Medicinal cannabis stocks soar as Australian market revels in 'pot stock' boom

Companies engaged in cultivation and harvesting of medicinal cannabis are revelling in the ‘pot stock’ boom. Their shares have surged by as much as 130 percent this year. The escalation is almost six times as compared to the companies in the United States and Canada.

The lift is largely attributable to the relaxation of imports on cannabis. The product is used in treatment of, epilepsy and cancer, among other diseases. Almost 90 percent patients have said it is more effective than alternative forms of treatment.

“The market is excited by the potential upside it could bring,” Niv Dagan, Melbourne-based executive director at Peak Asset Management, said. “The key risk we see is obviously regulatory risk.”

According to a report from the University of Sydney, the initial demand for medicinal cannabis could be worth more than $100 million a year. This is expected to expand to as much as $300 million a year should it become more mainstream in the first 10 years, according to Michael Kutz, who wrote the report.

Nevertheless, the number is significantly smaller than the US market. According to Morgans Financial Ltd., citing ArcView Market Research, the US market could be worth US$21 billion (AU$27.57 billion) by 2020.

A new survey has revealed that 90 percent of epilepsy patients prefer consuming medicinal cannabis over other forms of treatment. This was further supplemented by the findings of self-reported experiences of 976 people (a large percentage of which were either adults suffering from epilepsy or parents of children who had the illness), with 14 percent saying they used medicinal cannabis. Those who experienced acute pain would procure the product from black market prior to its legalisation.

The average market capitalisation among Australian companies is less than $80 million. This comes although an increase of more than 130 percent was seen this year.

Stemcell United Ltd. enhanced its market capitalisation to $150 million this month, coming on the heels of a statistic of less than $5 million. With this, the company now stands at $92 million. The company has appointed Nevil Schoenmakers as an adviser; and aims to shift its focus to medicinal cannabis.

MMJ PhytoTech Ltd. also witnessed a surge of its shares – increasing by 191 percent – this year, with the company also being operational in countries like the US and Israel. Auscann Group Holdings Ltd. has gone up by more than 200 percent since its initial public offering. The company has Canopy Growth Corp., based on Toronto, Canada, as its largest shareholder. Canopy posted a market capitalization of US$1 billion (AU$1.31 billion) last year.