Table of Contents

Australia Cannabis Investing: What You Need to Know

How to Access Medical Cannabis in Australia

10 ASX Cannabis Stocks

Additional information on Cannabis stock investing — FREE

Australia Cannabis Investing: What You Need to Know

We break down everything you need to know about Australian cannabis investing and how you can enter this emerging market down under.

Since the legalization of medical cannabis in 2016, Australia has been steadily developing its marijuana industry — and it's been attracting attention from international players and investors.

With a quickly growing population of over 25 million people and a robust agriculture industry, the country is positioned to mold itself into a major force in the international cannabis space.

Here the Investing News Network takes a look at how the cannabis industry in Australia has been shaping up since legalization and what these developments could mean for investors. Read on to see what you need to know about investing in cannabis down under.

Australia cannabis investing: Market overview

As mentioned, Australia's parliament passed legislation to allow the cultivation of cannabis for medicinal and research purposes in 2016 by amending the Narcotics Drugs Act 1967. Cannabis companies have been cropping up in the country since then.

While the cannabis industry is still young, Australia’s agriculture sector is well established. According to the Australian Bureau of Agricultural and Resource Economics and Sciences, agriculture production is valued at AU$58 billion and is one of the largest contributors to the nation's GDP. The country’s agriculture export prowess means that it may be able to capitalize on the trend of moving its medical marijuana products internationally.

Recreational cannabis use isn’t legal in Australia, but according to the Australian Institute of Health and Welfare (AIHW), cannabis is the most widely used illicit drug in the country. In a report, the AIHW notes that 85 percent of Australians now favor cannabis use for medical purposes, up from 69 percent in 2013.

Medical cannabis in the country is overseen by the Office of Drug Control, which issues three types of licenses: research, manufacturing of a drug or product and cultivation or production of medical cannabis. As of June 2019, the office had given out a total of 17 research licenses, 24 manufacturing licenses and 27 cannabis cultivation/production licenses.

Medical cannabis users do face a bit of difficulty accessing the drug. Patients can only receive pharmaceutical marijuana products via a specialist appointment and then may have to wait up to a month for government approval.

Some of the largest names in Canada’s cannabis landscape, such as Aurora Cannabis (NYSE:ACB,TSX:ACB) and Canopy Growth (NYSE:CGC,TSX:WEED), have substantial stakes in Australian companies. In 2018, Canopy launched Spectrum Cannabis Australia, a medical cannabis company.

Earlier in 2019, Spectrum received its first shipment of medical cannabidiol (CBD) oil and began sales. It intends to support patients through imports until domestic facilities are working at full capacity.

Australia cannabis investing: How to invest

Since the country's cannabis space is still in its early stages, the market hasn't yet reached its peak. However, more cannabis stocks are expected to list on the Australian Securities Exchange (ASX) this year, which means more investment opportunities.

Elixinol Global (ASX:EXL) is one of the largest Australian cannabis stocks with a market cap of AU$537.79 million. The company was formed in 2018 when Colorado-based Elixinol partnered up with Hemp Food Australia to form an international brand and launch an initial public offering.

While Hemp Food Australia manufactures and distributes hemp food and skin care products, Elixinol is a retail provider on the CBD side of things, with dietary supplements and topical cannabis products. In its 2018 annual report, Elixinol said that group revenues increased by 121 percent over pro forma full year numbers for 2017. The report also states that Elixinol plans on becoming a “top five CBD business in Europe” and intends to grow CBD export markets in Asia this year.

Another big player in the space is Cann Group (ASX:CAN,OTC Pink:CNGGF) with a market cap of AU$311.97 million. Established in 2014, Cann Group was the first company to be issued a cannabis research license and the first to be issued a medical cannabis cultivation license by the Australian government in 2017.

It’s since worked to develop and supply cannabis, cannabis resin and medical cannabis products to patients for everything from multiple sclerosis to chronic pain. Aurora Cannabis is the company’s largest shareholder, with a stake of 22.9 percent.

In an agreement announced earlier this year, Cann Group said that it would begin the construction of a new growing facility in Victoria to produce medical cannabis for international and domestic markets with an expected yield of about 50,000 kilograms of dry cannabis flower per year. This move puts Cann Group ahead in terms of production in a market that is still largely driven by imports.

There is also Althea Group (ASX:AGH), which currently has a market cap of AU$242.96 million. Althea is a producer, supplier and exporter of pharmaceutical-grade medical marijuana and received its license to cultivate medical cannabis in 2018. Currently, the company operates in regulated medical cannabis markets including Australia and the United Kingdom.

Last year, the company partnered with the Canadian cannabis player Aphria (TSX:APH,NYSE:APHA).

Aphria holds a 25 percent interest in Althea stemming from a AU$2.5 million investment that was announced in early 2018, and supplies Althea with medical cannabis products.

Althea has made outreach an important part of its business model. The company launched the Althea Concierge platform, a free online service that allows healthcare professionals to access treatment plans with information about specific Althea marijuana products.

Australia cannabis investing: Future outlook

In 2018, the medical cannabis industry in Australia was valued at a slight AU$17.7 million, but a forecast from Prohibition Partners, a market consultant agency for the cannabis sector, projects huge growth in value over the next 10 years. By 2028, the medical cannabis market is expected to hit AU$3.04 billion, and the recreational cannabis market is expected to be valued at AU$7.89 billion in the event that recreational use is legalized.

The Prohibitions Partners report also notes that, while the country is developing its own marijuana cultivation, Australia is still heavily dependent on Canadian imports for product.

Alongside the legalization of medical cannabis was the legalization of overseas exports in 2018, and Australia has big plans for the growth of its international presence. “We'd like to be potentially the world's number one supplier," said Australian Health Minister Greg Hunt on a local radio station.

In response, some companies in Australia, such as Cann Group, have already made investments towards building larger facilities to meet the demand.

There’s also been talk about the legalization of cannabis for recreational use. One of Australia's internal territories, the Australian Capital Territory, may become one of the first states in the country to make it legal to grow or possess cannabis for personal use. New parliamentary rules may delay the passing of the bill, but there has been growing support for complete cannabis legalization across the country.

Because of its proximity to the region, Australia is also well positioned to break into the burgeoning Asian market, which has become more attractive since the recent legalization of medical marijuana in South Korea and Thailand.

Overall, while recreational marijuana is still illegal in Australia, the growth of the country's medical cannabis industry — and the Australian marijuana companies that exist within it — will continue to grow investment opportunities.

Securities Disclosure: I, Danielle Edwards, hold no direct investment interest in any company mentioned in this article.

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How to Access Medical Cannabis in Australia

Cannabis is used to treat illnesses, but federal legislation has a strict hold on how people can access medical cannabis in Australia

Medical cannabis was only legalized in Australia in 2016 and, since then, Australians have been making use of their access to the drug.

In the “Alcohol, tobacco & other drugs in Australia” report from the Australian Institute of Health and Welfare, it was found that in 2016, “85 percent of Australians favoured the use of cannabis for medicinal purposes, rising from 69 percent in 2013.”

Cannabis in Australia is used to treat everything from epilepsy to neuropathic pain, but federal legislation has had a strict hold on the distribution of cannabis in the country.

Here, the Investing News Network takes a look at how to access medical cannabis down under, the challenges facing the country's patients and what it all means for Australia’s budding cannabis industry.

Accessing medical cannabis in Australia: The history

Cannabis was first outlawed in Australia in 1938, in the midst of a moral panic. The uproar was ignited by a story in an Australian newspaper from the US Bureau of Narcotics that referred to marijuana as “a new drug that maddens victims.”

The “war on drugs” ramped up in the Oceanic country decades later in the 1970s, when communes in Queensland and New South Wales faced paramilitary raids, following in the footsteps of a US-style drug prohibition.

Over the years, Australia’s relationship with the drug has been a complex one. Cannabis use remained fairly high, despite being illegal.

The drug’s status changed irrevocably, however, when in 2016 Australia's parliament amended the Narcotics Drugs Act 1967 to allow the cultivation of cannabis for medicinal and research purposes.

The amendment came into action exactly a year after medical cannabis campaigner Dan Haslam died after being diagnosed with bowel cancer. Haslam used marijuana to ease his pain and nausea before he died. His mother went onto create a medical cannabis advocacy group, Unite in Compassion, that petitioned the government to make it legal.

Haslam's story was brought up as an example of the kind of patient that counted on cannabis as a pain aid when the amended Act was being passed.

"It is incredibly fitting that today we are passing this bill which is one step towards making medicinal cannabis accessible to people like Dan," said Australian Senator Richard Di Natale before Parliament.

Access to medical cannabis in Australia: How to access

The Therapeutic Goods Administration (TGA) works under Australia's Department of Health and is the country's regulatory authority for therapeutic materials including medicine and medical devices. Like the Food and Drug Administration in the US, the TGA ensures the quality and safety of medicinal goods.

With the exception of one cannabis extract, medicinal cannabis products aren't registered in Australia and can only be accessed through specialized pathways for unapproved medicine. Patients can access products including raw cannabis, oils, liquid sprays and topical treatments via import from Canada, the US or from locally grown sources. But these items can only be prescribed by a registered medical practitioner after a thorough assessment to determine if medical cannabis is right for the patient.

Patients seeking access to medical cannabis products in Australia can do so through the Special Access Scheme (SAS), the Authorised Prescriber Scheme (AP) or a clinical trial.

An SAS provides medical professionals a way of getting governmental approval for their patients to gain access to unapproved medicine, while an AP is a medical practitioner that has already been approved by the TGA to prescribe unapproved medical goods and doesn't need further permission.

As of July 2019, the TGA has approved 11,000 SAS applications. Each approval does not mean a new patient, as repeat patients are listed as well. A scheme approval doesn't guarantee access to the drug, either; that falls to the medical practitioner and the patient. If a doctor sees fit to prescribe their patients with medical cannabis products, they have to do so under the rules of the state or territory laws. These vary and can affect whether or not medical cannabis can be prescribed.

The TGA has approved SAS applications for ailments including chemotherapy-induced vomiting, paediatric epilepsy, cancer pain and spasms from neurological conditions.

But there have been efforts to streamline the application process. In June 2018, the TGA set up an online system to lodge SAS applications, replacing the old paper form system, and has been working with the health departments of Australia's states and territories to make it easier for patients.

People looking for medical cannabis can also seek out an Authorised Prescriber. As of June 2019, there are 56 APs in the country. Patients can also submit an online form for an AP as well, allowing them to expedite the application process.

There are also clinical trials that involve the use and study of unapproved goods. When a trial involves cannabis, the products used have to meet the quality standards the TGA has established.

Access to medical cannabis in Australia: The difficulties

While Australia’s budding cannabis industry is well-regulated, its tight restrictions have caused problems for patients who wish to access to the drug.

Though cannabis companies have begun to crop up in the past few years, consumers have to go through the SAS, an AP or the clinical trial pathway which can prove to be lengthy processes.

Adding to that, according to some Australian MPs, physicians are unwilling to prescribe cannabis because of a lack of cannabis clinical trials. It’s lead to some apprehension around the drug.

In an article in the Guardian, Dr. Sarah Wollaston, chair of the health and social care committee, said, “Although the recent changes to government policy were welcomed, there was a failure to communicate what this would mean in practice for the availability of medicinal cannabis.”

Wollaston added that trials would, “build a stronger evidence base so that patients can weigh up any risks and benefits of treatment. At present, there are too many gaps in the evidence to allow most forms of medicinal cannabis to be licensed for use and approved by NICE [National Institute for Healthcare Excellence].”

There have been attempts to make sense of the existing cannabis research, however.

The TGA conducted a review of medical cannabis in 2017, which would go onto form the basis of the current TGA guidelines, to get a better sense of how cannabis could be used to help patients.

The review found that the evidence that medicinal cannabis could be used for pain relief, specifically for chronic neuropathic pain conditions, was “limited.”

The TGA review ultimately suggests that medical cannabis shouldn’t be considered as the first line of therapy for any condition and should only be used “when registered medicines have been tried and proven unsuccessful in managing the patient's symptoms or medical condition.”

Access to medical cannabis in Australia: Investor takeaway

Despite the hurdles facing patients who use cannabis, projections for Australia’s medical cannabis market are favorable. A 2018 report by Prohibition Partners predicted that by 2028, medical cannabis in the country will reach AU$3.0 billion.

Some of the projected growth is attributed to the legalization of overseas exports and Australia has big plans for the growth of its international presence. “We’d like to be potentially the world’s number one supplier,” said Australian Health Minister Greg Hunt on a local radio station. And with the country's well-established agriculture industry, Australia is situated to become a force in medical cannabis export.

Cannabis companies have been making moves to solidify their presence on the international stage.

In July 2019, two Australian cannabis companies announced partnerships with players in the UK. Bod Australia (ASX:BDA) announced that it has signed an agreement with UK-based medicine manufacturer PCCA to import and distribute its medical cannabis in the UK and Ireland. Imports are already underway and Bod expects to receive its first prescriptions from the region later this year.

Australian cannabis heavyweight Elixinol (ASX:EXL) also got a foothold in the UK market, announcing that its Dutch subsidiary, Elixinol B.V., has partnered with PharmaCare’s Naturopathica brand to co-create a CBD capsule to be sold in Holland & Barrett, a UK health and wellness retailer.

And earlier in July, Althea Group Holdings (ASX:AGH) announced the acquisition of Canadian extraction company Peak Processing Solutions and the launch of a new UK cannabis destination clinic in London.

Although still in its early stages, Australia’s medical cannabis industry is moving in the right direction despite the challenges it’s facing. As it continues to grow, Australia’s cannabis space will continue to be of interest for investors as companies expand their reach through international sales and through research products that may help demystify the effects of the drug.

Securities Disclosure: I, Danielle Edwards, hold no direct investment interest in any company mentioned in this article.

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10 ASX Cannabis Stocks

While the cannabis industry has been slow to gain momentum in Australia, it is poised to grow. Here's a look at 10 ASX cannabis stocks.

Overall, the Australian cannabis market is still in its early stages of development, with the country only legalizing medicinal use of marijuana as recently as 2016. 

More recently, the land down under legalized medical marijuana exports in 2018, thanks to the passing of the Narcotic Drug Amendment (Cannabis) Regulations in February of that year. This means that medicinal marijuana products developed in Australia can now be exported to a "licensed recipient" in countries where the drug is legal.

While Australia may, finally, just be entering the cannabis industry, it is projected to have long-term potential. According to the GreenFund, the cannabis export market in Australia is projected to be worth AU$55 billion by 2025 thanks in part to its agriculture industry. In short, Australia's role in the cannabis industry will certainly continue growing.

In terms of legal recreational cannabis use in Australia, that decision still remains up in the air, although there is promise that it could happen sometime soon.

With that in mind, here the Investing News Network profiles 10 ASX cannabis stocks that are actively involved in developing products related to medical marijuana. The companies listed below have market capitalizations between AU$10 million and AU$500 million, with data compiled from TradingView's stock screener. The companies below are listed in order of market capitalization from smallest to largest.

1. BOD Australia (ASX:BDA)

Market cap: AU$17 million

BOD Australia is largely focused on cannabis and hemp-related products. It develops, distributes and markets health and skincare products created using plant-based extracts in Australia and is aiming to enter the European market as well.

BOD Australia's reach in Australia ranges from selling prescription and over-the-counter products to more than 1,000 outlets, such as pharmacies, retail stores and healthcare chains. It also has distribution agreements with two pharmacy wholesalers in Australia.

2. Zelda Therapeutics (ASX:ZLD)

Market cap: AU$31.72 million

Zelda Therapeutics is focused on unmet clinical needs and on using medicinal cannabis to treat a range of diseases and disorders. Its most common target areas include pain, anxiety and sleep.

The company is largely focused on developing treatment options usinf plant-based medicinal marijuana and is currently conducting two programs: a human clinical program with a focus on insomnia, autism and opioid reduction, and a pre-clinical research program to test cannabinoids in breast, brain and pancreatic cancer. This program is also researching the role cannabinoids could play in treating diabetes-associated cognitive decline.

3. MMJ Group Holdings (ASX:MMJ)

Market cap: AU$52.93 million

MMJ Group Holdings holds a wide range of cannabis investments, including healthcare products, technology, infrastructure, logistics, processing, cultivation, equipment, retail and research and development.

Among other companies, it has invested in Harvest One Cannabis (TSXV:HVT), which develops health and wellness products; Fire & Flower Holdings (TSXV:FAF), a recreational cannabis retailer that's developed a variety of cannabis products and accessories; and MediPharm Labs (TSXV:LABS), a cannabis extraction company that received its cannabis oil production license from Health Canada in 2018. MediPharm Labs has launched cannabis extraction services in Australia and is waiting on approval from the Office of Drug Control to produce cannabis oil.

4. Creso Pharma (ASX:CPH)

Market cap: AU$56.84 million

Creso Pharma was the first company to import medical cannabis into Australia and the first to launch these products in Switzerland for people as well as animals. The company's anibidiol product was also the first hemp cannabidiol (CBD) complementary feed in animal health thanks to a partnership with Virbac Switzerland. Creso Pharma also launched cannaQIX in Switzerland, which was the first CBD nutraceutical in human health.

The company's medicinal cannabis products range across areas of therapeutics, nutraceuticals, animal health, lifestyle and topicals.

5. THC Global Group (ASX:THC)

Market cap: AU$59.29 million

THC Global Group takes pride in operating under a "farm to pharma" pharmaceuticals approach and has secured a growing capacity thanks to two grow sites and a pharmaceuticals biomanufacturing facility.

The company has a variety of global partnerships and is focused on manufacturing and distributing hydroponics equipment, materials and nutrients.

6. MGC Pharmaceuticals (ASX:MXC)

Market cap: AU$63.07 million

MGC Pharmaceuticals is a specialist medical cannabis company with a focus on phytocannabinoid-based medicine for the biopharmaceutical sector. The company aims to bring its cannabinoid-based pharmaceuticals to medical markets such as Europe, North America and Australasia, which includes Australia, New Zealand, New Guinea and other islands in that region.

The company is targeting medical conditions such as epilepsy and Alzheimer's disease and has three core products: CannEpil, which is an oral oil treatment for seizures associated with drug-resistant epilepsy; CogniCann, which is an oral spray using a specific THC:CBD ratio for dementia symptoms; and InCann, which is an oral solution that treats Crohn's disease and colitis.

7. Botanix Pharmaceuticals (ASX:BOT)

Market cap: AU$76.51 million

While Botanix Pharmaceuticals is largely a pharma company, the company is currently working towards the first human trials using synthetic CBD in a proprietary drug delivery system called Permetrex, which uses direct skin delivery.

Botanix Pharmaceuticals' product pipeline includes four programs that are focused on treating acne, plaque psoriasis and atopic dermatitis. Because no human clinical studies have been done using CBD to treat skin diseases, the company is advancing three of its programs with natural extract forms of CBD.

8. Medlab Clinical (ASX:MDC)

Market cap: AU$82.30 million

Medlab Clinical is largely a medical research and development company focused on novel biotherapeutics such as nutraceuticals and pharmaceuticals, although it does have a cannabis element to the medicines it is developing.

In terms of its medical cannabis approach, Medlab Clinical is developing pain management treatments that are assisted by medical cannabis as an alternative to opioid medication.

9. Cann Group (ASX:CAN)

Market cap: AU$285.20 million

Cann Group was established in 2015 and in 2017 was the first company in Australia to be awarded with a cannabis research license by the country's Government Office of Drug Control. It provided Cann Group with the opportunity to cultivate cannabis for research.  The company was also issued Australia's first medicinal marijuana cultivation license in 2017, allowing the company to produce Australia-grown medical cannabis.

10. AusCann Group Holdings (ASX:AC8)

Market cap: AU$330.23 million

AusCann Group Holdings is focused on developing, producing and selling its cannabis-based pharmaceuticals both locally and internationally.  The company is primarily targeting areas of medicine for neuropathic and chronic pain and intends to release a proprietary final dose in the form of a capsule.

With its medical approach, AusCann Group Holdings is also looking to target treatment-resistant epilepsy, nausea caused by chemotherapy and spasticity and spasms in patients with multiple sclerosis.

Investor takeaway

These ASX-listed cannabis companies show that the cannabis industry in Australia is undoubtedly growing, meaning that investment opportunities in the industry are also poised for additional growth. While recreational marijuana remains illegal down under, the medical cannabis industry is thriving, making that side of the sector worth considering.

So far, Australia has no timeline attached to the legality of recreational use of marijuana, but it will be a story to watch over the coming months for those interested in the space.

Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.