Some investors to date have been handsomely rewarded on Cannabis stocks.
Creso Pharma Limited (CPL) was one of several entries to the sector with solid credentials. Since listing in October of 2016, the share price has risen over 200%, albeit on a bumpy ride.
The buzz surrounding Creso reflected investor acceptance of the company’s capabilities to achieve its stated goal of “creating an integrated cannabis products opportunity with a global footprint, covering from seed to finished goods, greatly benefitting patients and consumers.” Creso had the technology, management, and strategic partnerships in place.
Falling below the radar of some was the early announcement of Creso’s planned cannabis-based animal health product in Switzerland. In January of 2017 an article in the Sydney Morning Herald, entitled Pot for pooches? Medical cannabis being used to treat doggy anxiety, interviewed Australian vets supporting the use of Cannabidiol – a natural compound from the cannabis plant – for anti-inflammatory and pain relief in animals. The Creso product – anibidiol® – is poised to begin generating revenue from Swiss operations with plans to introduce anibidiol® elsewhere in Europe and Latin America.
Advocates of ASX cannabis stocks know the potential market for medical and recreational use is significant. Demand growth estimates are problematic at best, given legalization of recreational marijuana around the world is still a matter of speculation, although Canada appears ready to take the plunge. With that in mind, the following graph from the Australian investment site eurekareport.com.au shows the potential in the US alone.
The market for animal health products – both companion and livestock animals – is also growing. The following graphs are from US based market research firm Grandview Research. The first looks at demand for companion animal in North America and the second for animal health products overall in the US.
U.S. animal health market, by product, 2014 – 2025 (USD Billion)
There are three start-ups with hopes of cracking the animal health sector with cannabis-based products. The following table summarises the price history of these three “punters’ specials.”
Newcomers to the red-hot pot stock sector might be wondering what could possibly be the relationship between bauxite, a mineral, and cannabis, a plant. The answer is nothing; other than an effort diversify into an unrelated business to cash in on the latest investment craze.
QBL is an exploration stage bauxite miner. On 16 October the company announced it had received an MDL (Mineral Development License) from the Queensland Department of Natural Resources and Mines (DNRM) for the company’s South Johnstone Bauxite Project. The license allowed the company to begin trial production of bauxite for feasibility studies. The share price barely moved.
One month later, Queensland Bauxite announced it had gained a controlling interest – 55% – in privately held Medical Cannabis Limited (MCL). The market reaction to the news serves as evidence of how hot the sector was perceived to be.
MCL already produces a line of hemp seed products under the brand name Vitahemp. The Australian government has legalised hemp food products for human consumption. Hemp is a fibre derived from cannabis plants.
Investors have been treated to a steady stream of positive news from the MCL acquisition. A subsidiary of MCL, VitaCann Pty Ltd, recently entered into a joint venture with a Canadian company to produce a prescription medical grade extended-release pill, the first delivery system of its kind.
Another MCL subsidiary, Medical Cannabis Research Group, is helping fund the Research and Development Foundation at the Technion-Israel Institute of Technology investigating medicinal cannabis treatments for autoimmune diseases, beginning with multiple sclerosis.
MCL is now expanding to medical marijuana use in animal health with a minority stake and a joint agreement with Algae.Tec Limited (AEB). US based Algae.Tec began in 2007, developing a proprietary technology for high efficiency production and harvesting of algae for use in multiple applications, from nutraceuticals, aqua feeds, to medical marijuana treatments and consumer products such as soap and face cream.
The nutraceutical operation is expected to begin generating revenue during FY 2018, with a supply agreement in place with privately held Gencor Pacific. Algae.Tec entered the medical marijuana sector, using its growing technology in a 25% partnership arrangement with a company in Uruguay. The first crop resulting from the joint venture is expected to generate between $6 and $8 million dollars in mid-2018.
The agreement with MCL will allow the development of cannabis-based veterinary medications, supplements and animal therapeutics. MCL owns its own seed bank, from which it will grant AEB an exclusive license for MCL’s low THC Delta 9 Cannabis cultivars. Algae.Tec will use the cultivars to establish a production breeding program. THC (tetrahydrocannabinol) 9 Delta is the principal psychoactive ingredient in marijuana. Product development has been fast-tracked, with AEB anticipating introduction to the market by the end of 2018.
As is the case with many start-ups, Algae.Tec commissioned an independent investment advisory and research firm, UK based Empire Capital Partners, to prepare an analyst research report. Empire rates the company a speculative buy, with the following recommendation:
• AEB presents a speculative buy with major developments coming into fruition and multiple projects scheduled for significant ramp ups in 2018. Significant revenues are forecasted as AEB continues along a realistic pathway to production in Uruguay and off-take agreements with Gencor are scheduled for positive cash flow in Q1 2018. Shares prices will be further driven up upon receipt of AEB’s license to Cultivate and Produce medical cannabis in Australia.
CannPal Limited (CP1) listed on the ASX last October and as often happens with start-ups, has taken its investors on a roller-coaster ride, up 40% since its debut.
CannPal was founded in 2016 for the express purpose of researching, developing, and commercializing pain relief products for companion animals derived from medical cannabis plants.
Companion animals have always been treasured members of families throughout the developed world. With the increasing use of pet insurance, more and more people are not only willing but now able to afford to help their pets. Traditional cancer treatments come with side-effects painful not only to the animals, but also to their owners forced to watch the suffering. Some animals experience digestive problems as a side-effect of arthritis medications.
Investors considering any of these cannabis treatments for animal health should know regulatory approvals for animal health treatments take far less time than approvals for human use.
Within two weeks of its entry on the ASX, CannPal received ethics approvals from the New South Wales Department of Health to begin trials with the company’s lead candidate – the CPAT-01 drug. CannPal also received an import license, allowing Canadian company Aphria Inc. (TSX: APH) to supply oils extracted from cannabis for use in the clinical trials.
The three-phased clinical trials will begin in 2018, with initial results to be released in June. The TetraQ Research Infrastructure Centre at the University of Queensland will provide CannPal with bioanalytical services during the trials.
The EMA (European Medicines Agency) granted the company SME (Small and Medium Size Enterprises) status, opening the door for financial and administrative help from the EMA for the development of its drug products for European approval. The approval recognises one of the largest veterinary research organizations in Europe – Klifovet AG – as a regulatory research partner. The development will proceed on parallel tracks with one focused on European approval and the other on FDA (Food and Drug Administration) in the US.
CannPal has $5.7 million cash on hand and no debt, as of the most recent quarter (MRQ). In contrast, Algae.Tec has only $577 thousand in cash with debts of $2.15 million and gearing at a 98%.
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