Are investors panic selling their shares at medicinal cannabis company Cronos Australia (ASX: CAU)? With 73.4% of the Company’s shares to be released from voluntary escrow soon, it’s the only explanation Cronos could give to the ASX to explain the irregular trading activity.
Cronos, who became Australia’s first ever ASX-listed cannabis company to pay out dividends back in August, had a share price drop from $0.75 to $0.59 on Monday. According to their response to the ASX price query, this unexpected price drop might be caused by speculation that the Company’s share price may fall further when those escrowed shares are released next month.
Cronos is a growing medicinal cannabis company focusing on its flagship CanView platform that facilitates medicinal cannabis prescription, sales, and distribution for doctors, pharmacies and patients throughout Australia using AI technology. The Company operates at the downstream end of the value chain of cannabis production (finished product and distribution to prescribers, pharmacies, and patients) that is claimed to be more sustainable for long-term growth and profitability as it avoids aggressive competition and significant risks in the upstream value chain (genetics, cultivation, extraction, and manufacturing).
Illustrating Cronos’ business scale, the CanView platform currently has an approximate 700 registered prescribers and 7,000 registered patients, and has partnered with 50% of pharmacies nationwide (more than 2,800 pharmacies) selling 160+ branded products from 25+ leading suppliers.
The Company also runs CDA Clinics that provides medicinal cannabis consultations on the Gold Coast, Brisbane, and Sunshine Coast, as well as being a major shareholder at Cannadoc Health, a medicinal cannabis clinic business that undertakes face-to-face and nationwide telehealth consultations with patients seeking access to medicinal cannabis.
The cannabis industry in Australia is flourishing as active medicinal cannabis patients have grown from near zero in 2018 to over 100,000 in 2022. Revenue generated from the industry has similarly grown from $30m in 2019 to a projected revenue of $423m in 2022.
Not wanting to wait any longer to snatch the growth opportunity, Cronos will dedicate the FY23 towards expansion, primarily through an ambitious target of acquiring the remaining 97.4% untouched market of GPs and clinic groups who prescribe medicinal cannabis.
The Company is also planning to increase the team by up to 50% to drive growth, expand to underserved areas identified in capitals and regions, and also develop engagement strategies that include online and face to face education events that will hopefully drive patient and product sales growth.
Last month, Cronos announced that it has secured Victorian Government licences to operate its newly-commissioned Melbourne Distribution Centre (MDC) at an undisclosed Melbourne location.
The MDC facility supports the Company’s market leading CanView platform and can facilitate a significant uplift of the Company’s medicinal cannabis sales volume. The facility will now begin to receive orders of medicinal cannabis products and will cover distribution in Victoria, parts of New South Wales, South Australia, Western Australia, Tasmania.
While it is still undetermined whether Cronos’ share price will dive deeper after the voluntary escrow shares are released, the Company’s strong financial result enabled them to claim the title of being the first ASX-listed cannabis company to issue shareholders with a dividend.
Following their September quarterly results, Cronos proudly announced that they have been relieved from the obligation to file quarterly reports by the ASX after successfully disclosing positive net cash flows for four consecutive quarters.
In the September quarter, Cronos reported a 13% quarter on quarter growth, with $3.8m net positive operating cash flows for the quarter, $19.5 cash at bank, and a record of 214,000 units sold through the CanView platform which is a 30% increase compared to the previous quarter. Apart from standard leases, The Company has no material debt as of the end of the FY22.
Clara is a Business Reporter for The Sentiment.
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