To buy or sell pot stocks, that is the question

By Jonathan Jackson. Published at May 31, 2019, in The 420 Report

Despite IG Markets forcing its users to sell the 19 global pot stocks on its books by 24 May, Australian pot stocks have generally been racking up the good news.

IG were spooked by potential legal ramifications, mostly affecting UK investors.

“Under English law, UK investors that hold shares or invest in companies whose business activities involve the cultivation of cannabis or sale of cannabis-related products are likely to be at risk of committing a criminal offence,” law firm Macfarlanes LLP said on its website in January.

Those rules may or may not apply to Australian investors, but it seems IG wasn’t taking any chances.

Their loss, when you consider the news flow of some Australian pot stocks and what effect continued news flow may have on their performance.

Take MGC Pharmaceuticals (ASX:MXC) for instance.

On news that MXC had been granted a cannabis cultivation research licence with RMIT (Royal Melbourne Institute of Technology) by the Australian Office of Drug Control (OCD), the company’s shares spiked 13.2%.

Shares have come back about since the 29 May announcement, but were still in the black up 7.5% to $0.055 today.

It has been a big month for MXC, having already have signed a distribution agreement with specialist medical cannabis company Health House International.

Health House International was granted the first medicinal cannabis import licence in Australia and will provide MGC Pharmaceuticals access through its wide supply network of affiliated pharmacies in all states of Australia, along with its network of prescribing doctors, hospital and associated clinical research facilities.

That is of benefit to all patients.

Health House founder and CEO Paul Mavor is overseeing the expansion of Health House into the UK market. He said of MXC, “They represent cutting edge technology in this industry that is backed up by ongoing research.

“MGC has a great selection of products with different formulations targeting different medical conditions that prescribers will have confidence in.” Mr Mavor said.

Now, we just need more doctors prescribing.

Mavor went on to say, “Our distribution and supply chain network is unique with Health House employing specialist cannabinoid pharmacists trained in all aspects of the supply process such as compliance, regulatory advice, approvals process, dosage, and drug interactions. We make it easy for doctors to prescribe and pharmacists to dispense ensuring product reaches patients in a timely and safe manner.”

Health House International deliveries are overnight to all capital cities in Australia.

“These agreements endorse our phytocannabinoid based product range, significantly expand our distribution in Australia and demonstrate that we are at the forefront of our industry,” said Roby Zomer, co-founder and managing director, MGC Pharmaceuticals.

MGC has received purchase orders under the agreements, which cover its proprietary cannabinoid treatments, including CannEpil for the treatment of Epilepsy and CogniCann for the treatment of Dementia and Alzheimer’s.

The agreements further includes two additional MGC formulations: MXP100, which is the company’s CBD only formulation, and MXC 1:1, a 50/50 mix of CBD/THC which was developed for the relief from symptoms of spasticity and certain types of inflammatory pain with all four applications permitted by the Australian Therapeutic Goods Administration (TGA) for supply in either clinical trials or under the special access scheme.

The deal has also been left open to include any additional MGC formulations that may be developed for commercial use, which could also have a positive effect on share price moving forward.

Cann Group’s construction

Another in the news recently is CannGroup (ASX:CAN), who will start construction of its $130 million state-of-the-art medicinal cannabis growing greenhouse in Mildura shortly.

Trading at $2.18 as of 31 May, Cann Group will construct a 34,000 sq.m glasshouse to be completed by the end of the year.

The company has seen a slight decline in its share price lately (1.80%), but once construction begins it could act as a catalyst, especially as site finalisation may only take a handful of months.

Paragon Funds Management believes CannGroup is one to watch, above peers such as AusCann and Creso Pharma, due to a five-year offtake agreement with Canada’s Aurora Cannabis.

New CEO for AusCann

Over at AusCann (ASX:CN8), not to be confused with CannGroup, a new CEO is in place.

Ido Kanyon has taken the reins of the company which is targeting the treatment of chronic pain.

Though the appointment was announced in February, Kanyon officially took leadership on 22 May.

Kanyon said, “I see tremendous opportunity for AusCann to lead in the delivery of cannabis-based pharmaceutical solutions that are endorsed by physicians and address the needs of patients who are suffering from inadequately treated medical conditions.

“The company has built a strong platform on which we will continue to grow.”

For a trading perspective on this stock, see this article.

Creso’s first cannabis crop

Just a week ago, Creso Pharma (ASX:CPH) subsidiary Mernova Medical announced that it had harvested its first cannabis crop in Canada.

The crop was harvested at its state of the art facility in Nova Scotia, Canada, which is up and running ahead of schedule.

It was a small crop but a precursor of things to come and places Creso in a strong position to enter Canada’s medicinal and recreational cannabis market.

Also working in its favour is a three year supply agreement with TerrAscend Canada, which has agreed to purchase 100 kilograms of cannabis flower per month, estimated to be worth approximately C$6 million (A$6.4M) in annual revenue.

The news came just a few weeks after the announcement that Creso had secured an import permit for the introduction of medicinal cannabis product Cannaqix®50 to Australia to be sold as a therapeutic product via approved channels.

April also saw Creso granted a licence to import Cannaqix®50 into Brazil. The product will be sold and marketed by SIN Solution which has direct access to more than 350,000 health professionals and over 200,000 patients.

Creso’s performance has remained stable through this period, with small peaks and troughs, peaking at $0.49 on May 16 and currently sitting at $0.43.

It’s the stability of the stocks that makes us think that holding isn’t such a bad idea. IG may have hit the panic button, but investors outside its platform should stick to their own informed strategies when considering to buy or sell in the pot stock market.

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

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S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

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