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Medical Cannabis Monthly Report | October

  • Things continue to look up for our medical cannabis ETF and cannabis as a whole: the upcoming US elections are expected to further increase medical legal jurisdictions in the US for cannabis.
  • Germany hit a symbolic milestone for medical cannabis activity, with over 100,000 patients applying for reimbursement from their insurers since the start of the medical cannabis program in early 2017[1]

 

Performance Review

September brought about a pause and a breather in equity markets. The summer brought about an abundance amidst a fast-economic recovery aided by highly accommodative monetary and fiscal policies globally. This froth was wiped clean in September as the threat of a second wave of Covid-19 becomes imminent and an ugly election season comes to the foreground. Cannabis, true to its high beta, performed in line with these broader expectations, with pharmaceuticals performing slightly better due to the defensive correlation with the broader healthcare sector. CBD Wellness lost steam as a logjam in congress failed to floor a redesigned hemp bill which would greatly increase the addressable market. However, things do continue to look up for cannabis as a whole as the coming US elections are expected to further increase medical legal jurisdictions in the US for cannabis.

 

Medical Cannabis Index Monthly Performance

  September
The Medical Cannabis and Wellness Equity Index (NTR)  -10.85% 

Current performance is no guarantee of future performance. Source: Bloomberg/ HANetf

 

Sub-sector  September Performance 
Ancillary Services -11.3% 
Pharmaceutical Cannabinoids  1.1% 
Medical Cannabis 3.9% 
CBD Wellness  -23.3% 
CBDX  -10.8% 

Past performance is no guarantee of future performance. Source: Bloomberg. Data as of 30/09/2020

 

Medical Cannabis and Wellness Equity Index (NTR) Performance and CBDX Medical Cannabis ETF

Total Return NAV to Date (up to 30/09/2020)

 

1M

3M

6M

YTD

12M

Since Inception

The Medical Cannabis and Wellness UCITS ETF (Acc)

-10.77%

1.55 %

35.87 %

2.05 %

-

2.05%

Medical Cannabis and Wellness Equity Index (NTR)

-10.85%

1.61 %

36.03%

1.61%

-16.98%

1.61%

Performance before inception is based on back tested data. Back testing is the process of evaluating an investment strategy by applying it to historical data to simulate what the performance of such strategy would have been. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. Past performance for the index is in USD. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product.

Source: Bloomberg/ HANetf. Data as of 30/09/2020

 

Industry News

Germany hit a symbolic milestone for medical cannabis activity, with over 100,000 patients applying for reimbursement from their insurers since the start of the medical cannabis program in early 2017. Although this number does not include all medical cannabis prescriptions, it does provide insight into growth of the medical cannabis program in Germany which has been fairly stable since initiation. In the second quarter of 2020, total reimbursements reached 36.7M Euros, setting Germany a run-rate of roughly 150M Euros in sales, and a 24% increase in year over year sales[2].

In a sign of confidence, the UK’s financial regulator (Financial Conduct Authority) has cleared the listing of medical cannabis companies on the senior London Stock Exchange (LSE). For now, companies operating in the medical cannabis space globally will be allowed to list given they have the appropriate government licenses and do not fall foul of the UK’s Proceeds of Crime Act 2002 (POCA). The demand for medical cannabis investment continues to grow in the UK as evidenced by this regulation. Ahead in the pack are family offices and high net worth investors, who recently came together to raise US$100M[3] in a private fund to invest in medical cannabis, pharmaceutical cannabinoids, and CBD wellness, a theme which is in line with the investment thesis of our medical cannabis ETF.

 

Outlook

As we approach November, excitement continues to build around the US elections and the multiple referendums on cannabis which will take place concurrently. Five states are to vote on cannabis legalisation in the coming elections for either medical or adult-use, with the total population impacted close to 20 million. This defines the base case of further legalisation in the US. Additionally, the general election is seeming to be more tilted towards a Democrat sweep which would further bolster the cannabis industry in the US.

Outside of the US, patient counts in Australia and Israel are on the rise which rounds out the medical cannabis story to be a wider one beyond the immediate monetisation of the US alone. Australia experienced another six thousand patients in September[4], and Israel another ten thousand in August[5]. Similar stories continue to prevail in different jurisdictions across the world but any federal moves in the US will be largely influential to many international markets as well.

 

Constituent News

Corbus Pharmaceutical (CRBP) is a clinical stage pharmaceutical company focused on the development and commercialisation of novel therapeutics targeting the endocannabinoid system to treat inflammatory and fibrotic diseases. Corbus recently announced negative phase III data of their lead drug in systemic sclerosis. The drug failed to show any significant improvement over a placebo group, but the study largely illustrated the inherent complexities of testing in a group with extensive use of background immunosuppressives. CRBP still has several shots on goal for the drug in other indications but largely comes to show the challenges of smaller pharmaceutical companies and the possibility of binary outcomes. The stock was down 80% for the month of September, but the analyst community remains hopeful of the company’s future given that better controlled studies shall be designed going forward. The company is now a 1.6% weight in CBDX[5].

The ancillary services industry continues to show outsized growth as the adult-use cannabis industry takes off in the United States. Scott’s Miracle Grow (SMG) updated their fiscal outlook for the 2020 fiscal year, with earnings expected to further exceed prior guidance. Company-wide sales growth of more than 30% is being recorded year over year[6] and is expected to continue on the back of further development of the US cannabis industry which awaits tailwinds from coming elections.

 

Top 10 Constituents

Weight

Arena Pharmaceuticals Inc

19.46%

Innovative Industrial Properti

19.14%

Scotts Miracle-Gro Co/The

15.40%

GW Pharmaceuticals PLC

12.18%

GrowGeneration Corp

8.09%

Amyris Inc

6.37%

Cara Therapeutics Inc

6.35%

Charlottes Web Holdings Inc

2.28%

Medicenna Therapeutics Corp

2.12%

NewAge Inc

1.71%

 

Region Breakdown

Weight

United States

85.29%

Great Britain

12.18%

Canada

2.53%

 

 

Medical Cannabis ETF Details

The Medical Cannabis and Wellness UCITS ETF, is a UCITS compliant Medical Cannabis ETF domiciled in Ireland.  

Our medical cannabis ETF tracks a rules-based Medical Cannabis and Wellness Equity Index from Solactive, consisting of publicly listed companies conducting legal business activities across nine thematic sub-sectors in the medical cannabis, hemp and CBD industries.  

The fund seeks to provide targeted exposure to the rapidly expanding legal medical cannabis industry that is set for further growth as more countries legalise cannabis for medical use.  

Please remember that the value of your investment may go down as well as up and past performance is no indication of future performance.

Exchange BB Code RIC ISIN Currency Income
London Stock Exchange CBDX LN CBDX.L

IE00BG5J1M21

USD Acc
London Stock Exchange CBDP LN CBDP.L IE00BG5J1M21 GBP Acc
Xetra CBSX GY CBSX.DE DE000A2PPQ08 EUR Acc
SIX CBDX SW CBDX.S IE00BG5J1M21 CHF Acc

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