While Australia legalised medicinal cannabis back in 2016, Australian farmers and producers were only earlier this year allowed to export to global markets estimated to be worth $55 billion. Following the announcement, share prices in the sector soared despite the fact that almost all of these companies are still pre-profit or pre-revenue.
As for the Australian companies listed on the local stock exchange, only a handful of these specifically target relief for patients going through chemotherapy or muscle spasm-related diseases such as epilepsy, multiple sclerosis, stroke and Parkinson’s disease. Additionally, the official number of approved patients prescribed medicinal cannabis currently stands at around 360, compared to Canada with 200,000 and Israel with 30,000.
These comparatively low prescription figures are partially attributed to wary doctors less willing to prescribe it in the first place for various reasons (while only 30 doctors are authorised in Australia with Prescriber status), as well as the onerous application process with state health departments and the Therapeutic Goods Australia (TGA).
The TGA itself is not due to issue its guidance on medicinal cannabis until the end of this year, with no uniform law for medicinal cannabis currently in place across the country. Given these barriers hindering local demand, the approval to export to global markets presents a huge opportunity for the sector.
In addition to increasing medicinal demand internationally, recreational use of cannabis is also gaining momentum with many European countries, as well as several states in the US, decriminalising its use. Canada is also expected to join this list and companies are aiming to take advantage of this opportunity to supply this lucrative market.
Meanwhile, most cannabis materials are either imported or grown offshore (mostly in emerging countries). In Australia, cannabis crops are still in the early stages of approval with only three listed companies issued licenses to grow so far, and the largest farms are still at least a year away from a commercial crop. These companies will still have to seek capital funding to build production facilities and apply for a separate manufacturing licence.
Unlike many offshore practices which rely on greenhouse growth, Australia is able to grow these crops outdoors in high sunlight areas. This reduces the energy intensity which otherwise would demand 24-hour indoor lighting, heating and ventilation systems.
The medicinal cannabis sector remains an interesting space, as potentially more favourable regulatory framework evolves. However, with only a small number of companies around the world owning a lawful source of cannabis approved for scientific and medical research, we maintain a prudent stance and prefer to monitor how the sector delivers on governance, financial and ethical merits for now.