Cannabis stocks guide: Here’s everything you need to know
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Cannabis-based medicine and health products have grown into a sizeable business in just a few short years with expanding numbers of patients in Australia, Canada, Germany, and the UK.
Clinical trials have started in Australia and the UK — markets with huge upside potential — to verify the beneficial health effects of medicinal cannabis products in treating Alzheimer’s, anxiety, insomnia, dementia and providing pain relief for cancer.
New health-related cannabis and hemp products are appearing on supermarket and pharmacy shelves, and the COVID pandemic has fostered a rapid growth in online sales.
Some cannabis companies that came to the ASX market only two or three years ago are now significant players globally, with lucrative businesses in overseas markets.
Product offerings are ever more sophisticated and take in everything from health supplements, food and beverages, to medicine and seeds and oils.
In Australia, competition is heating up again in the medicinal cannabis sector, as companies jostle to buy up distribution channels such as cannabis clinics for patients and as years of work building markets and educating medical professionals come to fruition.
There are 18 pot stocks on the ASX that are neck-deep in the cannabis business; for another 20, cannabis makes up a part of the business.
The value of the global market for medicinal-use cannabis is expected to hit £84bn ($150bn) in 2024, according to bio-pharma company MGC Pharmaceuticals (ASX:MXC).
In Oceania, which includes Australia, New Zealand and Pacific island nations, the market for cannabis — medical and recreational — is estimated to be worth $US8.7bn, according to US-based cannabis market research firm New Frontier Data.
Roughly 2 million Australians aged over 14, or 10.4 per cent of this age group, use cannabis at least once a year, and 6.9 million Australians or 35 per cent have tried cannabis in their lifetime, the Australian Institute of Health and Welfare said on its website.
The Australian market is growing at a rapid pace with record new prescriptions being approved each month by the medications regulator the Therapeutic Drug Administration (TGA).
ASX-listed cannabis company BOD (ASX:BDA) forecasts the 67-million-strong population in the UK will mean the medicinal cannabis market will reach $US3bn by 2024, with 7.3 million customers per year, and will be four times larger than the Australian market’s size by 2028.
However, Australia is now growing strongly too: Compass Cannabis president Dave Martyn says this country is the world’s next big medical cannabis growth market, an opinion based on the rate of script approvals compared with Canada at a similar period after legalisation.
In Australia, 50,000 prescriptions for medical-use cannabis were approved until the end of June 2020 and the government expects that number to reach 70,000 by the end of this year.
According to Althea Group (ASX:AGH), 18,500 patients accessed medicinal cannabis in 2019.
Key to the medicinal cannabis market’s growth in just a few short years has been its quick response to new licensing and regulatory regimes.
Companies in the cannabis space have tweaked their business models and adjusted their product lines to fit with the new permissive legal landscape.
Some cannabis companies have been more successful than others.
Typically, those with an added-value product offering that is well marketed to a specific customer segment such as dementia patients, or providing pain relief for cancer patients, have done well.
Others with a basic product line such as hemp seeds or oils have struggled in a market that is still dominated by foreign imports with a customer base that is still small.
Marijuana, the colloquial name for the cannabis variety that’ll get you high, has been used for millennia as both a medicine and a recreational drug.
There are two main cannabis species: cannabis sativa and cannabis indica.
Both produce delta-9 tetrahydrocannabinol (THC) — the part that gets you stoned — and cannabidiol (CBD) along with about 600 other known compounds.
Hemp is a variety of cannabis sativa grown specially for its fibre. It contains low levels of THC and slightly higher levels of CBD.
The other key compound to know about in cannabis are terpenes.
Terpenes are fragrant oils found in plants that carry flavour and aroma. They carry the pungent odour of cannabis and offer some medicinal properties — but they don’t contain THC or CBD.
About 200 terpenes have been identified which give cannabis its distinct aromas.
Together, cannabinoids and terpenes produce a range of effects known as the “entourage effect” or the type of feelings the drug or treatment gives.
They do this by tapping into the body’s own endocannabinoid system and different cannabinoids and terpenes will influence whether it makes you sleepy, hungry, creative, or acts as a pain reductor.
Around 50 countries have taken steps to legalise the use of cannabis in a medical context, according to Wikipedia. Notable on this list is Australia (all states and territories), Canada, Germany, Israel, Italy, Mexico, New Zealand, Switzerland and the United Kingdom.
Medicinal cannabis use is allowed in 33 out of 50 US states, four US territories, and the District of Columbia.
Australia pulled the trigger in 2016, with medical legalisation coming into effect on October 30 of that year.
It led to a rash of new cannabis-focused companies listing, or backdoor listing, onto the ASX in 2017, and a variety of others changing their business operations to incorporate facets of the new industry.
Australia’s first pot stock was MMJ Group (ASX:MMJ), which has since morphed into a cannabis venture investor named MMJ. Its investments include a $2.65m interest in Canadian production and investment company Embark Inc.
The biggest IPO was Cann Group (ASX:CAN), which followed that with a mammoth $60m capital raising in November 2017. Strongly supported by institutions, it was the first indication of professional money in Australia becoming interested in cannabis.
Licences and permits are needed to grow, manufacture and research cannabis in Australia.
A licence enables a company to start preparing a growing, research or manufacturing site. A permit, which stipulates constraints such as strains and the number and weight of its plants, allows them to start work.
The federal government’s Office of Drug Control (ODC) has issued an ever-increasing number of licences that allow companies to grow cannabis for commercial purposes, grow cannabis for research, manufacture cannabis-based products, and import and export marijuana.
In October 2018, the ODC gained Cabinet-level approval to hire more staff after being swamped by licence applications: they expected 18 a year but at one point were trying to wade through about 190. It takes between 18 months and two years to go from submitting an application to receiving a permit for a cultivation site.
The ODC website list of authorised producers of medical cannabis include Althea, AusCann, Canopy Growth, Cronos, Green Farmers, Medcan, Medicinal Harvest and Tcann.
Scroll down to find out which ASX cannabis companies have licences.
At the end of 2019, a total of 92 licences have been issued by the Australian government for cannabis production, New Frontier Data said in a July 2020 report on Australia’s medical cannabis market.
One-third of the issued licences were exclusively for cannabis cultivation in Australia, 20 licences were for cultivation for research purposes, and 40 were for manufacturing cannabis products, the report said.
Australian licence holders are permitted to produce a total of 35,000kg of dry cannabis flower for medicinal purposes.
The Therapeutic Goods Administration (TGA) controls who can use medical cannabis in Australia, under two ‘special access schemes’ (SAS): SAS B is for unapproved products and SAS A is for people in palliative care.
Medical professionals can also apply to become an authorised prescriber, meaning they don’t need TGA approval for each prescription.
As there are only two registered cannabis medicines in the world, Epidiolex for epilepsy and the nose spray Sativex, both owned by UK company GW Pharma, the TGA has also allowed the import of unregistered products that can be used for medical purposes — that is, products that haven’t been tested in clinical trials and approved by the regulator.
By the end of June 2020, the TGA had approved 50,000 SAS B applications, compared to 4200 by the end of February 2019.
However, this is not the total number of people in Australia approved to use medical cannabis.
Applications are per product so if one person is using multiple products, they have to apply separately for each. Some people are approved, but are turned off at the final hurdle by the high price of medical cannabis products, which can range from $300 for a month’s supply of cannabis oil to $1200 for a 10ml vial of Sativex.
While Australian authorities say there is no predetermined list of conditions that cannabis can be prescribed for, guidance documents by the TGA endorse chemotherapy-induced nausea and vomiting, epilepsy, multiple sclerosis, chronic non-cancer pain and palliative care.
Patient access is looking to be big business for ASX marijuana stocks.
The difficulty is, however, that while “everybody knows” cannabis causes drowsiness or increases appetite, there are vanishingly few completed clinical trials that can back that information up and give doctors a basis on which to prescribe.
In Australia at least five companies are taking treatments through clinical trials or have imminent plans to do so.
Clinical trials are generally divided into three phases. Phase 1 focuses on safety, Phase 2 tests for effectiveness and Phase 3 examines whether the new drug is an improvement on existing treatment. Sometimes trials are further divided into parts A and B, where a B stage is generally more rigorous.
The two leaders are Zelira Therapeutics (ASX:ZLD), which is trialing its medical cannabis formulations for insomnia, chronic pain and opioid use reduction, and Medlab Clinical (ASX:MDC) which is looking at cancer-induced bone pain and chemotherapy-caused nausea and vomiting.
There are around 20 pot stocks on the ASX that are neck-deep in the cannabis business. These can be split broadly into six categories.
Patient access: Althea was the first listed patient access play on the ASX.
Althea is a licensed producer, supplier, and exporter of pharmaceutical grade medicinal cannabis. It also provides education to support patients and healthcare professionals in navigating medicinal cannabis treatment pathways.
The company operates in Australia, the UK, and is looking at European and Asian markets. It estimates there are 2.9 million potential medicinal cannabis patients in the UK for a market worth £1bn in 2021.
An independent scientific committee is conducting a UK trial for medicinal cannabis, Project Twenty21, and patients can be referred to Althea’s MyAccess Clinics for assessment and treatment.
In Germany, where 60,000 patients were treated with cannabis-based medicine in 2019, Althea distributes its products through Nimbus Health which has 25 per cent of the market.
In response to COVID-19, Althea has started to deliver its products direct to patients, through its Concierge online platform, eliminating any need to go to a doctor or pharmacy.
In Canada, Althea’s Ontario production plant for infused cannabis products for Canada’s adult market such as infused beverages, topicals, edibles and medicinal products is nearly complete. Canada’s recreational cannabis market is estimated at $C4.3bn.
Biotechs and pharmaceutical manufacturers: These are companies that are focused on creating drugs and taking them through clinical trials, a risky business with a 9.6 per cent success rate.
AusCann is finalising the development, manufacture, and testing of proprietary cannabinoid-based hard-shell capsules for physicians to prescribe to patients in Australia.
Clinical tests for the capsules along the lines of standardised test procedures in the pharmaceutical industry have started and include a randomised trial in healthy volunteers of capsules in two different doses.
AusCann has completed the construction of a Perth facility to produce its capsules at a cost to date of $4.5m.
BOD Australia (ASX:BDA) sells cannabichromene (non-psychoactive cannabis) products under its CBII brand in the UK in collaboration with the Health & Happiness Group.
The company is also taking part in the UK’s Twenty21 project – a medicinal cannabis project with 20,000 patients. The project will collect research data from chronically ill patients to review the affordability and availability of medicinal cannabis treatment, assist prescribers and advance potential of NHS funding.
BOD’s healthcare products treat a range of conditions such as Tourette’s syndrome, anxiety, and PTSD. The business continues to commercialise and scale up through the uptake of its MediCabilis product.
In Australia, BOD has an import permit for two new medicinal cannabis products from BOD proprietary extract to be bottled and sold under its MediCabilis brand.
Swisse Wellness and BOD launched their first hemp products in 2,000 Australian stores under the Swisse brand for seeds and oil products and at Chemist Warehouse, Priceline, Coles.
An Australian medicinal cannabis study started in July with 500 patients over 12 months through various cannabis clinics, BOD said.
Botanix Pharmaceuticals (ASX:BOT) is a synthetic cannabinoid company developing products supported by clinical trials for treatment of skin diseases such as acne based on the antimicrobial properties of synthetic cannabidiol.
Another is Creso Pharma, although it also fits into the lifestyle category, thanks to its animal health products and grower category via its Canadian subsidiary, which received a growing licence in 2019.
Creso Pharma has developed water-soluable micro-granulated hemp granules as part of its health product line, developed with Swiss Domaco Pharma.
IDT Australia (ASX:IDT) is a pharmaceutical manufacturer and has started to scale-up production of medicinal cannabis biomass from partner Cann Group into high-value pharmaceutical ingredients.
MGC Pharma is a Europe-based seed-to-medicine bio-pharma company specialising in the development and production of phytocannabinoid-derived medicines at its facility in Slovenia and has plans to build a second factory in Malta.
The company’s branded medicines include CannEpil for epilepsy, CogniCAnn for dementia, and MP100 in Australia, Europe and South America.
The company has a clinical trial for its CogniCann treatment for dementia and Alzheimer’s disease. Estimates are that 500,000 people in Australia suffer from Alzheimer’s and in Europe 1.5 million have the illness.
The company is also carrying out a clinical trial for its treatment for COVID-19.
The company has distribution partners in Europe, North Africa, South America, Russia, Australia, New Zealand and Thailand.
Medlab Clinical has participated in a clinical trial in Australia involving 125 doctors and 256 patients to assess the real-world impact of its NannaBis cannabinoid medicine for cancer pain management.
The clinical trial found that NanaBis was safe, tolerable, efficacious and fast-acting for cancer pain. The company has sold its first batch of 5,000 units of its hybrid cannabinoid drug to Cultech in the UK.
Suda Pharmaceuticals (ASX:SUD) is developing cannabinoid drugs in the form of oro-mucosal sprays to treat a range of medical issues and has a partner agreement with Cann Group.
Growers: Cann Group is the dominant grower in Australia right now and is focused on product sales in Australia while it develops export opportunities.
It has a base in Mildura, Victoria, designed by a subsidiary of its major shareholder Aurora Cannabis, and two current facilities.
Cann medicinal products are developed for pharmacies and hospitals in Australia. The company holds licences to import, grow, produce and manufacture and export cannabis products. It has two export agreements with European and UK partners for medicinal cannabis formulated oil and dried products made by IDT.
THC Global is the other main listed grower and has received its permit to grow and manufacture from its Queensland sites.
CropLogic (ASX:CLI) reviewed its operations following a failure of a trial crop and a drop in hemp prices and was put into administration.
Cann Global grows and researches medicinal cannabis and has partnerships in Australia, US, Israel, Asia and Canada. The company has three divisions — medicinal cannabis production, medicinal cannabis research, and natural foods.
Hemp: Ecofibre is arguably the most successful Australian pot stock: with its main operations based out of the US, it is profitable and has strong revenue growth.
Australian Primary Hemp (ASX:APH) has commercial partnerships in the hemp space, including exclusive supply agreements with Freshwater Brands for cosmetics sold in Woolworths and Chemist Warehouse, and its Life Cykel products for wellness sell in 40 countries.
APH has a network of hemp growers and farmers for its raw material and claims to be the largest grower of hemp in Australia.
The company makes and distributes hemp products under the APH brand to retail and wholesale and white label customers in Australia.
ECS Botanics (ASX:ECS) grows hemp in Tasmania and made its first shipment of hemp oil to its Woolworths supply chain partner in 2019.
The company has a supply deal with Just Foods Australia for its ECS Botanics 250ml hemp oil product. Its hemp food products include Indian Masala lentil soup and Mexican spiced bean soup, as healthy meal options.
Elixinol is a major US hemp grower. It makes the majority of its income from hemp-derived CBD oils and foods.
Investor: MMJ switched from being a lifestyle-cum-medical cannabis company to a pure-play investor, after a series of deals didn’t pan out.
MMJ has investments along the cannabis value chain in Australia, Europe and Canada ranging from cultivation through to extraction, research and development, product manufacture, testing, distribution and retail, and patient services.
The company has investments in growers WeedMe and Harvest One, product makers Bien and Embark, and retailers VitaGenne and Hemple and the Cannabis Access Clinics.
Lifestyle: The last group are those with fingers in a range of pies.
An example is Esense-Lab (ASX:ESE), which makes synthetic cannabis terpenes (it doesn’t extract them directly from the plant).
MGC Pharma and Creso Pharma currently also fit into this bracket.
Cronos (ASX:CAU) received its first shipment of Peace Naturals branded medicinal cannabis oils from Cronos group, its major shareholder, and the products are now prescribed in Australia.
The company acquired a 51 per cent interest in Cannadoc Health, a Melbourne-based medicinal cannabis clinic and has launched its Adaya range of medicinal cannabis products.
Elixinol Global produces hemp derived cannabinoid products under its Elixinol brand.
The products are made in Colorado and sold in Australia, Europe, the UK and the Americas. They include capsules, tinctures, balms and sports gels, topical products and supplements.
In Australia the company’s products are sold through 1,600 medical practitioners and 2,000 pharmacies.