Is Australia missing out on a $5.5B pot market?

In the wake of Canada's landmark legalisation of recreational pot — alongside the multiple US states that have done the same — several new reports have emerged that speculate on the potential size of Australian and global pot markets.

In-depth analysis by global firm, New Frontier Data, looked at current illicit usage rates and comparable global regulated industries to model what a possible future legal market could look like.

Weed is the most widely used drug in the country, with 12% of people reporting having used it in the past year.

New Frontier estimates that the total legal and illegal Australian pot market is worth between $4.6 billion and $6.3 billion.

It speculates that there are about 2 million current users, with the highest number living in Victoria.

ASX pot-stocks like Cann Group (ASX:CAN), which is building Australia’s largest state-of-the-art medical cannabis growing facility near Melbourne Airport, as well as THC Global (ASX:THC), are already establishing operations to supply both local and international demand.

As CAN revealed this week, it has also secured a deal with the Victorian government to supply cannabis plant extract, or resin, to be used to treat children with severe or intractable epilepsy.

One of Canada’s heaviest cannabis players, Canopy Growth (NYSE:CGC | TSX:WEED), is set to establish its southern hemisphere headquarters in Victoria — a move that will create more than 200 jobs. The company will spend some $16 million establishing a hub for cultivation and production in Australia, with a long-term view of exporting the product overseas.

Last year, the Andrews Government in Victoria released a medical cannabis strategy, aiming to have the state — seemingly the nation’s hash heartland — supplying half of Australia's medical cannabis by 2028.

More compelling predictions, meanwhile, come by way of European-based market intelligence firm, Prohibition Partners, which has released a comprehensive report detailing what Australia’s fledgling pot industry might look like in ten years’ time.

The report reveals that the cannabis industry in Oceania — the region comprising Australasia, Melanesia, Micronesia and Polynesia — could be worth at least $12.3 billion to the economy by 2028, representing unprecedented market growth rates over the coming decade.

Prohibition Partners suggests that Australia’s legal medical cannabis market, currently valued at $17.7 million per year, could swell to $1.2 billion by 2024, and then to $3 billion by 2028.

On the back of sweeping legislative changes in a number of US states and now Canada, there’s been a growing movement calling for recreational marijuana use to be legalised in Australia.

Australia’s nascent pot industry could grow even further with a recreational market worth up to $8.8 billion annually in a decade if it’s legalised soon, say Prohibition Partners.

According to the New Frontier report, if this were to happen, the total market — encompassing both recreational and medicinal use — would be worth $5.5 billion annually.

When asked about this possibility, Australian prime minister Scott Morrison gave a flat no. Morrison also recently suggested praying for rain as an appropriate antidote for the ongoing drought in NSW.

The Australian government has approved companies to import, store and sell the drug to meet demand. Both NSW and Queensland have passed legislation for GPs to be able to supply medical cannabis.

In theory, medicinal cannabis is available in every state and territory, having been authorised at a Commonwealth level in 2016. In practise, however, the reality of obtaining it is considerably harder. Patients still have limited access, with long wait times and an excessively bureaucratic process to navigate.

Despite these kinds of setbacks — and although very much a nascent industry compared to Canada and the US — the Australian pot space has been flourishing.

There are now more than 20 pot-stocks listed on the ASX, and more than 1000 registered Australian patients receiving cannabis as a prescription medicine. According to Prohibition Partners, this number of patients could reach 400,000 by 2028.

The Therapeutic Goods Administration (TGA) approved 469 applications for the drug under the Special Access Scheme between August and September — up from just 97 between January and February.

Pot-stocks in fighting form

Making for a vivid illustration of the thriving (albeit underripe) Australian cannabis space, it’s been a fine week for ASX pot-stocks.

Hydroponic ag-tech play, RotoGo (ASX:RGI), revealed on Monday that it’s acquiring Supra HC — a holder of a Health Canada-issued cannabis dealer’s licence, providing RGI with a critical edge over both its Canadian and Australian pot-stocks peers.

This strategic acquisition gives RGI the ability to legally produce its own pot products in Canada’s newly opened recreational cannabis market — a sizeable point of differentiation in the rapidly expanding ASX pot-stock space, where many local companies have to meet the challenges of clinical trials and strict TGA requirements to take a product to market.

Speaking of ag-tech, Roots Sustainable Agricultural Technologies (ASX:ROO) has secured the first sale of its Root Zone Temperature Optimisation (RZTO) heating and cooling tech in the medicinal marijuana market.

This sale follows on directly from encouraging interim proof-of-concept cooling results on medicinal cannabis planted in greenhouses during July, where cooled plants achieved a substantial increase in size and stem diameter compared to control crops in just two months.

Creso Pharma (ASX:CPH), on the other hand, has kicked off the importation and sale of its cannaQIX®50 to patients in Brazil for treatment of chronic pain, and is up 9% on the back of this development.

Althea Group Holdings (ASX:AGH) opened 27% higher this morning after revealing it has been granted a manufacturing licence — the third in its licence arsenal.

Another company that’s up this week is the aforementioned THC, which has begun supplying its Endoca CBD products to its first Australian patients. TCH is 10% in the green.

Meanwhile, Medlab (ASX:MDC) has successfully completed the first stage of a Phase 1 clinical trial for one of its two cannabis mouth sprays at Royal North Shore Hospital, with the company’s NanaBis drug successfully passing safety and tolerability trials.