THC Global reports revenue in NZ and Canada, sets stage for Australian production

Medicinal cannabis developer THC Global (ASX: THC) has published an interim update of its market performance in which it reaffirmed its target of completing product validation at its Southport manufacturing facility by the end of December 2019.

From a financial perspective, THC Global confirmed that in addition to the $4.02 million in cash held at the end of Q3 2019, it had received $1.1 million in repayment of an employee loan earlier this month – an eventuality it will be able to recognise in its end of year regulatory filing.

In addition, THC said that continuing exercises of its publicly listed options will further increase the overall cash balance.

Earlier this month, THC received Schedule 4 and Schedule 8 narcotics licences from the Queensland Department of Health which facilitates the manufacture and wholesale of a range of different drugs including medicinal cannabis.

The approvals provided the go-ahead for the company’s overarching “farm-to-pharma” strategy that will see both Australian and foreign patients receiving high-grade products, with January 2020 considered to be the earliest possible commencement time.

The licence approvals also enable THC to utilise its analytical lab equipment, located in Southport and the company’s other facility in Bundy.

THC said the approvals are a direct means of reducing the cost of product research/development and will enhance its quality and safety assurance capabilities.

Completing preparations for commercial production will then pave the way for THC Global to commence the supply of Australian medicinal cannabis to Australian patients in early 2020.

Oceanic market expansion

In parallel to supplying products to Australian patients, THC is already distributing European-made medicinal cannabis products in New Zealand.

Currently, THC is the exclusive distributor of cannabidiol (CBD) products produced by Endoca, a cannabis producer based in the Netherlands.

As part of an effort to promote its activities and streamline operational efficiency, THC decided to provide “financial assistance” to NZ-based healthcare company DATAPHARM, to launch product and information hub CBDinfo.co.nz. The site operates as a central hub for patients to obtain high-quality information on the use, availability, benefits and risks of CBD products.

The site offers a wide range of cannabis and hemp products including CBD oil, a previously overlooked pioneering method of treating a variety of ailments including epilepsy, pain relief, anxiety and various cancers. The site offers patients oral, inhaled or transdermal methods of CBD intake, but equally importantly, provides information on potential risks of CBD use for patients to make an informed choice.

So far, supply has struggled to meet demand among patients that have experimented with CBD.

Medical cannabis laws in New Zealand were relaxed in a similar vein to other countries such as Australia, the US, Canada and the UK with cannabis products now being regulated as “prescription medicines”, thereby enabling terminally ill patients to possess and use cannabis if they have certification from a medical practitioner.

In New Zealand, since DATAPHARM’s site was first launched in June this year, over 100 medical practitioners have enrolled to use the platform. In parallel, THC Global said that it had sold out its recent shipment of Endoca’s CBD products in October.

Given the softer regulatory stance, combined with a growing demand for medicinal cannabis products, that have proven their efficacy amongst millions of users around the world – the future of medicinal cannabis is expected to be commercially viable by analysts.

“As production of THC’s own medicines from Southport reaches export scale in mid-2020, we expect to commence distribution of our own products in parallel with the Endoca CBD products, taking advantage of the supply and distribution pathways built with the Endoca product,” THC Global said.

Canadian cheer

Over in Canada, THC also has reasons to be cheerful.

In a statement to the market, the company said that its Canadian hydroponics equipment wholesaling and retailing division, Crystal Mountain, has reported unaudited trading revenue of over $3 million since January.

Moreover, in this quarter alone, Crystal Mountain reported cash receipts of more than $1 million, representing a 79% quarter-on-quarter improvement.

According to THC, strong market traction in Canada was driven by its strategic focus on the retail market including targeting holders of a commercial micro-cultivation licence and individuals registered with Health Canada for personal cultivation of cannabis for medical purposes. A market strategy that is being lined for Australian patients in the years to come.

The Canadian results raise hopes that THC can emulate the same performance in Australia next year with its global export-scale pharmaceutical bio-extraction facilities with Southport alone expected to process 120,000kg of cannabis per year.