Today, we need to talk about the Australian company AUSCANN GROUP HLDG (OTCMKTS:ACNNF), which is focused on providing cannabinoid medicines to the patients. The share price of this company increased astonishingly after The Federal Health Minister from Australia noted that export of Australian manufactured cannabinoid medicines would be allowed.
From trading below $0.75, the stock price spiked to touch the one-year highs of $1.75. Additionally, the market seemed to be interested in the company, as the trading volume was also very high. Almost 2 million shares changed hands. Have a look at the following stock chart and form your own opinion:
History of ACNNF and business partners
AusCann is an Australian company founded in September 2014 and focused on producing and providing high quality, economical and clinically validated cannabis medicines to the patients. The company is said to bring expertise across all aspects of the medical cannabis value chain, beginning with cultivation and production through to manufacture and distribution of products. Also, the company has built a strong team of experts and partners with international connections.
Having business partners with other operators indicates that the company has recognition in the marijuana industry. The following are the most remarkable institutions collaborating with ACNNF:
- CANOPY GROWTH CORP (OTCMKTS:TWMJF): it works with the company to increase its IP assets, and is a big player in the industry selling marijuana to about 24,000 patients in Canada. We have already assessed this partner. Please check out some articles to learn more about this Canadian business.
- Fundacion Daya: it is a non-profit Chilean organization.
- Phytoplant Research: it is a privately-owned Spanish company founded in 2008. It provides genetics, breeding, cultivation and extraction expertise to the company.
- Murdoch University: it is a public university in Perth, Western Australia, which signed R&D collaboration agreements for the development of additional cannabis strains. Phytoplant also works with this institution.
Developments in 2017
After raising $5 million, it seems that the company has grown quite a bit in 2017. Some in the market seemed to be expecting this, as the share price increased astonishingly after its IPO in February 2017. From below $0.25, the stock price spiked to hit the long-time highs of $0.75. Business Insider featured the stock returns in this article.
Let’s see what was released thereafter.
On April 10, 2017, the company released its first harvest in Chile underway with DayaCann. Approximately 400 plants were being harvested, which would result in a total of 300 kgs of dried cannabis buds. ACNNF noted that this 50:50 joint venture with DayaCann included a 30-hectare facility south of Santiago and the Chilean National Institute of Public Health will be responsible for analyzing the production. Once the process is done, the product would be available for sale to Chilean patients and export markets. The news seemed to draw the attention of the media. We found this article in fool.com, in which the announcement was remarked.
On August 9, 2017, the company released that it had been granted an Australian manufacturing license authorizing the manufacture and supply of medicinal cannabis under the Narcotic Drugs Act 1967. We believe that the announcement made the share price increase from $0.25 to almost hit the resistance of $0.5. The market reaction makes a lot of sense. The company can now cultivate, manufacture, and supply Australian produced cannabinoid medicines to the patients. Given the current state of the industry, we believe that the company is an early mover, which will help in the future. There is more. The company can also deal with marijuana in Tasmania through its strategic partnership with Tasmanian Alkaloids, which was announced on July 11, 2017.
In November and December, great news also arrived from Chile. It was released that the company had secured a further license for the cultivation of medical cannabis crops at its Chilean facility. According to the company, this country is very supportive of the entire supply chain for medical cannabis companies. It is helping the Joint Venture, in which the company collaborates, become a fully integrated medical cannabis organization.
Furthermore, on December 18, 2017, the company noted that it had commenced planting its second medicinal cannabis crop in Chile. A maximum of 435 plants will be planted at DayaCann’s 30-hectare facility south of Santiago. The crop is expected to be harvested in the first half of 2018.
In addition, it was also remarked again that the products could be sold in Chile or exported to other countries. We are not sure if the company is allowed to send products to the United States, but if this is the case, ACNNF will be able to make interesting revenues. Please note that the production is much cheaper in Chile than in the U.S., so the profits would also be large.
Export of Australian manufactured cannabinoid medicines is now allowed
Undoubtedly, the most interesting announcement in terms of market reaction was released on January 5, 2017. The company noted that Australian companies were, from that time, allowed to export manufactured cannabinoid medicines. This means that the market size is increasing astonishing with each passing day.
Read the reaction of the management:
“It will allow the Australian medical cannabis industry to scale up to a certain size and stability, making it easier to produce more cost effective products in a shorter amount of time.” said AusCann managing director Elaine Darby.
CANOPY GROWTH CORP also acquired 10.65% stake in ACNNF
We knew that the company could be a great pick after it was noted in February 2017 that TWMJF had acquired 10.65% of the company. The fact that this close collaborator, an experienced marijuana player, was buying shares means that it is seeing a bright future in the Australian partner. We believe as well that the future growth will continue, as the industry is developed in Australia.
Currently trading with a market cap of $46 million, ACNNF is an exciting story among small caps. The company reported losses equal to $652,426 in the year 2016, but the balance sheet seems to be in a good shape. $370,270 in cash, $60,604 in total liabilities and a net asset equal to $319,946 show that the company has still cash on hand to continue its operations.
To sum up, be ready to assess the announcements noting growth on this name; it is what’s driving the share price up.
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Disclosure: We have no position in ACNNF or TWMJF and have not been compensated for this article.
Image courtesy of Brian Shamblen via Flickr