What is cannabis:
Cannabis is genus among a specific type of flowering plants in the family Cannabaceae. The family of plants has three recognised species, namely; Cannabis sativa, Cannabis indica, and Cannabis ruderalis. The structure of the leaves is arranged palmately, leaves diverting from a common centre. This plant is also known as “Hemp” and can grow up to 8-12 feet.
One of the most important parts of the plant is its flower, which is used for various medical purposes; however, every part of the plant is usable from its leaves to roots. The plant has been believed to have originated from Central and South Asia. However, as the species is present since centuries and have evidence of been used in early Rome and Egypt era, the origin is not scientifically confirmed.
One interesting fact about the cannabis plant is that it is dioecious. In the plant kingdom, there are many ways of reproduction. Monoecious plants are the ones which produce two different types of flowers on the same plant. Then there are dioecious plants which are grown as a separate male and female plants.
The plant is chemically complex, having more than 400 chemical entities and cannabinoid compounds alone cover more than 60 of them.
Cannabis Usage in the Ancient Times:
The uses of cannabis were so magical that in some cultures and regions, it became an agricultural crop. In early times, people used cannabis for various purposes;
- They used to mix the plant in tea to treat pain and other ailments.
- The crop was used for its high protein seeds.
- The fibres from the crop were used for making ropes, cloth, and nets.
Medical benefits of cannabis:
Post many years of research and development of using cannabis for recreational purposes, some of the medical benefits to heal chronic diseases have been uncovered.
- The drug can ease out the pain of Multiple Sclerosis.
- It increases the treatment effectiveness of hepatitis C and lessens the side effects.
- Inflammatory bowel diseases are known to be treated with cannabis
- It is used in the treatment of Parkinson’s disease and soothes tremors
- It protects the brain from stroke
Government Regulation and Licencing:
As mentioned in our previous article, cannabis has been a hot and controversial topic due to its psychoactive properties. This has several associated risks like slowing down of brain functioning, illusion, change in mood, unusual behaviours etc.
Due to these symptoms, the drug has been regulated quite tightly not just in Australia but in other countries as well. loophole in the policies and licences may ultimately harm the end patients. Therefore, governments in these nations are quite serious regarding the control and regulation.
In Australia, cannabis is an illicit narcotic drug and the cultivation of it for any purpose other than that allowed through licence and permit schemes under the Narcotic Drugs Amendment Act 2016 is an offence.
Office of Drug Control (ODC) is a government authority in Australia, incorporated with an aim to prevent the risk of diversion of medicinal cannabis. The regulation of medical cannabis products is being made by the Therapeutic Goods Administration (TGA), which regulates the access and quality of therapeutic goods.
Both these regulators are a part of the Australian Government Department of Health, making an entire Health Products Regulation Group.
ODC licences and permits
In order to legally cultivate cannabis, the company must obtain a research license (ODC licence) first. After the licence, cannabis research permit (an ODC permit) needs to be obtained before commencing the cultivation of the crop.
An ODC licence has conditions that the cultivation/production of cannabis must be in accordance with a permit. The type and amounts of cannabis that can be cultivated or produced in mentioned in a permit
Materials required for cannabis production is only obtained after a licence and a permit.
A precondition for the licence is that one must show that the cultivation and production of the cannabis plant are for the purposes of either:
- Supply to the entity holding the medicinal cannabis manufacturer licence from ODC
- Research and development related to medicinal cannabis or medicinal cannabis products
Some of the outlines of the permit are;
- The type of cannabis plant that is to be cultivated
- The quantities of cannabis that can legally be produced
- The timeframes in which all the authorised activities can occur
- The next entity in the supply chain of the company (a specific manufacturer or researcher).
A condition that must be satisfied before a permit is that one must show that the cultivation and production of the cannabis plant are for the purposes of either:
- Research related to medicinal cannabis or medicinal cannabis products.
- The contractual arrangements need to be satisfied for supply to the entity holding the medicinal cannabis manufacturer licence from ODC.
Some prominent companies:
- Althea Group Holdings Limited (ASX: AGH) has a licence to manufacture and supply medical cannabis to both the domestic and international market. With education and management services in its offerings, it is supporting eligible patients and healthcare professionals.
On 5th June 2019, the company’s subsidiary, Althea Company Pty Ltd has been granted a hemp cultivation licence, which allows the cultivation and processing of low-THC (Hemp) cannabis. In addition to obtaining the licence, Althea entered a contract with Tissue Culture Australia (TCA), under which TCA would be helping Althea to develop exclusive tissue culture protocols for cannabis plants.
On the technical front, the stock is in a positive trend and has given a good rally in 2019, from A$0.28 to the high of A$0.77, translating to a return of 175% in just five months. This strong trend is continuing as of now as depicted by the 21-day moving average. The average is acting as good dynamic support for the stock, and therefore, it becomes more reliable. As long as the stock is trading above its average, the trend is considered to be positive.
Daily chart of Althea Group (Source: Thomson Reuters)
The company has a market capitalisation of A$133.17 million, and the stock had touched a 52-week high and low of A$0.77 and A$0.175 respectively. The stock is trading at A$0.665 (11 June 2019, AEST 2:44 PM), up by 1.527% making an intraday high of A$0.67 as on 11th June 2019. The last six-month return of the stock is 219.51%, and the YTD return stands at 147.17%.
- MMJ Group Holdings Limited (ASX: MMJ) is an ASX listed global cannabis investment company and aims to own a portfolio of a full range of emerging cannabis-related sectors including healthcare, processing, retail, infrastructure etc.
Some of the cannabis stocks in the portfolio are, Harvest One, Cannabis Access, Weed Me, Fire & Flower etc.
The company is well focused on providing the shareholders’ value with the benefits of operational scale and investment experience. The company gets access to private market deals and resulting IPOs which Australian retail investors cannot access themselves.
Its strategic partner; Embark Ventures would help the company to manage cannabis investments.
On the technical front, the stock is in full gear to break is falling trendline, which was acting as resistance from a past few months. However, the trendline has not been broken yet, but on Friday during the day stock was trading above the trendline.
The volume on the day of strategic partnership announcement (7th June 2019) was quite high at 1.8 million, and a higher volume above this was seen only back in March 2019.
If the stock unable to breach its trendline, the smooth downtrend will continue, and the trendline will become more credible.
Daily chart of MMJ Group (Source: Thomson Reuters)
The company has a market capitalisation of A$56.39 million, and the stock had touched a 52-week high and low of A$0.395 and A$0.185 respectively. The stock is trading at A$0.250 (11 June 2019, AEST: 2:44 PM), up by 2.041%, making an intraday high of A$0.250. The last one-year return of the stock is negative 27.94%.
- Elixinol Global Limited (ASX: EXL) is one of the well-established firms in the global cannabis industry. The company manufactures and sells hemp-based products like hemp food and wellness product, hemp-derived CBD dietary supplements etc.
It has many companies working under its umbrella on a global scale including
- Elixinol LLC – a manufacturer and global distributor of hemp-based products
- Nunyara Pharma Pty Ltd – Currently has a pending licence application
- Hemp Foods Australia Pty Ltd – an established hemp food wholesaler, retailer and manufacturer
EXL’s subsidiary Elixinol LLC into a strategic partnership with RFITD Holdings via a new entity Infusion Strategie, LLC. Elixinol to own 60% and the remaining 40% by RFI. The new entity is expected to increase EXL’s reach in in the CBD- Infused dietary supplement, nutraceutical, F&B industries via distribution to RFI’s customers.
Further, in order to accelerate the expansion in the US, the company raised A$50 million from institutional placement. With 12.8 million or 10.3% of the company’s issued shares at A$3.90 per share, the placement closed on 3rd June 2019.
On the weekly chart, the stock has been correcting for a couple of weeks. At the top of the trend, the stock has made a three black crows candlestick pattern. It is a bearish reversal pattern and turns the prior uptrend to downtrend. There is support around A$3.6 wherein the stock may halt its downtrend
Daily chart of Elixinol Global (Source: Thomson Reuters)
The company has a market capitalisation of A$494.04 million, and the stock had touched a 52-week high and low of A$5.93 and A$1.35 respectively. The stock is trading at A$3.920 (11 June 2019, AEST: 3:13 PM), marginally down by 0.759%, making an intraday low of A$3.900. The last one-year return of the stock is 136.53%, and the YTD return stands at 46.84%.
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