Australian medicinal cannabis market opened up by S3 scheme

Investors have welcomed the TGA’s decision to down-schedule low-dose cannabidiol (CBD) products to Schedule 3 (S3) as this will allow pharmacies to offer the products over the counter and is expected to help centralise a scattered market – with the potential new market estimated to dwarf the current highly regulated $250 million market, at over $3 billion.

Investors have welcomed the TGA’s decision to down-schedule low-dose cannabidiol (CBD) products to Schedule 3 (S3) as this will allow pharmacies to offer the products over the counter and is expected to help centralise a scattered market – with the potential new market estimated to dwarf the current highly regulated $250 million market, at over $3 billion.

This pivotal move is expected to be a key inflection point in Australian pharma with a good dose of challenges yet to be addressed but potentially a favourable outlook for companies that can make the cut.

In the second of a two-part summit, Reach Markets will delve into how businesses and fund managers are positioning themselves to take advantage of what could see the market grow as much as 14 times.

Join our live medicinal cannabis summit with Merchant Group, Bell Potter and Wellnex Life (ASX: WNX) on Friday, 4th November, at 12pm (AEDT), to hear about valuable insights within the industry and how to identify potential opportunities. Click here to book your spot. If you can’t make it, click here to receive a recording.

Industry prepares for new era

Historically, the medicinal cannabis industry has been associated with high capital expenditure, mainly in infrastructure to satisfy cumbersome approval processes, as well as the stigma attached to the herb with some debate and controversy, which constrained the market for companies to sell into.

The industry turned over a new leaf when Australia’s Office of Drug Control (ODC) legalised cannabis for medicinal use in 2016 and companies chasing the new opportunity rushed onto the boards.

Medicinal manufacturer Cann Group raised $13.5 million for its IPO and listed in 2017, completed an additional ~$78 million capital raising and finished that year at an 813.3% premium to its IPO price – with no sales to boot.

A more recent milestone was the ASX’s first profitable and dividend-paying cannabis company, Cronos Australia, recording over 390% CAGR in revenue from FY19-22, reaching $67 million with prescription-only sales.

In October, US President Joe Biden pardoned all simple possession marijuana convictions at the federal level in the US, which was followed by cannabis stocks rallying globally – including some ASX stocks jumping over 25%.

Could it be fair to say that Australia’s medicinal cannabis market is finally starting to b(l)oom? One trend to follow is the commercialisation of the S3 market, which could spark a surge in cannabis stocks that potentially dwarfs the interest seen during 2017/18.

Demand is growing and consumers are keen

CBD’s anti-inflammatory properties are well documented, and its non-psychoactive nature allows people to function normally without any intoxication. While the analgesic effects of CBD are still being researched, its use in pain management has resulted in reduced opioid use and comes with a better safety profile.

Chronic pain affects one in five Australians, which often locks patients into a vicious cycle of pills, depression and bed rest. The estimated cost of healthcare and lost work days is $34 billion, making it by far one of Australia’s most costly healthcare problems.

Over the three years to 2022, the number of TGA-approved prescriptions have more than doubled each year (25,516 in 2019, 57,714 in 2020 and 122,486 in 2021).

It is estimated that 600,000 Australians are now self-medicating with cannabis, and chronic pain is the leading cause. Of the 248,000 prescriptions issued for medicinal cannabis products in Australia since 2016, pain is the number one underlying cause.

In this final session, industry insiders will discuss the future of the medicinal cannabis market, their favourite stocks and why the market is at an inflection point and about to evolve. Click here to secure your spot. If you can’t make this time, click here to request the recording.

Reach Corporate provides Corporate Advisory Services to WNX and have been engaged by them to manage their investor communications.

Past performance is not a reliable indicator of future performance.

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