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‘Like investing in an alcohol company at the end of Prohibition’

To best understand the medicinal cannabis opportunity currently knocking on our door, says one of Australia’s leading biotech investors, we must cast our minds back to a landmark event that occurred 89 years ago.
To best understand the medicinal cannabis opportunity currently knocking on our door, says one of Australia’s leading biotech investors, we must cast our minds back to a landmark event that occurred 89 years ago. “It’d be like investing in an alcohol company at the end of Prohibition,” Merchant Group MD and industry leader Andrew Chapman told Reach Markets, ahead of his appearance on our Future of Medicinal Cannabis online summit this Friday. (For details or to book yourself in, click here.) “This is where the industry is now and this is what investors have to understand. If you had the opportunity to buy shares in Constellation Brands, or whatever beer or scotch producer was around in the 1930s when Prohibition ended, you would have made a fortune. “I believe we’re again sitting at the precipice of that sort of dynamic, of having a milestone event in a demand-driven industry, and therein lies the opportunity we haven’t seen in generations.
“In my view, medical cannabis has that same potential now with its tailwinds. It’s very exciting.”
Mr Chapman has been involved in the ready-to-bloom industry from an investment perspective for about seven years, investing in “quite a number of the early medical cannabis companies that were listed or about to be listed on the stock market”. “We invested in MMJ PhytoTech (now Hygrovest) in 2015, and then did seed investing for Zelda Therapeutics (now Zelira) and AusCann. We were also involved in MGC Pharmaceuticals and backed an animal health company called CannPal. “They’re all still around and have had varying degrees of success over the years.” The investment manager’s personal interest, however, preceded his financial one – courtesy of a life-changing experience with medicinal cannabis that he witnessed first-hand. “My then-partner had an ailment in her stomach, which doctors hadn’t been able to define or cure. For years, she suffered from ‘stomach migraines’ – really, just another word for ‘we don’t know what it is’ – and they would basically wipe her out for about three or four days,” he said. “After researching the medical cannabis industry, we went to the US and met with a physician named Dr Mara Gordon, who actually became the founder of Zelda Therapeutics. Following the consultation process and so on, my partner was given medical cannabis oil. “On the onset of the stomach migraines the next month, she took a couple of drops of the medical cannabis oil under her tongue and, incredibly, it cured her. Over a period of time doing that, it completely resolved her unknown and debilitating ailment. “And so after that, it hit home to me that there’s more to the industry than just hype.”

The ‘big game-changer’ for industry and investors

With the medicinal cannabis industry in its infancy, especially in Australia and many countries outside the US, there is plenty of room to grow and opportunities to invest, Mr Chapman says. “Medical cannabis has been a terrible sector for the past three years; it’s been downtrodden. There are companies operating without any focus on what it is to be a medical cannabis company. They’re doing a scattergun approach and just hoping something works. “On the other side of the coin, there are companies past and emerging that have developed proper commercial business models and are coming into play from a revenue point of view. Those are the companies leading the way and showing what can be done in this industry.
“Rest assured, the industry will mature. We’re only at the end of the early phases of this industry becoming what people would describe as ‘legitimate’.”
The Merchant Group MD says current events in the US, with President Joe Biden pardoning people convicted for possession of marijuana and looking to federally regulate cannabis as a recreational drug, are “a big game-changer for the industry” – both recreationally and medically. “It’s a huge development and cannot be underestimated. And I think the stock markets, especially the Australian ones, haven’t really grasped what that means yet. “The Cannabis 2.0 Boom is coming.” Reach Markets is hosting a special medicinal cannabis panel discussion this Friday, 4th November at 12pm (AEDT), where industry leaders – including Merchant Group MD Andrew Chapman, Bell Potter healthcare equities analyst Anubhav Saxena and Wellnex Life CEO George Karafotias – will discuss the medicinal cannabis investment landscape, types of companies you can invest in and how investors can benefit from the commercial potential of leading businesses within the fast-emerging industry. Click here to book in.   Reach Corporate provides Corporate Advisory Services to WNX and have been engaged by them to manage their investor communications. Past performance is not a reliable indicator of future performance.
     

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