Cannabis stocks eye US Federal legalisation after difficult year By Proactive Investors

It’s been a busy year for cannabis stocks. The global industry enjoyed increasing support from governments and legislative bodies, in turn increasing positive consumer sentiment.

The industry is highly regulated, meaning it can be slow and cumbersome to get new strains and products approved, and the bar to entry for new companies can be high.

State of the market

Cannabis stocks were hit hard by recent market upheaval and inflation uncertainty, pulling back from some of its strong progress during the COVID-19 pandemic.

The Biden Administration in the US has signalled the Federal Government will continue to take steps toward reforming cannabis laws, adding to a recent pardon of people convicted of federal marijuana possession offences.

The US Department of Health and Human Services also took steps toward rescheduling cannabis from Schedule I to Schedule III, a noteworthy downgrade that would reduce research restrictions significantly.

In Australia, medical cannabis approvals from the TGA retained strong volume, with 304,000 given in the first half of 2023 alone.

The number of medicinal cannabis patients also increased dramatically over the last few years, from 25,160 in 2019 to almost 122,000 in 2021.

Rhys Cohen, of the Penington Institute, estimated that Australian patients spent roughly A$250 million on prescription medical cannabis products in 2022.

As for government moves in Australia, the Greens introduced an amended version of the Legalising Cannabis Bill 2023 in August, the inquiry submissions for which closed in November.

The reporting date for the Bill is May 31, 2024, at which point the findings of the inquiry will be revealed.

Overall, the global cannabis market is predicted to produce revenue of US$60.79 billion in 2024, at a compounding annual growth rate of 14.06%.

What are cannabis stocks up to?

Emyria Ltd (ASX:EMD)

Emyria Ltd (ASX:EMD) launched its pioneering MDMA-assisted therapy trial for Post-Traumatic Stress Disorder (PTSD), distinguishing itself as the sole Australian Securities Exchange (ASX)-listed entity exploring psychedelic-assisted therapies this quarter.

The initiative, which is a world-first in a private community-based setting, has already passed through two dosing phases for two participants, with a third currently enrolling.

The trial has already received crucial approvals from regulatory bodies, including an ethics endorsement and Authorised Prescriber status from the Therapeutic Goods Administration (TGA), and Health Canada’s approval to import the necessary drug supply.

The company also appointed Greg Hutchinson as an independent chair to bolster its ability in delivering impactful mental health services and advanced its proprietary drug development programs with the extension of a key agreement for MDMA analogue development as well as preclinical screening for cannabinoid dose forms in the USA.

Overall, the company drew clinical billings of $973,000 during a typically quieter quarter.

MGC Pharmaceuticals

This quarter saw ArtemiC™ of MGC Pharmaceuticals Ltd (LSE:MXC, OTC:MGCLF, ASX:MXC) gain approval from the Food and Drug Authority of the Kingdom of Saudi Arabia. The approval was the result of successful Phase II clinical trials and European studies demonstrating ArtemiC™’s effectiveness in aiding COVID and long-COVID recovery as an over-the-counter option.

MGC’s joint venture with Capital Blossom Ltd and its Saudi partner enabled the milestone, also opening pathways for potential commercial orders in the region.

The quarter also saw MGC Pharmaceuticals complete a strategic corporate restructuring, including a 1,000:1 capital consolidation and a US$7.9 million (~A$12.4 million) fundraising effort.

The restructuring was aimed at bolstering the execution of its pharmaceutical work plan for 2024, expanding its global presence and exploring new growth opportunities.

Financially, the company successfully raised funds through the issuance of 31 million new ordinary shares at US$0.255 (~A$0.40) per share, along with a strategic placement of US$500,000 by issuing shares at an issue price of A$0.50 each.

These financial moves, designed to cover legal and marketing expenses, have fortified the company’s cash position, leaving it with approximately A$6.482 million in cash reserves at the quarter’s end.

Incannex Healthcare

Incannex Healthcare Inc (NASDAQ:IXHL) had a busy quarter as the company completed its ambition to redomicile on the Nasdaq, achieving that milestone in November last year.

One of the biggest achievements of the quarter was the approval and beginning of treatment through IHL’s collaboration with Clarion Clinic, having gained GA Authorised Prescriber approval for MDMA and psilocybin use in treating PTSD and treatment-resistant depression.

Incannex is the first company to begin formal treatment in this new sector of mental health therapies, with one patient already moving through dosing schedules and another enrolling presently.

The company also completed dosing in the PsiGAD-1 clinical trial, a Phase 2 study into psilocybin treatment for generalised anxiety disorder (GAD) and began dosing for a Phase 2 clinical trial assessing IHL-675A for rheumatoid arthritis.

Finally, the company received independent Institutional Review Board (IRB) approval for a Phase 2/3 clinical trial assessing the safety and efficacy of proprietary combination drug candidate IHL-42X in patients with obstructive sleep apnoea (OSA).

The RePOSA study is a Phase 2/3, randomised, double-blind clinical trial to determine the safety and efficacy of IHL-42X in subjects with OSA who are intolerant, non-compliant, or naïve to positive airway pressure (PAP), such as that administered via a continuous positive airway pressure (CPAP) machine.

At least 560 patients will be recruited, with a total of 355 patients receiving IHL-42X over the course of the study.

Hygrovest

Hygrovest Ltd (ASX:HGV, OTC:MMJJF) appointed HD Capital Partners, the investment company’s largest shareholder, to act as investment manager for a term of five years in August last year, meaning this quarter was the first full financial period under the new direction.

This move seems to have been a positive one for the company, with its investment performance for the three months to December 2023 enjoying a 15% appreciation.

The company made several investment and acquisition overtures during the quarter, finishing with a net tangible asset value per share before tax of $0.0990 as of December 31, 2023.

HD Capital said its focus for 2024 would be realising the large discount to net tangible assets (NTA) that the shares currently trade at while maximising risk-adjusted returns for the portfolio.

As of the end of the quarter, significant investments held by HGV included:

Weed Me Inc – HGV was a foundation investor in Weed Me back in 2017. Its investment consists of 4.24 million shares, representing about 13.1% of issued capital, and over 460,000 warrants convertible at C$2.17 with an expiry date of October 29, 2024.

Southern Cannabis Holdings – Hygrovest became an investor in 2018 and now holds 21 million shares, 18% of issued capital.

Delivra Health Brands Inc – another foundation investment, the company owns more than 55.5 million shares representing an 18% shareholding.

Overall, the company’s (unaudited) net asset value as of December 31, 2023, was A$20.8 million.

HGV intends to distribute 20% of its annual profit after tax as dividends, payable within three months of each half-year after the completion of the half-year and annual financial statements.

Read more on Proactive Investors AU

Disclaimer