Biocurious: The cannabis stocks that stand out in a field of weeds
Regulators have lax telehealth prescribers in their sights
Althea Group has sold its medical pot arm in favour of THC-infused beverages
Having sprouted in a field of hope and hype eleven years ago, the ASX medicinal cannabis sector has wilted in the face of unrealistic expectations and misguided strategies.
Demand isn't the problem: patients have embraced medical weed zealously since it was legalised a decade ago.
Globally, most western countries have sanctioned both medical usage and many have condoned recreational indulgence (including most US states).
Because there's only two approved cannabis treatments, local dispensing is largely carried out via an authorised prescriber scheme.
In the six months to December 2024, these docs wrote 377,840 prescriptions. Of these, 230,091 were for products with a THC content of more than 98%.
Patients aren't mucking around.
What's not to like?
The answer is rampant oversupply of the green stuff coupled with the rise of telehealth clinics, some of which are being criticised for alleged 'tick and flick' dispensing practices.
Echoing Australian Medical Association concerns, Little Green Pharma (ASX:LGP) CEO Paul Long refers to 'poor actors' in the local market.
'Reports constantly refer to a handful of doctors, often junior doctors that are either being coerced, or paid exorbitant money to write a huge volume of THC scripts,' he says.
'I agree it is an issue and calling it out for the long-term growth of our industry is important."
He adds hundreds of thousands have tried medical cannabis when nothing has worked, with great success.
Reflecting the 'commoditised' market, Althea Group (ASX:AGH) in May sold its local medical cannabis business, Tasmanian Botanics Pty Ltd for a knock-down $1 million.
'The market has become irrational,' says Althea CEO Joshua Fegan.
'It's very saturated, with product from places like Canada, South Africa and Colombia'.
He says most of the consumption is by way of dried flower, which implies folk might be smoking the devil's lettuce for jollies rather than using it medicinally.
We'll delve further into Althea's new direction below.
The dope on how to get it right
While most suppliers have withered, a handful prosper via differentiated strategies and perhaps a bit of luck. They are producing meaningful revenues and – in some cases - profits.
The Perth-based Little Green Pharma derives 80% of its revenue from the local market, but its greater fortunes align to the rapidly evolving European market.
Germany is in the throes of partial legalisation.
In France, the company supplies a pilot program that's a precursor to legalisation.
Little Green's owns a production facility in Denmark – Europe's biggest – purchased from Canada's Canopy Growth for a knock-down $20 million three years ago.
Two hours from the German border, the facility provides a streamlined route to the biggest Continental markets.
'It's very unlikely a site like this will be built again in the foreseeable future,' Little Green CEO Paul Long says.
Meanwhile, the company's Busselton facility becomes a 'craft' producer of a small amount of slowly cured, hand trimmed, genetically superior stuff.
Naturally, this attracts a better margin.
In the year to March 2025 Little Green grew its revenue by 43%, to a record $36.8 million 'against a backdrop of significant regulatory change and intense competition'.
European revenues doubled.
Adjusted for non-cash items, Little Green managed underlying earnings of $2.9 million compared with a previous $1.6 million loss.
From gummies to suppositories
Bioxyne (ASX:BXN) has a modest $64 million market cap, but that's big enough to confer 'sector leader' status.
Bioxyne's engine room is Breathe Life Sciences (BLS), acquired via scrip in 2023.
BLS makes and distributes medical cannabis and other consumer health products, either under its own brands or third-party labels.
(locally, Bioxyne is also the only licensed maker of MDMA and psilocybin for authorised prescribers and pyschedelic clinical trials).
In 2019 the company launched in the UK and Japan via its well-known Dr Watson brand, covering everything from gummies, to vapes to suppositories.
BLS too has entered the German market with a deal to supply a minimum 1.6 tonnes of cannabis flower and finished product to two clients.
The company expects the agreement will reap a minimum of $5.6 million of revenue in the 2025-26 year.
Ja, das ist gut!
Bioxyne CEO Sam Watson expects German demand to rapidly overtake the $1 billion a year Australian market.
On June 12 the company upgraded full-revenue expectations from $25 million to $28 million, a lofty step up from the previous year's $9.65 million.
The Ebay of medicinal dope
Formerly known as Cronos Australia, Vitura Health (ASX:VIT) doesn't produce any of its own material, but operates a marketplace that sells hundreds of flowers and oils from third party suppliers.
Vitura also has expanded into prescription nicotine vapes.
The company has built a network of physical and online prescribers, mainly via acquisition.
Vitura owns the Canview marketplace, Doctors on Demand telehealth business, CDA Clinics (medical cannabis telehealth) and the clinic chain Candor Medical.
In May, Vitura's 50% joint venture Flora acquired the digital platform Heyday Medical, 'one of Australia's most respected medicinal cannabis clinics'.
Established in 2020, the chain claims to have serviced more than more than 5000 patients.
Last November Flora acquired the Releaf Group, which operates telehealth and physical clinics.
In a March quarter update, Vitura said full-year revenue was unlikely to meet the targeted 10% improvement. But the June quarter implies a yearly run rate of $138 million, up 11%.
Management also expects a 20% improvement on last year's normalised underlying earnings of $8.4 million.
Putting the pep into soft drinks
Coming back to Althea, the company's new schtick is entering the North American market for THC-infused beverages.
(THC is the psychoactive component of cannabis).
Yep, these bevvies are legal in Canada and the US and are sold in bottle shops alongside alcohol.
Althea's foray is by way of its subsidiary Peak.
Althea's Fegan says when Peak started producing in 2021, only 4% of cannabis consumers had tried these drinks. Now, the number is more like one-quarter of them.
He says the drinks have a similar effect to a similar sized serve of alcohol, but without the hangover.
'It ticks a lot of boxes as a good consumer product,' he says.
Peak's competitive edge is its technique to produce the THC emulsion, without the 'planty' taste of dope.
Peak's offerings include seltzers, sodas and mocktails – but it's not yet putting the 'pep' into Pepsi.
Peak Canada has just launched its own brand Snap Back, a heady mix of THC and rosin (pine resin).
By December Althea expects to have four or five US production sites, as close to distributors as possible.
'These big alcohol companies are looking closely at this space and our job is to develop drinks for those type of companies and produce them at scale," Fegan says.
In the December half, Althea derived $8.2 million of revenue in Canada and the company expects this to grow during the summer months.
Given the sale of its Australian business, Althea in May withdrew its full-year guidance of revenue between $26-33 million and underlying earnings of $800,000 to $1.1 million.
Althea lost $2.6 million in the March quarter. But Fegan says the company should be cash flow positive without the drag of the divested Australian business.
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