Medicinal cannabis distribution
Cronos Australia is a medicinal cannabis company that is the market leader in distribution to pharmacies and provides patient consulting services through its clinic business. The key driver for the impressive growth in the past 24 months has been the CanView platform which provides the widest range of medicinal cannabis products compared to competitors (Anspec, Health House).
CanView 2.0 launch
The current system provides access to patients, doctors and pharmacists. The transition to CanView 2.0 streamlines the consultation and prescription process. Additional features include a consultation platform, connecting patients directly with doctors, integration with clinic software allowing to optimise prescribing, status updates for patients regarding pending orders and a treatment tracker which facilitates pharmacist & clinician monitoring. Phased roll-out of this new ecosystem is targeted from September to December 2022.
Prescribing trends in medicinal cannabis
From a broader industry perspective there has been increasing prescribing of medicinal cannabis products. Authorised Prescribers have increased from 194 in January 2021 to 1,307 in August 2022, SAS-B prescribers has increased from 493 in CY18 to 2,272 in CY22 to date. The key to further clinical adoption will be stronger evidence with a number of studies currently underway.
Investment view: Initiate with Buy, Price Target $0.60
We initiate coverage on Cronos with a Buy recommendation. We expect the momentum observed in FY22 to continue into FY23 and translate into strong revenue and earnings growth. Cronos is currently the only profitable dividend paying medicinal cannabis company on the ASX and the valuation does not appear demanding relative to the expected growth.