Australia's medical marijuana industry was celebrating last week, as it became legal to sell cannabidiol (CBD) products in chemists and pharmacies. A decision by the Therapeutics Goods Administration (TGA) to approve the sale of low-dose CBD products over-the-counter means adults will be able to purchase these products without a prescription.
CBD, which occurs naturally in marijuana plants, can help relieve pain, anxiety, insomnia and reduce cancer-related symptoms and side effects. Unlike THC, which is the main psychoactive cannabinoid found in marijuana, CBD does not make users 'high'.
The TGA's decision means adults will be able to purchase a maximum daily dose of 150mg of CBD over-the-counter in oral and sublingual formulations. CBD topical creams and vaping products will continue to require a doctor's prescription.
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What does this mean for ASX cannabis shares?
The change is a positive development for ASX cannabis shares, which have been lobbying for easier access to medical marijuana products. But don't rush out to your nearest pharmacy just yet — no specific CBD products have been approved for sale so far.
Australian cannabis companies are working hard to get products approved for sale, and sales of CBD products are expected to boom over the coming months as products come to market. This will create a significant opportunity for ASX cannabis shares. We take a look at how some of the largest ASX cannabis shares are performing in light of this development.
Althea Group Holdings Ltd (ASX: AGH)
Althea is a producer, supplier, and exporter of pharmaceutical-grade medicinal cannabis products. Currently operating in Australia, the United Kingdom, and Germany, the company has plans to expand into emerging markets throughout Asia and Europe. The Althea share price has been on the rise since the TGA's decision was announced in December, gaining 23% from a low of 42 cents. Shares in Althea are currently trading at 52 cents apiece.
Althea has welcomed the TGA's decision and is exploring registration options for current and future products. Even before the decision, Althea was performing strongly. In the company's December quarter, Australian revenues increased 29% (compared to the September quarter), and UK revenues grew 90% month on month in December.
Germany's health department granted all necessary licences for the sale and distribution of Althea products in Germany late last year. An initial shipment of products is en route to the country. Althea also operates a manufacturing plant in Canada, which entered an agreement to manufacture three cannabis-infused beverages during the December quarter.
Expansion into South Africa is on the cards, with a wholesale supply agreement signed under which Althea-branded products will be imported for sale and distribution in the country. The first shipment of products under the agreement is expected to be delivered in the second quarter of 2021. This represents a significant opportunity for Althea, with the South African legal medicinal cannabis industry expected to be worth US$667 million by 2023.
Auscann Group Holdings Limited (ASX: AC8)
Auscann has a pipeline of proprietary cannabinoid-based pharmaceutical products in development and has voiced its support for the TGA decision to make cannabinoid products available over the counter. The decision means a number of Auscann's CBD products in development have the potential to be registered as pharmacy-only medicines.
CEO Nick Woolf has said, "the TGA decision is a positive outcome for the industry. We are well advanced in developing compliant CBD-only products that could be registered as over-the-counter medicines."
Auscann is in the process of acquiring Cannpal Animal Therapeutics Ltd (ASX: CP1), a move that will add breadth and depth to the product line.
In the December quarter, Auscann completed a restructuring program to reduce cash burn, with expenditure focused on value-adding R&D. Utilising its state-of-the-art medicinal cannabis facility in Western Australia, Auscann is advancing the development of a hard-shell capsule product containing up to 150mg of CBD. This CBD-only product candidate is being formulated for approval as a pharmacy-only medicine.
Auscann's share price has also risen off the back of the TGA decision, gaining 28% since 1 December 2020. Auscann shares are currently trading at 18 cents a share.
Zelira Therapeutics Limited (ASX: ZLD)
Zelira is a therapeutic medicinal cannabis company with a portfolio of proprietary revenue-generating products and a pipeline of products undergoing clinical development.
In the December quarter, Zelira launched its HOPE products in Australia, which are targeted at patients with autism. Available through the TGA's special access scheme, the products are now working their way via authorised prescribers into the market. A new licencing deal was also announced to distribute HOPE products in Washington DC late last year. Washington has reciprocity arrangements in place with 32 other US states, meaning patients in these states will be able to legally purchase HOPE products at an approved Washington dispensary.
Zelira announced the launch of its proprietary CBD toothpaste in December, which will be distributed in the USA through retail stores such as Bed Bath & Beyond and e-commerce platforms such as Amazon. Discussions regarding distribution in networks outside the US are ongoing.
Sales of Zelira's products have been in line with forecasts, although they were impacted by COVID lockdowns. Increasing sales are forecast as the company builds market awareness of its products and market conditions improve thanks to the roll-out of the COVID vaccine internationally.
Zelira's share price spiked late last year following the TGA's announcement but has since fallen back to levels seen in November 2020, with shares currently trading at 7.6 cents.
What's next for the medical marijuana industry?
The availability of CBD products over the counter is a step towards increasing social acceptance and reducing the stigma often associated with medical marijuana products.
CBD products are expected to start to become available in the coming months – each product that goes on sale requires individual approval by the TGA. The market is expected to be competitive, with early entrants potentially benefiting from a first-mover advantage.
For ASX cannabis shares, the race is on to make a mark in the over-the-counter CBD space.
