For now, Australia’s plans for cannabis market dominance are more smoke than fire

SYDNEY: When Australia said this month it would allow exports of medicinal cannabis in a bid to dominate a global market set to be worth US$55 billion by 2025, investors scrambled to buy shares in marijuana companies – pushing several of them, and the sector as a whole, to record highs.

But convoluted and restrictive licensing demands, substantial finance requirements and a guarded medical profession means even Australia’s largest marijuana companies are at least a year away from a commercial crop.

And doubts linger about the prospects for smaller entities, belying the government’s ambitious plans to be the world’s leading exporter.

“There will be more cannabis used in Australia and overseas over the next 10, 20 and 50 years but it is not clear that any of the local market can capture that, let alone make money from it,” said Scott Phillips, director of research at investment company Motley Fool.

“Look at the gold rush: sure, some made money, but the biggest winners were the sellers of the shovels.”

Australia’s medicinal cannabis sector, with 12 listed companies, produces a range of products that include chronic pain management and acne creams with extracts of marijuana to aid acne.

The businesses acknowledge some barriers to growth but say they are primed to profit from a maturing market.

Australia already produces 50 per cent of the world’s legal poppies, which are processed into pharmaceutical opiates such as morphine and codeine.

Last year, it expanded its legal drug market by legalising medicinal marijuana use, a move that spurred a wave of IPOs and backdoor listings on the Australian Stock Exchange (ASX).

Contradicting the hype, however, only several hundred patients in Australia have so far been prescribed medical cannabis, data from the country’s Ministry for Health show, as local doctors remain wary of the benefits of marijuana.

The reluctance of doctors has curtailed the growth of Australia’s cannabis market.

Australian law requires the seven companies licensed to grow medicinal cannabis to produce only enough to meet domestic demand. — Reuters