Why Auscann Share Price Shot Up 9.28%

Auscann, or Australasian Medical Cannabis, is an Australian-based company looking to produce and provide cannabis based medicine across the Asia Pacific.

The company currently develops and sells cannabis medicines in Australia. It has a market capitalisation of around $220 million, and a strategic partnership with Tasmanian Alkaloids (an opium poppy processing plant in Tasmania).

The company values the Australian medical cannabis market for neuropathic and chronic pain alone at $9 billion. It’s no wonder we’ve seen over 20 ‘marijuana stocks’ list on the ASX in recent years, although most have differing commercial objectives.

Most would say the craze and hype surrounding cannabis stocks in Australia crystalised around March of last year. The entire sector saw a huge boost then. Some individual stocks rocketed over 400%.

Yet the Australian marijuana market is hinged on the ability, medicinally or otherwise, to sell and produce in Australia and throughout the globe. Of course, a certain irony is to be found in the case of global exportation, with marijuana laws so much more restrictive in Australia than many other countries. Still, earlier this year the Federal Government announced it would allow Australian companies to export cannabis-based medicines.

This pushes us closer to what I believe is the inevitable full legalisation of the product…but that could be a whole other article.

In any case, the cannabis story is only just beginning to unfold.

And it’s unfolding well for Auscann Group Holdings Ltd [ASX:AC8] which is up 9.28% at time of writing today. It currently sits at $1.59, after reaching a high of $1.66 earlier this morning.

Why is Auscann share price up?

The company posted its half year earnings report on Wednesday, with a sizable $12.3 million in cash on the balance sheet, and an increase in both revenue and losses. It still currently operates at a loss for shareholders.

Yet the report was encouraging. The group is achieving a number of its milestones, including the aforementioned Tasmanian Alkaloids partnership and licence procurement for its cannabis medicines. The company claims:

The granting of the licences makes AusCann the only ASX-listed company with all the required licences covering the entire supply chain, allowing it to cultivate, harvest, manufacture and distribute cannabinoid pharmaceuticals in Australia.

In addition to its commercial abilities in Australia, the company has exposure to North America and Chile.

More recently, Auscann signed an agreement with Australian Pharmaceutical Industries [ASX:API] for the distribution of Auscann’s cannabinoid medicines. API has the infrastructure in place to distribute to approximately 5,700 pharmacies in Australia.

The company seems to be in a strong position to take advantage of the globally emerging market.

Domestically, things are moving faster than expected.

News coming out this morning which has excited cannabis stock investors, was that the ‘red tape’ surrounding NSW’s medical cannabis market is set to be slashed. With patient access to medicinal cannabis to become significantly easier, approval times should drop from months to days.

Whatever your opinion on the plant, it’s an exciting time to be a green investor.

Regards,

Ryan Dinse,

Editor, Money Morning   

and

Jack Cameron,

Junior Analyst, Money Morning

PS: If you want to lay down a little money on the hottest corner of the ASX right nowbut you dont know your way around the small-cap sectorthis report is for you. Get access now (free).


Ryan Dinse is an Editor at Money Morning.

He has worked in finance and investing for the past two decades as a financial planner, senior credit analyst, equity trader and fintech entrepreneur.

With an academic background in economics, he believes that the key to making good investments is investing appropriately at each stage of the economic cycle.

Different market conditions provide different opportunities. Ryan combines fundamental, technical and economic analysis with the goal of making sure you are in the right investments at the right time.

Ryan's premium publications include:


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