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This ASX cannabis share is sinking lower following its Q2 update

James Mickleboro
Medical Cannabis

The AusCann Group Holdings Ltd (ASX: AC8) share price is sinking lower on Thursday following the release of its quarterly update.

At the time of writing the medicinal cannabis company’s shares are down 4.5% to 32 cents. At one stage they were down as much as 7.5% to 31 cents.

What happened in the second quarter?

This morning AusCann provided investors with an overview of its activities for the three months ended December 31.

Although it is still not generating revenue, it may not be too long until this is the case.

During the quarter AusCann reached a major milestone with the successful development, manufacturing, and testing of its proprietary cannabinoid-based hard-shell capsules.

The company is now working to develop a commercially focused, short clinical evaluation.

AusCann’s solid fill capsule formulation is a unique presentation for cannabinoid medicines, and the clinical evaluation goal is to provide key exposure information to inform dose selection, bioavailability, and safety.

Management is aiming to have the hard-shell capsules commercially available for physicians to prescribe in Australia through the Therapeutic Good Administration (TGA) special access scheme and authorised prescriber scheme during the first half of calendar year 2020.

R&D Facility.

The company was also busy completing the construction stage of its facility based in Perth during the second quarter.

The site construction was completed on time and on budget with $4.5 million spent to date. An additional capital spend will be deployed for R&D equipment within the original $6 million budget.

This site will provide AusCann with a state of the art R&D facility that it expects to assist in the development of an innovative cannabinoid-based medicines pipeline.

Cash outflows.

Net cash outflows for the quarter were $6.4 million. This was due mainly to product development facility construction costs of $3.4 million. Operational costs were ~$2.9 million, including R&D costs of ~$1 million.

Cash outflows of approximately $4.7 million are expected next quarter.

So, with a cash balance of ~$26 million, I estimate that AusCann has enough cash to fund its activities through to 2021 based on its current cash burn rate.

The post This ASX cannabis share is sinking lower following its Q2 update appeared first on Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2020