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What's up with the Australian Cannabis Industry?

Team Veye | 18 Jul 2018

What's up with the Australian Cannabis Industry?

In early 2016, Australian legislature passed the Narcotic Drugs Amendment Act, which allowed for the creation of a licensing and permit scheme for both regulated cultivation of cannabis plants and the production of cannabis and cannabis resin for medicinal purposes or research. The Office of Drug Control, which oversees the industry, issued three types of licenses: cultivation or production of medicinal cannabis, research, and manufacturing of a drug or product. As of mid-April this year, it had granted 16 medical cannabis cultivation licenses, 10 research licenses, and 9 manufacturing licenses since the process began in February 2017. While it doesn’t publish a list of license holders, it does make available a list of manufacturers and suppliers.

Australia is doing a good job of getting a regulated industry started, but it struggles with low patient counts because no qualifying conditions have been established yet. The Therapeutic Goods Administration (TGA), the country’s equivalent of the US Food and Drug Administration, is looking into cannabis to treat epilepsy, MS, chemotherapy side effects, and pain and for use in palliative care. For now, patients can access medicinal cannabis as an unapproved drug through authorized prescribers, special access, and clinical trials, but very few patients are actually receiving it. As of November 2017, the government put the total number of patients at 300.

One recent change by the Australian government was to open the door to exports, a move announced in early January that’s expected to expand opportunities for licensed companies and minimize the risk of catering exclusively to a domestic market that might be slow to evolve. In response, several companies already have announced plans to build larger facilities.

In addition to being smaller than Canada by about 30%, Australia is far behind it in terms of the size and development of its medicinal cannabis program. So at this point, it doesn’t seem that Canada should feel threatened for its spot as the global cannabis leader. After all, several Canadian licensed producers own substantial stakes in Australian companies and/or are exporting products into the country. Still, there may be potential for global powerhouses to emerge from Australia, catering to the Asia-Pacific region and beyond.

Those aiming to capitalize on cannabis have learned that looking abroad can be a lucrative alternative to investing in companies focused on the United States, where cannabis remains federally illegal across majority of states. The best example, of course, is Canada, which has seen incredible gains in the stocks of its licensed medical marijuana producers over the past 2 ½ years, as the country has moved towards full adult-use legalization.

With its market dynamics similar to where Canada was just a few years ago, Australia is emerging as another top choice among speculative investors.

On 4th January this year, Australian government declared that it planned to become the fourth country in the world to legalize medicinal marijuana exports in a bid to score a piece of the estimated $55 billion global market. This news prompted an extraordinary investor rush on ASX-listed Australian cannabis producers, with some stocks jumping more than 50 per cent.

Since then the price of these stocks has either fallen down or stabilized after a quick reaction to the market news. Those holding cannabis companies stocks need to be patient for few years as the market is still in its development stage.

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