Cannabis Equity Markets “Rebounding” After Drop, Analyst Says

Cannabis stocks faced a precarious summer last year, but one analyst has noted that “equity markets (are) rebounding,” causing an upswing across the sector — including in Australia.

In a note sent to investors on January 22, Cameron Bell, an analyst with boutique bank Canaccord Genuity Australia, said investor confidence in the Australian cannabis market has been renewed due to an exceptionally strong recent performance from the global cannabis space.

Canaccord’s own Australian Cannabis Index has risen 34 percent over the last month, Bell said, bouncing back from the hit of over 50 percent that it took in 2019.

“The strength has been partially led by investor sentiment in offshore markets, as some key concerns have eased while expectations for demand growth remain very high and access to funding improves.”

Bell also attributed more reasonable valuations as an aid to rising share prices.

Some of the largest companies on Canaccord’s index by market cap, including EcoFibre (ASX:EOF), Elixinol Global (ASX:EXL,OTC Pink:ELLXF) and Cann Group (ASX:CAN,OTC Pink:CNGGF), have seen impressive growth in the last month.

EcoFibre is up almost 10 percent in the last month, while Elixinol and Cann Group have soared 68.9 percent and 114.7 percent, respectively, in the same span of time.

Meanwhile, Bell said patient applications through the Therapeutics Goods Association’s (TGA) Special Access Scheme-B (SAS-B) pathway were on the rise in December.

Approvals for patients increased to 3,685 application authorizations that month, up 8 percent from the 3,404 confirmations in November.

December’s numbers are also almost seven times larger year-over-year than the 490 approvals issued in December 2018, indicating a rapid rise in patient adoption for these items.

By the end of 2019, the TGA had approved over 28,000 patients throughout the year. This figure exceeded Canaccord’s expectation of 25,000 approvals, reported in a previous Australian cannabis update released in November.

Ninety percent of total SAS-B approvals have happened in the last year, Bell noted.

If growth continues at the current rate, the total number of approvals is expected to grow to 72,000 by the end of calendar 2020.

The analyst noted that there’s been an interesting shift away from the Authorised Prescribers path, which gives medical practitioners in Australia the ability to prescribe unapproved therapeutic goods, like cannabis, directly to eligible patients.

According to the TGA, there were 22 authorised prescribers in Australia at the end of December, a steep drop from the 60 reported at the end of July, Bell wrote.

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Securities Disclosure: I, Danielle Edwards, hold no direct investment interest in any company mentioned in this article.