AusCann Group Holdings Ltd.
AusCann is a pharmaceutical company focusing on pre-clinical drug candidate development and production. They focus on cannabinoid drug candidates and are located in Australia.
Is ACNNF a strong BUY and HOLD?
ACNNF Fundamental Analysis
Profile
HQ: Perth, Western Australia
Founded: 2013
Symbol: ACNNF (OTC), AC8 (ASX)
Focus: Strong
Producing and selling medical cannabis to patients in Australia, and later the world. They are focused on creating cannabis treatments for pain, plus other conditions. This is a $9 billion market in Australia alone. Many investors know of them from their relationship (now closed) with Canopy Growth.
Size: Neutral
Market Cap: $31.6 mil
Enterprise Value: $17.94 mil
Number of Employees: 32
Markets: Neutral
Secondary: MA, CT, PA, and CA in the near future, Canada
DayaCann (Chile), Yarra Glen Vineyards Holdings, ACN 096 717 458 Pty Ltd, Australian Commercial Wines Pty Ltd.
Operations: Neutral
Cultivation: None
Current production: Drug development focusing on their first product, for chronic pain, a dry powder 50:50 ratio of THC:CBD in a hard shell capsule formulation.
Distribution: Initial sales of their capsules are currently being ordered.
Direct sales: Yes
Store networks: Has an agreement with the leading Australian pharmacy API to distribute medical cannabis through nationwide pharmacy networks
Integration/Diversification:
Vertically integrated: Yes
Horizontally diversified: No
Financials: Weak
Revenue (2019): $671,000
Shares Outstanding (diluted): 317 million
Return on Equity: -18.55%
Management: Neutral
CEO: Nick Woolf
CFO: Quentin Megson
Director: Max Johnston
Director: Bruce McHarrie
Director: Krista Bates
Old CEO Ido Kanyon stepped down in May. Much of the Board also turned over this year. The end of their relationship with Canopy late last year also shifted the directors. There has been a LOT of turnover for AusCann.
Branding: Neutral
Most of their drugs cover anti-convulsion, anti-inflammatory, anti-nausea, glaucoma, pain management, and appetite stimulation areas. They have not branded any of their drug candidates yet as none are approved.
Valuation: Weak
Current share price: $0.095
Price to Sales: 13,190
52 week low/high: $0.067-$0.25
EV/Revenue: 5,600
Price/Book: 1.22
Financing: Strong
AusCann has no debt but is burning cash fast, typical of most pharma companies undergoing drug development. Clinical trials are expensive, and they have over $34 million to pay for the next few (company net assets were reported at $34.37 million). They reported $7 million in losses last fiscal year.
ACNNF Technical Analysis
Should I buy AucCann Cannabis Stock?
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Bottom Line: Is ACNNF Cannabis Stock a Buy?
Recommendation: Weak
AusCann is often referred to as having the lead position in the Australian cannabis industry. They used to have Canopy Growth as 10% investors but now Canopy has been replaced by local Australian Merchant Capital.
From a licensing perspective, they are ahead of other competitors in Australia. They can produce, sell import, and export. They may have a strong position if they can deliver on production and distribution. It’s a big unknown.
The company has reported only $671k in revenue for the year ending Dec 2019. This revenue was not based on sales as none of their drug candidates are approved. The drug furthest along is their 1:1 THC: CBD capsule for chronic pain indications. This would be a large market to enter (Pain drugs) but they are still a way away from sales for this drug.
Its price to sales ratio is an astronomical 13,000 and they EV/Revenue is 5,600. We don’t typically see values this high in our analyses (remember lower is better here).
They do have a partnership with Tasmanian Alkaloids Pty Ltd. to distribute medical cannabis in Tasmania. TasAlk produces 40% of the world’s alkaloid raw material and a partnership with DayaCann, the only licensed medicinal cannabis grower in Chile. These deals extend their reach internationally.
For all the reasons above, we rate this stock as Weak. Perhaps in a few more years, their drugs will be closer to approvals and they’ll be closer to revenue. Until then, expect dilution if you’re a shareholder.
For all the reasons above, we rate this stock as Weak but check out our other featured companies for many other winners in the cannabis and hemp industry.
