Company overview - AusCann Group Holdings Ltd, formerly TW Holdings Limited, is an Australia-based company, which is engaged in the medical marijuana cultivation and distribution. The Company is in the process of researching and obtaining licenses for growing and distributions rights, as well as developing appropriate cultivation methods. The Company focuses on investigating other opportunities in the medical cannabis sector, including acquisition or investment in other international plant breeders, producers and suppliers.

  AC8 Details

Improved access for critically ill patients: Recently, the Australian government has announced changes to existing medical practitioner’s norms by increasing the ability of Australian medical practitioners to prescribe cannabinoid medicines to critically ill patients. The Therapeutic Goods Administration (TGA) currently has two access pathways in which Australian medical practitioners may prescribe unregistered cannabinoid medicines, the Authorised Prescriber Scheme (APS) and the Special Access Scheme (SAS) Category B. Both of these pathways require the medicinal practitioner to apply for and wait for approval from the TGA prior to being able to prescribe. SAS Category A does not require prior approval but is a process where the medical practitioner notifies the TGA they have prescribed the medicines. Prior to the changes, any unregistered therapeutic goods can potentially be supplied via the SAS Category A process, except for prohibited substances in schedule 9 of the poisons Standard; and medicinal cannabis products.

The company is delighted as terminally ill patients will now be able to access cannabinoid medicines through the TGA’s Special Access Scheme Category A. Category A patients are defined as 'persons who are seriously ill with a condition from which death is reasonably likely to occur within a matter of months, or from which premature death is reasonably likely to occur in the absence of early treatment'. The medical practitioner completes the relevant category A form and sends it to the supplier of the product and a copy to the TGA. This provides the supplier, such as AusCann, with the legal authority to supply the product.


Medical cannabis value chain; (Source: Company reports)

Partnering with global leaders in the industry:  AusCann and Tasmanian Alkaloids have entered into a long-term exclusive strategic partnership to align their respective competencies in cultivating medicinal cannabis plants and to manufacture and distribute cannabis products within Australia, and internationally once regulations permit. Tasmanian Alkaloids, based in Tasmania Australia, is a global leader that develops, grows and produces Alkaloid Raw Materials from proprietary poppy varieties used for medicinal purposes throughout the world. The partnership also intends to jointly investigate and develop new international opportunities for cannabis products. AusCann and Tasmanian Alkaloids will work together to establish cultivation, manufacturing and distribution operations for medicinal cannabis in Australia and overseas. Through the strategic partnership, AusCann will have access to Tasmanian Alkaloids’ wealth of expertise. Jointly, the two companies will secure a licence to cultivate and manufacture medicinal cannabis in Tasmania. Notably, the Tasmanian license will be in addition to AusCann’s current medical cannabis cultivation licence granted by the Office of Drug Control. AusCann will continue to import product from its partner Canopy Growth Corporation, North America’s largest producer of medicinal cannabis, ahead of the parties being able to supply Australian medicines. This partnership with Tasmanian Alkaloids significantly builds on company’s position within the Australian market as a leading medicinal cannabis company that intends to cultivate, manufacture and supply the Australian market with access to high quality medicinal cannabis products.


Key partnerships; (Source: Company reports)

Secured medicinal cannabis licence: The group has been granted a licence from the Office of Drug Control to cultivate medicinal cannabis in Australia. This is positive news for the company and makes it one among the select few companies to be granted a licence. Finding support from the group’s relationship with one of the largest producer of medicinal cannabis, Canopy Growth Corp, AC8 is now poised to execute its strategy in a more directional manner. Further, the recent milestones achieved along the licensed joint-venture in Chile are expected to make AC8 a leading player in the global medicinal cannabis market.

March 2017 quarterly update: AusCann successfully completed a reverse takeover of TWH Holdings (TWH) and listed on the Australian Securities Exchange. As part of the transaction, the company completed a $5million capital raise that received dedicated support from institutional and high net worth domestic and international investors. The capital raise provided the Company with the necessary funding to drive forward its Chilean cultivation operation and its licensing applications for growing operations in Australia. The company is continuously being presented with opportunities in the sector and is focused on balancing the ability to accelerate AusCann’s development.

Continues to leverage partnerships: Canopy Growth Corporation, one of Canada’s largest and leading medicinal cannabis companies, drawing on its expertise in the cultivation, manufacture and importation and exportation of products. Canopy is a substantial shareholder in AusCann, with approximately 11% shareholding, and an important strategic partner with AusCann able to import and sell Canopy’s products within the Australian market. Canopy’s experience and skilled management team will continue to support AusCann to the benefit of all shareholders. The company is initially targeting the treatment of neuropathic and chronic pain, which have a combined market opportunity of over $5 billion in Australia alone. In 2017, a report by the American National Academies of Sciences, Engineering and Medicine found there is strong and conclusive evidence for medical cannabis as an effective medication in treating chronic pain in adults, chemotherapy-induced nausea and multiple sclerosis spasticity symptoms. This conclusive clinical data supports medicinal cannabis as a viable treatment and has provided strong validation for the industry globally.


Target markets and opportunity; (Source: Company reports)

Favourable Regulatory development and Promising harvest results: Recent changes in federal legislation indicated a move to facilitate faster access to medical cannabis for patients and a more streamlined importation process. This should allow AusCann to import product ahead of time to meet demand from authorised prescribers and be able to provide patient access much more efficiently. Further, this should significantly accelerate AusCann’s timeline in being able to supply Australian patients. On production front, out of the strains harvested, four have been selected as superior strain that have been clonally selected for future crops. After the successful clinical trials in Chile, the medicinal cannabis formulations will be registered with the Chilean National Institute of Public Health that will enable the product to be made available for sale to Chilean patients and export markets. Notably, Argentina, Chile’s neighbouring country has recently given legislative approval to legalise the use of cannabis oil and other cannabis derivatives for medicinal purposes and established a medical cannabis research program to provide access for patients. The company is correspondingly advancing its plans to establish and grow in Australia and supply Australian cannabis.

The group reported for 221% rise in loss from ordinary activities after tax attributable to members for half year period ending December 2016 and fell 2.3% on February. AC8 had incurred a loss after tax of $533,604 in FY16 as compared to a loss of $166,305 in the pcp. 


FY16 Revenue and Earnings summary; (Source: Company reports)

Recommendation: The stock has declined 33% in the last three months, while it was up 75% over the past six months as on 20 June 2017. Given the recent regulatory developments in the industry for medicinal cannabis and AusCann’s partnerships with global players, we believe that stock offers further upside in near term. We give a “Buy” recommendation on the stock at the current price of $ 0.380

  
AC8 Daily chart; (Source: Thomson Reuters)
 

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