Author: Joshua Schmidt MBA
In what has been a landmark week for the Australian cannabis industry; with three specific projects being granted ‘Major Project Status’, one claiming to be worth $350 million and the other two are stating $140m and $160m. It raises the question of where all of the cannabis products will go, and how these projects will create profitability for shareholders. Afterall, the Australian market is still relatively small and medicinal cannabis products are not yet covered by the Pharmaceutical Benefits Scheme (PBS).
Australia has long been viewed as a new market for medicinal cannabis following the industry growth in Canada. But exactly how big can it get, and by when? And put simply, can people afford it as a medicine? Australia has both domestic producers, as well as some who are headquartered in Europe and importing product down under to service the Australian market. Given the age and size of the industry, it must be asked if the supply is already meeting demand and when these new projects come online, what happens to the excess product?
Industry leaders such as Cann Group Limited have completed numerous harvests in Australia, but are yet to directly service patients with their own branded products, while others have imported product from partner organisations, and are utilising service providers and concierge services to reach patients. While both patient and prescriber numbers have been on the rise, how long until Australia reaches a saturation point, and at what point does it become untenable to grow in Australia, given the high production costs?
Perhaps the answer is the EU, where insurance schemes (which differ from country to country) will cover most or all patient costs, and the consumption of dried flower is widely accepted (and prescribed). On the continent, numerous countries have engaged in multi-year trials, seeking to gather a body of evidence for the use of medicinal cannabis, and validate the effectiveness of the industry.
Ireland has made oral solution available to qualifying patients, the Czech Republic insurance scheme came online in January 2020 to reimburse 90% of patient costs for prescribed cannabis flower; and Germany, who imported over 6.7 tonnes in 2019, is relying on imports until at least the end of 2020 to meet demand, before domestic cultivation levels will start to balance out patient requirements. Then there is the ongoing Danish program, Italy’s foray into medical cannabis as well as the French approval for a two-year “experiment”, and the list goes on.
So, with all of these markets launching programs or trials, and showing a willingness to explore the application of medicinal cannabis, SHOULD Australian companies start to produce specifically for export markets instead of their own backyard in the race to revenue? And should this be factored into the license application process.
Is the medicinal cannabis industry the next great bastion of Australian exports, rivalling that of mining and farming, which helped to forge the national identity or will it become something else entirely?
With this in mind, it must be asked why it is taking the Australian Government and regulators so long to reduce the redtape and streamline patient access when other nations have come online so quickly.
Put simply, is there a future here, or will it all go up in smoke?
- In part iii of this series, we will look to better understand the appeal and complexity of the above EU nations, and the potential for Australian Cannabis companies.
Joshua Schmidt is a New York-based MBA and cannabis entrepreneur who has gained considerable experience working in the Canadian and Australian Cannabis industries, achieving company exit by acquisition in 2018 in Canada, before establishing and managing the intelligence program for an Australian cannabis company.