikes in 2022.
Let's take a look at what's in store in 2022 for some of this month's top performers coming into the new year.
Incannex Healthcare Ltd (ASX: IHL)
Shares in medicinal ASX cannabis company Incannex Healthcare pared some of the strong gains earned in November, but have held the fort this month.
Investors held onto their long positions as shares remained buoyant across the month so far, dipping slightly amid weakness in the broader sector.
For instance, the market wasn't too phased with an update on Incannex's Nasdaq listing from earlier this month. In that release, the company advised it is in a position to conduct its offering of American Depositary Receipts (ADIs) in January 2022.
The deadline comes after a lengthy and intense period endured by the company to address comments raised by the SEC and other headwinds.
CEO and Managing Director of Incannex Healthcare, Mr Joel Latham said: "We are grateful to our team for their work on the registration process and now look forward to marketing the Offering and listing on Nasdaq in January when institutional investors are back on deck after the relatively short winter holiday period in the northern hemisphere. It's been a momentous year for Incannex with six research and development programs that continue to progress rapidly"
The number of securities to be sold and the price per ADS under any offering have not yet been determined. However, Incannex has applied to list its ADSs on Nasdaq under the ticker symbol "IXHL", which has been granted to Incannex by Nasdaq.
Aside from that, the company recently advised that it has completed dosing of participants in the phase 2, proof-of-concept clinical trial investigating novel cannabinoid combination product, IHL-42X, for the treatment of obstructive sleep apnoea (OSA).
OSA remains a significantly unmet medical need and can lead to a variety of cardiovascular complications, with no FDA approved pharmacotherapies.
All participants in the phase 2 trial have now completed the treatment periods and the data is being analyzed by Novotech, the contract research organization engaged by Incannex to manage the study and resulting data. Delivery of the final clinical study report is anticipated in Q1 2022.
Cronos Australia Ltd (ASX: CAU)
Shares in medicinal cannabinoid player Cronos continue charging higher and have now climbed from 17 cents in November to trade at 20.3 cents today.
Cronos is flat for the month so far, however, the company did announce a key update in December that is likely to be of importance in 2022.
Mid-December the company announced that it had completed its merger with CDA Healh Pty Ltd following the successful satisfaction of all conditions precedent.
Pursuant to the merger, four directors of Cronos have handed in their resignations and subsequently, new directors have been appointed, namely Guy Headley, Dr Benjamin Jansen, Kurt Schmidt and Dr Marcia Walker.
As part of the transaction, the company has today issued a total of 403,552,399 ordinary shares and paid $5 million in cash to CDA shareholders in consideration for the purchase of 100% of the shares in CDA Health.
As a result, CDA Health is now a wholly-owned subsidiary of Cronos Australia and the former shareholders of CDA Health collectively own approximately 73.6% of the issued capital of Cronos Australia (on an undiluted basis).
The merged group is poised to deliver proforma FY21 revenue of $23.1 million – up from $4.6 million in FY20 – whilst only increasing its expense base by around $3 million to $10.2 million.
However, cost of goods sold is also expected to blow out to over $15 million from just $2.578 million in FY20, according to financials released by the company just prior to the merger.
Creso Pharma Ltd (ASX: CPH)
Shares in Creso Pharma have actually been on the down lately, however, the company has been embroiled in a set of peculiar updates that has investors intrigued about what's in store for the ASX cannabis player in 2022.
Just a month ago Creso's chairman, Adam Blumenthal, also a director of EverBlu Capital, was under investigation from ASIC and that it had been involved due to "common directorships".
Nevertheless, when all of the news broke, Creso's share price fell from a 6 month high of around 15 cents and has continued south ever since. At the time of writing, it is fetching 7.9 cents on the trade quote.
However, the company has moved along relatively unfazed, and subsequently provided a positive update early in December.
Creso advised that its' recently acquired Canadian psychedelics business, Halucenex Life Sciences, secured an upgrade to its dealer licence with the Canadian Health regulator.
As such, the company is now permitted to grow its own psilocybin, enabling it to expand its research into the compound as a treatment for various complex disease segments.
Phase II clinical trial to test the efficacy of psilocybin on treatment resistant PTSD is expected to commence Q2 CY2022. This could be a key inflection point for investors to consider at that time next year.
Aside from this, the wider ASX cannabis sector has been more than a mixed bag once again this month. The market is becoming less visibly clear as we roll on into 2022 with surging case numbers and choppy investor behaviour.
