Medical cannabis and health companies continue momentum in March quarter – Proactive Investors Australia

Medical Cannabis Legalisation

While cannabis stocks aren’t quite the talking point they were a year or so ago, behind the scenes medical and recreational cannabis companies have continued to manufacture product and bury themselves in research and development to meet product demand for when the supply chain eventually catches up to public sentiment.

Several of those stocks have also moved into the psychedelics market in anticipation of a shroom boom.

Market sizes for both cannabis and psychedelics continue to grow, with the US leading the way in psychedelics with more than 50 publicly traded companies developing psychedelics and at least three valued at in excess of $1 billion.

The overall psychedelics market is projected to grow from $2 billion in 2020 to $10.75 billion by 2027, a rate that could outpace the legal US cannabis market.

The global cannabis market was predicted to be US$16.47 billion in 2022 and is forecast to grow to US$46.18 billion by 2027 at a CAGR of 22.9%.

Driven by a prevalence of chronic diseases such as cancer, migraine, arthritis and brain disorders and the treatment of these issues and others including chronic pain, depression, arthritis, diabetes, glaucoma, migraines, epilepsy, multiple sclerosis, acquired immunodeficiency syndrome (AIDS), amyotrophic lateral sclerosis (ALS), Alzheimer’s, post-traumatic stress disorder (PTSD), Parkinson’s and Tourette’s, public sentiment will continue to improve, which means legal hurdles will continue to fall and the market can only get bigger.

Highs and lows of legalisation

Over the past two years, we have seen the movement to decriminalise and destigmatise cannabis grow stronger by the day, leading to various legislative restrictions being removed.

This has been a worldwide movement, spanning continents including North America and Australasia.

In the regions where cannabis has been legalised for medical purposes, we have seen life-changing stories, where the pain of chronic illness and disease has been minimised.

This has been most evident in war veterans dealing with PTSD.

Due to these successes, what was once a taboo issue has led to dozens of bills in the US from Democrat and Republican corners that would allow adults to consume drugs, including cannabis and psychedelics under supervision.

“It’s gone viral and sparked an interest nationwide,” said Democratic Washington state Senator Jesse Salomon, who is sponsoring a bill that would allow psilocybin use among adults over age 21 under supervision. “I just didn’t know there were so many like-minded people on this.”

There is still a long way to go on the psychedelics front. These are banned in most countries.

However, there is hope in America that under President Joe Biden there will be policy change regarding the federal prohibition of psilocybin, MDMA and other psychedelics.

Oregon legalised psilocybin therapy and decriminalised all drugs, while Washington DC decriminalised all plant- and fungi-based psychedelics.

Here in Australia, the legal framework around medicinal cannabis is still evolving and remains closely regulated.

Medical marijuana was legalised in 2016 at the federal level in Australia, and in September 2019, Canberra became the first city to legalise cannabis for personal cultivation and possession of marijuana for recreational purposes. Despite this, recreational possession of marijuana remains illegal.

State governments passed legislation which permits medicinal cannabis to be prescribed to certain patient groups or under certain circumstances and thus it is medical use that most Australian listed cannabis companies are focusing on, as this presents the easiest path to a growing market.

The Australian legal cannabis market size was valued at US$41.2 million in 2020 and is expected to grow at a CAGR of 32.7% from 2021 to 2028.

With that in mind let’s take a look at some of the companies working in the cannabis and psychedelics space and how they have performed over the last quarter.

Four cannabis quarterlies to take note of

Emyria

The highlight for Emyria Ltd (ASX:EMD) this quarter was the start of its EMD-RX5 Phase 1 clinical trial, comparing Emyria’s ultra-pure cannabidiol (CBD) capsule to Epidyolex oil – the sole registered CBD medicine in the US and Australia.

Interim results from the trial are expected in May 2022.

Emyria is also expected to this quarter begin an advanced pivotal Phase 3 clinical trial for EMD-RX5.

Further highlights include the launch of EMD-RX7, Emyria’s second ultra-pure CBD capsule targeting registration as a prescription medicine for clinical indications requiring higher CBD doses. A Phase 1 trial for EMD-RX7 is in the works.

Emyria has also expanded its proprietary MDMA analogue library with the University of Western Australia.

The company is in a strong cash position, with $6.66 million in the bank to advance multiple registration programs with the TGA and FDA.

Emyria’s managing director Dr Michael Winlo, said: “This quarter, Emyria has made substantial progress towards the registration of over-the-counter EMD-RX5 with the commencement of an important Phase 1 study whilst advancing plans for the pivotal Phase 3 trial, expected to commence in the June Quarter.

“Emyria’s proprietary dose form development program delivered EMD-RX7, a highly bioavailable capsule of ultra-pure cannabidiol. EMD-RX7 is targeting registration as a prescription medicine with major global regulators including the FDA.

“Further unique cannabinoid dose forms are in development, accelerated by targeting unmet clinical needs discovered through analysis of Emyria’s proprietary, and growing, Real World data asset which is also backed by award-winning technology.

“Emyria has also made great progress this quarter on the expansion and screening of a unique compound library, inspired by the molecule MDMA. This MDMA analogue library has the potential to yield next-generation psychedelic-assisted therapies and registered treatments for a range of neurological conditions and deepens Emyria’s drug development pipeline.”

Creso Pharma

This has been a solid quarter for Creso Pharma Ltd (ASX:CPH, OTCQB:COPHF).

The company had cash on hand as of March 31, 2022, of A$5,086,000 (this amount does not include A$318,000 from the March placement, which remains subject to shareholder approval).

Creso recorded record group revenues of A$2,752,000 for the quarter, an increase of 36% quarter-on-quarter and 93% on the previous corresponding period of 2021.

Its current acquisition target, Sierra Sage Herbs LLC (SSH) generated US$1.5 million (A$2.07) of revenue during the quarter, which should add to CPH’s bottom line once the acquisition is finalised.

Pro forma quarterly group revenue including SSH would be A$4.8 million for the quarter, representing proforma increases of 138% QoQ and 238% on the PCP when compared with previous group revenues excluding SSH.

Wholly-owned subsidiary Mernova has continued its rapid growth, to set a new quarterly revenue record of C$1,371,000 (~A$1,494,000), an increase of 31% QoQ and 97% on the PCP (Q1 2021) and another consecutive quarter of record growth.

The company continues its product development initiatives and building distribution partnerships.

Chief executive officer and managing director William Lay said: “Revenues from all operating divisions continue to increase, and with several key growth and product development initiatives materialising this quarter we are set to see continuing progress throughout the calendar year.

“We have remained active on the M&A front with the acquisition of Sierra Sage Herbs and their leading Green Goo and Southern Butter product ranges. The acquisition not only provides us with an instant footprint in the large US market, but access to strong brands, distribution relationships manufacturing partnerships, and an excellent management team who have scaled the business impressively since beginning operations in 2008.

“We have already begun extensive product development discussions and are working on various ways to accelerate the market penetration for all our CBD products. We have noticed an increase in the number of opportunistic, strategic M&A possibilities in the market over the quarter and continue to carefully assess additional opportunities for accretive transactions.

“Considerable progress has also been made on all our other operating divisions. Mernova has achieved a significant market share milestone whilst also expanding into new provinces in Canada all whilst moving forward with product development initiatives. Likewise, product development continues with our Nutraceutical division and new relationships are being built in LATAM. And lastly, Halucenex continues to hit significant milestones on the way to commencing its phase II clinical trial.”

Elixinol Wellness

Elixinol Wellness Ltd (ASX:EXL, OTCQB:ELLXF) is a global leader in the hemp industry, innovating, marketing and selling hemp-derived nutraceutical, food and topical products.

It, too, has had a busy March quarter.

Interim global chief executive officer Ron Dufficy commented: “It was a busy March quarter for the Elixinol Wellness team as we continued to make progress with the previously announced strategic review. We implemented substantial additional cost reductions which will make the group more efficient moving forward.

“We are excited to have achieved a number of new product development milestones across our core markets during the quarter and achieved strong outcomes in many of our other markets.

“Our products were named on the long-awaited UK FSA novel foods list; we renewed an exclusive licence agreement with Elixinol Japan; appointed Elixinol Malaysia as exclusive distributor; and we received a Canadian trademark received for ELIXINOL after many years of application processing time.”

Elixinol reported revenue of $1.5 million for Q1 FY22, a decline from the prior quarter (Q4 FY21: $2.3 million), reflecting post-Christmas seasonal softness, compounded by continued US CBD industry headwinds, and Omicron impacts.

However, EXL does have a strong lineup of innovative new products expected to drive future revenue growth. Including the products named on the long-awaited UK FSA novel foods list, which will allow Elixinol products to continue to be sold in the UK.

Meanwhile, Hemp Foods Australia has received preliminary approval from the Therapeutic Goods Administration (TGA) for exclusive use of Hemp Seed Oil as a permissible ingredient for Listed Medicines and an exclusive licence agreement with Elixinol Japan has been renewed.

MGC Pharmaceuticals

The highlight of MGC Pharmaceuticals Ltd (LSE:MXC, OTC:MGCLF, ASX:MXC)’s quarter has been its strong phytocannabinoid product sales in key markets.

This has been underpinned by its strategic EU and UK distribution agreement for CannEpil and CogniCann with leading “at home” medicine supplier, Sciencus Rare.

Staying in Europe, MXC’s Malta EU GMP production facility fit-out has been continuing towards full operational status and GMP Certification.

The company is also making waves in the US, with the University of Florida Internal Review Board now in the final stages of approval process to participate in CimetrATM clinical trials, as a key stage for entry to the USA market.

That entry is being helped along by AMC Holdings Inc, with which MXC has a three-year US supply and distribution deal.

AMC is currently finalising documentation to lodge US FDA Investigational New Drug Application for CimetrATM.

MGC Pharmaceuticals co-founder and managing director Roby Zomer said: “This quarter has seen strong consolidation on our company strategy as we affirm key partnerships with industry leaders and advance our clinical pipeline.

“We continue to make progress against our key goals and cement our position as a biopharmaceutical company producing treatments for some of the most debilitating conditions globally.”