Pain relief without prescription – Australia’s medicinal cannabis opportunity

Australia’s pharma landscape is in for arguably one of the largest developments in recent times – the long-awaited move to allow over-the-counter medicinal cannabis sales.

Australia’s pharma landscape is in for arguably one of the largest developments in recent times – the long-awaited move to allow over-the-counter medicinal cannabis sales.

Medicinal cannabis for many has offered life-changing chronic pain relief, anti-inflammatory medication, aiding sleep, stress relief and much more.

The existing market is forecast to be worth $423 million in 2022 for Australia, but has been limited by its prescription requirement. The TGA has approved medicinal cannabis as an over-the-counter product under Australia’s new Schedule 3 (S3) classification. Which means for approved drugs you don’t require a script, you can buy over the counter (OTC) at a pharmacy.

It is expected to unlock the market and, some predict, dwarf the existing prescription-required market.

Wellnex Life is in a position to be one of the first to officially apply for TGA approval for an OTC medicinal cannabis product. Its core competencies are around required regulatory approvals and distribution networks, in combination with the production capabilities secured through its joint venture with OneLife Botanicals. The company believes this provides them with all the ingredients required to be one of the first few to enter this market.

To stay up to date with the latest Wellnex Life news and announcements, register your details on the Wellnex Life investor centre.

With the Aussie S3 market yet to see its first medicinal cannabis product on pharmacy shelves, the opportunity is wide open for first-movers to seize the derestricted market.

This is key as, when a new sector is formed, pharmacy shelf space is limited and brand loyalty among consumers is built early. Combined with the expected high-entry barriers for competitors, this puts first-movers in a position to quickly become a dominant player.

Wellnex has revealed its plans to seize this opportunity, with CEO George Karafotias noting that the company’s approvals knowledge, established infrastructure and wide distribution network are critical factors that further propel Wellnex ahead of potential competitors.

“While the market has long been plagued by companies haemorrhaging money on infrastructure and lengthy regulatory burdens that have resulted in very little progress and very large expenses, Wellnex is in a unique position to capitalise on this opportunity with only R&D costs to absorb, not the tens of millions required for infrastructure,” he said.

Mr Karafotias says the company will approach medicinal cannabis with the same logistical and partnership precision that it implemented for the launch of Wagner Liquigesic – Australia’s first liquid gel paracetamol product.

“In that instance, we developed the product and had it TGA approved under the (S3) scheme. A strategic partnership was then formed to manufacture the product, and we used our established sales channels to distribute it,” he said.

“In much the same way, Wellnex has already formed a strategic partnership to develop an S3-approved product and leverage that IP. Our partner will provide Wellnex with exclusive use of their state-of-the-art medicinal cannabis cultivation and processing facility – at no cost to Wellnex. We will then once again utilise our sales channels to distribute the product.”

Already, Wellnex is in a position to be one of the first businesses to lodge a product application with the TGA – which, subject to approval, puts it on track to become one of the first providers of a low-dose CBD product for pain relief available over the counter in Australia.

To stay up to date with the latest Wellnex Life news and announcements, register your details on the Wellnex Life investor centre.

Wellnex Life in the wider world of wellness

Beyond the CBD opportunity, Wellnex is fast evolving as a key player in the wider Australian health and wellness market, worth $10.7 billion (as at February 2022). The company identifies consumer trends, creates brands and products that capture these trends and brings them onto shelves ‘first and fast’ and at scale by leveraging its extensive networks and process know-how.

Since listing in 2021, Wellnex has successfully launched and scaled five company-owned brands, with TGA approvals obtained where required, and are ranged across major retailers such as Coles and Woolworths and pharmacy groups.

Wager Liquisegic is one such brand to get TGA approval. It was launched under a joint venture with Chemist Warehouse and has shown sales up 61% in the six months to July 2022. Other Wellnex brands have performed well too, with its Wakey Wakey caffeine effervescent sales up 192% and Iron Company vitamin gummy sales up 132% (in the eight months to August 2022).

The company is showing growth, guiding Q1 FY23 revenue at +78% above Q1 FY22 ($6.8 million vs $3.8 million), which Mr Karafotias says puts it on track to achieve its $29 million revenue and positive EBITDA targets for FY23.

Further, the company has signed contract manufacturing, marketing and distribution agreements with Chemist Warehouse and global pharma leader GlaxoSmithKline (GSK), demonstrating its ability to design world-class products that meet industry standards while delivering high margins.

How CBD shapes up beyond our shores

On a global scale, the CBD market was worth US$12.8 billion in 2021, and is forecast to grow at a 21.7% CAGR from 2022 to 2028, taking the market up to US$56.2 billion.

In the US alone, a growing number of people are enrolling in medicinal cannabis programs, with the total surpassing 2.97 million in 2020 – more than quadrupling the number of people enrolled in 2016, according to a study published in Annals of Internal Medicine.

The researchers found the most common condition cited was chronic pain (61%), followed by post-traumatic stress disorder (11%). Other conditions included multiple sclerosis, Alzheimer’s, AIDS, glaucoma, Crohn’s disease and chemotherapy-induced nausea and vomiting.

Extensive clinical research has proven CBD’s efficacy when treating a variety of physical and mental conditions, the largest application being chronic and acute pain – all without the psychoactive side effects associated with the recreational use of marijuana.

To stay up to date with the latest Wellnex Life news and announcements, register your details on the Wellnex Life investor centre.

“Australia is behind the game compared to the rest of the world, but we expect the market to grow rapidly in the next few years – and the lifting of the prescription restrictions will only serve to dramatically increase uptake,” Mr Karafotias said.

“For Wellnex, the medicinal cannabis component of our business might be 30-35% by FY25 – and so I would say about 50% of our revenue will be coming from the medicinal cannabis base by that stage. That is subject to us obtaining registration, which we’re very confident on.

“Acquiring just a fraction of the market could potentially return tens of millions of dollars in revenue. We plan to seize more than a fraction and it’s very high margins for this product.”

Why Wellnex Life believes it can succeed

The company believes it has the ingredients required to be a winner in Australia’s emerging S3 OTC medicinal cannabis space, and puts it down to three critical factors.

  1. Wellnex’s deep knowledge of the regulatory approval process, having proven its ability to take brands and products through the TGA process quickly and effectively;
  2. Its vast and established distribution networks and joint ventures, including with Chemist Warehouse and GSK; and
  3. The company’s manufacturing capability that has been newly secured through its joint venture with one of the very few TGA-approved Australian manufacturers.

As Australians await the arrival of OTC medicinal cannabis, Wellnex has identified this need early on, and is in a position to be one of the first companies to lodge a product application for its CBD product with the TGA. And with its critical know-how, infrastructure and wide distribution network, the company is positioning itself to enter the market as one of the all-important first-movers.

To stay up to date with the latest Wellnex Life news and announcements, register your details on the Wellnex Life investor centre.

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

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