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Southern Cannabis CEO expects rapid growth for Australia’s medicinal cannabis market

Last updated: 09:54 13 Aug 2020 AEST, First published: 09:29 13 Aug 2020 AEST

Southern Cannabis Holdings - Southern Cannabis CEO expects rapid growth for Australia’s medicinal cannabis market in the next 6-12 months
FreshLeaf Analytics will be releasing this data in its Q3 report in about four weeks

Southern Cannabis Holdings’ director and chief executive officer Tim Drury provided a positive outlook for the medicinal cannabis market in Australia during this week's Proactive medical cannabis virtual investor conference.

The company’s market intelligence business FreshLeaf collects around a million data points from products, to pricing, to patients and expects Australia’s pharmaceutical market to be worth close to $2 billion, once fully addressed.

Drury said: “We’re still rapidly growing, the growth rate in Australia right now is about close to 10% month-on-month.

“Having said that, less than 5% of the addressable market has been addressed at this point so there’s a huge amount of upside.”

Revenues to double

In the next 6-12 months for Australia, FreshLeaf expects revenues to double but pricing spend per patient, which is currently at around $400 per month, to decline.

Drury said: “We think that over the next couple of years the revenue per patient will decline, as there’s quite heavy downward pressure from a pricing perspective at the moment on products, so we do expect that average spend will decline.

“However, the rate of growth is going to outpace that substantially.

“We think the revenues will probably double in that period.”

25,000 active patients

FreshLeaf anticipates that in about two years, the market will have tripled in terms of patient numbers and product volumes.

By the end of this year, there will be 25,000 active patients in the market who will consume more than 500 kilograms of cannabinoids.

Drury said: “That translates to close to $80 million of product revenues here in Australia this year.

“So if you’re looking at any claims of market share or any sales numbers that come out of the listed companies, you can look at their sales this year and get a bit of an idea of what their market share might be based on this.”

The company expects that Australia will have 750,000 active patients in the market by the middle of 2022, and potentially around 100,000 by the end of that year.

The FreshLeaf Analytics Q3 Report will be available next month.

150 products legally available

As of last week, there are more than 150 products legally available in the Australian market for doctors to prescribe, up from 100 at the start of the year.

More than 95% of the products are imported and around 2,000 doctors (out of close to 100,000 registered doctors and practitioners) have prescribed them so far.

Drury said that most patients using medicinal cannabis (around 75%) have chronic or cancer-related pain.

He said: “The next largest segment is anxiety and stress, and that segment is rising quite substantially at the moment - given what’s going on in the world.”

Over the counter CBD

FreshLeaf expects registered medicines (backed by random control trial data that is registered with the regulator) to enter the market in the near term.

The company also believes that CBD (one of the active ingredients in medicinal cannabis) is likely to become an over the counter drug which no longer requires a prescription from the doctor.

Drury said: “The government has announced their intention to do this and we expect that from around next year companies will be able to register their CBD products.

“We think that that market will grow to about $200-300 million of revenue pretty quickly, so watch out for whoever manages to do that first or the early phase of players, they will be good bets in terms of generating revenue.”

NZ goes recreational

New Zealand has announced that they will hold a referendum in September for new laws if more than a majority of the population supports recreational legalisation of cannabis.

Drury said that while this would create an entirely new market in New Zealand, it didn’t necessarily mean Australia would follow suit.

He said: “So far the Australia regulators and government have said there’s no intention to do that, but we are living in strange times.

“Governments like Australia will have to figure out how to drum up a few extra hundred billion dollars to pay off COVID debts over the next couple of years and maybe legalising and taxing cannabis could be one idea that gets floated.

“Something to look out for and certainly from an investment perspective, it would be an interesting development if it does.”

This data will be available for free download in the FreshLeaf analytics quarter three report which will be released next month.

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