Australian cannabis stocks had a pretty brutal year in 2019, following the global cannabis sector lower.
However, I see signs that the Australian cannabis industry is about to rebound and I believe that two early industry-leading stocks are in position to benefit.
According to a recent report by Marijuana Business Daily, Australian cannabis regulators are expecting the number of medical cannabis patients to grow by more than 100% in 2020.
Australian health regulators expect the number of medical cannabis prescriptions will climb to at least 70,000 in 2020 at the current rate of growth, but local experts predict the final number could be much higher.
That’s more than double the 30,000 approvals through the end of 2019, which the health ministry says roughly equates to the number of prescriptions.
“Even if there were no increase to the current rates of prescribing, by the end of 2020, about 70,000 prescriptions are anticipated to have been written in Australia,” the Department of Health wrote in a submission to a Senate committee studying Australia’s medical cannabis access.
Local experts say the actual tally could end up being much higher as monthly prescription rates continue to rise.
North Sydney-based data firm FreshLeaf Analytics estimates 140,000 prescriptions could be written for medical marijuana products by the end of 2020.
The sharp increase in medical cannabis patients is driven by ongoing regulatory reforms, making it easier for Australians to gain access to medical cannabis. Those reforms should continue to have a positive impact on patient growth.
Looking forward, challenges remain. The Australian medical cannabis industry struggles with burdensome regulations, high consumer prices and an absence of government subsidies.
However, the Australian medical cannabis industry is making big progress and is headed in the right direction.
Two Australian Cannabis Stocks Looking to Cash In
Auscann Holdings (ASX: AC8, OTC: ACNNF) is an early leader in the Australian medical cannabis industry, becoming one of the first in the industry to land a permit to sell medical cannabis. That gave Auscann a valuable first-mover advantage over the competition that it is currently capitalizing on.
Auscann recently announced two important achievements when it released third-quarter results in late January.
First, Auscann announced the completion stage of its primary production and research and development facility in Perth.
Secondly, Auscann announced that it had completed the development, manufacturing, and testing of its proprietary hard-shell cannabinoid capsules. Auscann said it’s on pace to have these capsules available for prescription in the first half of 2020.
Auscann shares had a pretty brutal 2019. At one point shares were down more than 75%. However, shares have been stabilizing for the last four months. This could be a good place for a long-term bottom and the beginning of a new rally.
Cann Group (ASX: CANN, OTC: CNGGF) is another early leader in Australia’s cannabis industry.
Cann Group is also one of the first companies in Australia to win a permit to grow and research medical cannabis. Slower than expected market growth in 2019 forced Cann Group to hit the ‘reset button’ and update its business plan. That included cutting costs, cutting its labor force by 25% and slowing capital deployments.
Cann Group is in the early stages of funding and building a medical cannabis production facility in Muldera.
The facility will require additional funding and more construction. However, Cann Group is projecting its first production to happen in the fourth quarter of 2020. This new facility will help Cann Group source its supply agreements. For example, Cann Group has a distribution with Symbion, a company that supplies healthcare services and products to more than 4,000 pharmacies and 1,300 hospitals in Australia.
Cann Group shares have been trending lower for the last two years. More recently, shares saw a pretty big bounce in the fourth quarter of 2019. After a string of losses in 2018 and 2019, this could be the spark this stock needs to reverse and start a new rally higher.
Australia’s Cannabis Industry is on the Upswing
The Australian medical cannabis industry grew at a slower than expected pace in 2018 and 2019. That caused big losses in Auscann Holdings and Cann Group.
While expectations have fallen sharply, the Australian medical cannabis industry is set for major growth in 2020. Both Auscann and Cann Group are in a position to capitalize. Now is a good time to take a second look at both companies with their share prices trading well below the 52-week high.
About the Author & Cannabis Stock Trades
Michael Vodicka is an equity analyst with more than 20 years of experience trading and investing. His research has been featured in some of the industry’s most respected publications. He has been investing and leading investors in the cannabis sector since 2013.
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