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Cannabis boom not so certain as philanthropist lobbies for cheap imports

September 5, 2017

Victorian Premier Daniel Andrews has been a strong supporter of medicinal cannabis which is dispensed to children with severe epilepsy. Supplied
 

Buying shares in medicinal cannabis stocks is the new gold rush.
 

Brave fundies and retail investors are punting on exponential growth in profits from the "pot stocks" supplying cannabinoids to the domestic market and for export overseas.
 

The prospect of stellar returns has seen entrepreneurs rush to list companies on the ASX including backdoor listings of old mining shells into medicinal cannabis companies.
 

But it is not one big speculative bubble as shown by the minority investments made in a couple of Australian companies by two of Canada's biggest cannabis companies, Aurora Cannabis and Canopy Growth Corporation.

Financial Review rich lister Barry Lambert has called for reform of medicinal cannabis laws after his son was found guilty of possessing the drug, which he was using to treat his child. James Brickwood

 

Canada leads the world in the wide social acceptance of marijuana. In keeping with an election promise, Prime Minister Justin Trudeau has put forward legislation to legalise the use of cannabis for recreational use in Canada by July 1 next year.

 

Australia's has actually moved faster than Canada did to establish a medicinal cannabis industry. It is a tribute to bipartisan politics that the federal government passed a law and created what looks like a well regulated system in about 18 months.
 

There are now eight companies with medicinal cannabis licences, which allows them to cultivate and produce, five companies with cannabis research licences and four with manufacturing licences.
 

First commercial crop

 

The first commercial cannabis crop under Australia's new laws was produced last month by Cann Group at a secret location in Victoria.

 

The bipartisan political agreement to foster the new industry included the willingness of the Victorian government, which had first mover advantage, to adjust its laws to ensure there was uniform federal legislation.
 

For politicians such as Victorian Premier Daniel Andrews, federal Greens leader Richard Di Natale and NSW senator David Leyonhjelm the successful establishment of a well regulated medicinal cannabis industry has marked the end of a long and sometimes tough campaign to have the drug legalised for medical use.
 

In the rural sector, cannabis growing is seen as the new frontier for high tech agriculture. It brings together bioscience and genomics as scientists and cannabis farmers find best strains for serving the needs of patients.

 

The industry's respectability has been helped by the fact that respected and wealthy rural identities such as Tassal Group chairman Allan McCallum and Nufarm founder Doug Rathbone are backers of Cann Group. This company has won the support of two well known fundies, Ellerston Capital and Tribeca Investment Partners.

 

 

Australia's marijuana crop could end up being a world leading industry given the involvement of the CSIRO and the increasing number of universities conducting medicinal cannabis research.
 

There is a fourth stakeholder that cannot be ignored in this new gold rush – the parents of children with severe epilepsy and Tourette syndrome.

 

These are likely to be the single most important market for Australian made cannabinoids. The question is will the product be affordable?
 

That question needs to be considered in the context of the daily living arrangements for families that have a child suffering epilepsy or tourette's. Usually only one person can work because of the demands of care at home.

 

 

At this early stage in Australia's development of the medicinal cannabis industry it would seem the main users of the drugs are being forced to pay too much for treatment.
 

That might augur well for the emerging producers of medicinal cannabis but it raises questions about the ultimate philosophy behind developing a local industry.
 

Carole Ireland, the chief executive of the Epilepsy Action Group, says the cannabidiols available on prescription cost about $560 for 10 days treatment. She says spending $1000 a month on a course of treatment is too much.

 

She says there are 250,000 people in Australia with epilepsy and about 65 per cent of these are able to cope with existing drug therapies. She says the remaining 35 per cent have severe episodes of epilepsy and are potential users of medicinal cannabis.

 

A recent presentation to investors by Cann Group estimated there were 146,000 people in Australia with epilepsy in the pool of potential patients for medicinal cannabis.
 

The same presentation, which drew on work done by researchers at Sydney University, said the largest numbers of patients in the pool were 4.8 million with chronic pain, 3.85 million people with arthritis, 650,000 with osteoporosis, and 130,000 with cancer.
 

The Cann Group presentation said the potential size of the market in Australia in terms of revenue was $380 million by 2018 and $1.3 billion by 2026.
 

Global shortage


Peter Crock, who is CEO of Cann Group, says there is likely to be a global shortage of medicinal cannabis and that is why the Office of Drug Control in Australia was willing to recently explore the possibility of allowing exports of Australian made medicinal cannabis.

 

He says when the Office of Drug Control did its first road shows about medicinal cannabis last year, it suggested exports would be three to five years away. The Minister for Health, Greg Hunt, says he does not want to constrain a growing industry.
 

The government has allowed imports of medicinal cannabis to help meet demand in the local market ahead of the ramp up of production by the new producers.

 

But it will not allow imports of cannabidiols made from hemp plants. This has triggered a campaign for reform of Australia's nascent medicinal cannabis laws by Barry Lambert.

 

 

He is the founder of the Count financial advisory group, which was bought by the Commonwealth Bank of Australia.
 

Lambert and his wife Joy provided $33.7 million in funding for research at Sydney University into medicinal cannabis trials.
 

They were motivated by their granddaughter Katelyn, who has a dangerous form of childhood epilepsy known as Dravet syndrome. Lambert says the best treatment for his daughter comes from a cannabidiol from the hemp plant.
 

This is illegal in Australia but is grown freely like a crop in the United States. Lambert put $10 million of his own money to ensure the production of the hemp by a company called Ecofibre.
 

In the US there are two separate approaches to marijuana and hemp. Hemp is allowed to be grown because only 0.1 per cent of its flower includes THC, which is the drug in cannabis that gives people a high.
 

Lambert is devoting his entire life to helping Katelyn and this includes a non-stop campaign to convince state and federal politicians to change the law.
 

He met recently with Di Natale and Leyonhjelm. He meet recently with NSW Minister for Health Brad Hazzard.
 

If Lambert is successful in his campaign and hemp based oils are allowed into Australia it will change the economics of the medicinal cannabis market.


Originally published here: http://www.afr.com/brand/chanticleer/cannabis-boom-not-so-certain-as-philanthropist-lobbies-for-cheap-imports-20170905-gybexp

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