Will kava be the cannabis of 2018?
Health & Biotech
Health & Biotech
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With cannabis stocks leading the charge, naturally derived ingredients that provide medicinal benefits are some of the hottest stocks on the ASX.
One of the hottest products in the plant-based extract space is Kava — a numbing relaxant that comes from the root of the kava shrub.
Many Australian know Kava from the occasional consumption on Fiji sojourns.
Since ancient times Kava has been used in social and ceremonial life in the Pacific islands for its relaxing, anti-anxiety effects.
What is less known is that there are several Kava extracts that are marketed as herbal medicinal products for anxiety disorders and as dietary supplements to improve stress disorders, nervous tension and restlessness.
Most of us are familiar with energy shots — whether in the form of energy drinks, coffee or a plain sugar hit. The energy drink market is huge — $1.2 billion per year in Australia alone.
What we are needing is a way to chill out at the end of a long trading day. This is where the Kava companies have a solution.
Potential IPOs in the pipelin
With potential Initial Public Offerings in the pipeline some of the hottest stocks for 2018 may be companies that are using extracts from Kava to help us all chill out and relax.
Given the rise in stress and anxiety based disorders in the western world the potential size of the market for Kava extracts is huge.
One example is the use of Kava for the treatment of high blood pressure.
High blood pressure (hypertension) is a major health problem in most developed countries, and in urban populations of many developing countries.
It can lead to heart problems such as stroke and disease, as well as to kidney disease: all leading causes of death in western populations. In the US alone, around 75 million adults have the condition.
This is especially dangerous when coupled with rising rates of obesity, diabetes, as well as poorer diets, and lack of exercise.
With many people over-medicated, the search for natural ways to counter hypertension in place of prescription drugs is becoming more common.
Clinical testing of kava
Kava has been shown in clinical tests to be effective in treating mild anxiety. Stress can raise your blood pressure, so a little extra relaxation with some calming kava should have the opposite effect.
There are many benefits in using Kava extracts to treat a variety of disorders.
Unlike other substances used for these purposes, kava has been shown to have positive effects on reaction time and cognitive processing. Furthermore, it has the potential to decrease anxiety without the loss of mental acuity.
The big pharmaceutical companies are finally beginning to take notice of Kava and its benefits in their desire to tap into the herbal supplement market.
However, for kava exports the supply chain is tightly controlled in which quality assurance checks ensure dirt and mould are removed from plants and kept out of the finished product.
The Fijian island of Ovalau produces some of the highest quality Kava in the world. The volcanic island is known in Fiji for the high quality and potency of its kava which is grown by subsistence farmers.
The companies that will succeed in this market will be the Fijian ones that have the local experience to navigate the rigorous regulatory requirements as well as have the know how to engage with the substance farmers that grow Kava.
Keep an eye out in 2018, because if the rumours are true Fijian company Taki Mai — one of the most relaxed companies around — may be hitting the ASX early in the new year.
Chris Robertson is a Sydney-based Investment Manager who has been working in the investment management industry globally for more than 25 years. He is director of Arthur Austin Advisory.
In his monthly column Chris brings insights to Stockhead honed by years at the investment coal face. He is on Twitter @ChrisRobbo01.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.