Freshleaf Analytics Say – Battered (Australian) medical cannabis industry is set for even more pain

Here’s a serious dose of pain that medical cannabis isn’t going to cure any time in the near future.

The report might as well say that with regard to cannabis; Australia, after years of beating around the bush, writing up red tape and allowing few to access the market as either producers or patients has become a medical cannabis basket case.

Stockhead certainly aren’t beating around the bush and it’s interesting to see Freshleaf Analytics suddenly being somewhat more realistic about the market.

We wonder what caused the conversion on the way to Damascus ?

A new editor / MD at the helm not looking to please all and sundry might be our first guess.

Cassandra Hunt Recently Appointed Managing Director & Advisory Board Member @ Freshleaf Analytics

Key Phrases

Battered medical cannabis industry is set for even more pain

Bumpy year

37 companies fighting for a share of less than 100,000 medical cannabis prescriptions.

“These data suggest the Australian cannabis market is saturated and the current growth trajectory is unsustainable,” the report says

A $150 million industry in 2021 ……(Let’s compare to Oregon which is now turning over close to $US100 million a month on a population of 4.2 million) Australia has a population closer to 25 million and yes only medical compared to medical and adult use in Oregon but this does illustrate what a minnow Australia is in this sector until some serious decisions are made.

Stock head write…

Australia’s battered medical cannabis industry is set for even more pain as a looming price war will force some companies out of business, a new industry report predicts.

While the country’s medical marijuana market is on pace to triple this year and expand further in 2021, that solid growth probably won’t be enough to sustain all the companies vying for a piece of the pie, according to the third-quarter report by North Sydney-based cannabis data supplier FreshLeaf Analytics.

“We are still very optimistic for the outlook for the industry, we think there will still be growth and innovation,” FreshLeaf managing director Cassandra Hunt told Stockhead.

THE FRESHLEAF Q.3 REPORT

FreshLeaf-Analytics-Q3-2020

“It just might be a bumpy year for some players… those who haven’t planned for some dramatic prices changes may find themselves under pressure.”

It’s already been a tough 18 months for Australian cannabis companies, with Elixinol Global (ASX:EXL) seeing a more than twentyfold collapse in its share price and THC Global (ASX:THC) having to defend its continued existence on the ASX after its auditor queried assumptions in its financial forecasts.

Current growth unsustainable

The report found 37 companies fighting for a share of less than 100,000 medical cannabis prescriptions.

In contrast, in the opioid market, there are 23 companies competing for 15 million scripts per year.

“These data suggest the Australian cannabis market is saturated and the current growth trajectory is unsustainable,” the report says.

“It would be reasonable to conclude that in the next 12-18 months we will begin to see a reversal in growth of prescription numbers and consolidation in the number of players.”

A $150 million industry in 2021

The report estimates active patients numbers will triple to 30,000 by the end of the year, and they’ll spend around $95 million on products this year, up from $30 million in 2019.

In 2021 the medicinal cannabis will grow even more, to $150 million, the report estimates.

But that number of products on the market is also growing fast, too. It has grown by 50 per cent in the last six months to more than 150, and there could be more than 300 approved on the market by the end of 2021.

“It’s difficult to identify other prescription categories with such a wide range of choice and with such a large number of companies fighting for a piece of the pie,” the report says.

And another product was added to the market yesterday. Zelira Therapeutics (ASX:ZLD) said it had launched Zenivol, a proprietary cannabis formulation to treat chronic insomnia.

The product launch came five months after a Phase 2a clinical trial involving 23 chronic insomniacs found Zenivol was a safe and effective therapy.

Very aggressive pricing

Prices are also falling fast, with wholesale prices at under 5 cents per milligram – less than half of where they were 12 months ago, and one-quarter of what they were when the legal market began in 2017.

“No segment of the market has been untouched by intense pricing competition and we have seen almost one-third of all products in the market hit by price cuts in the past six months,” the report says.

Legal cannabis is now even cheaper than illegal cannabis, retailing for around 6 cents per milligram, the report says. The cheapest products on the black market clock in at 7 cents per mg.

In Canada, there’s been dumping of soon-to-expire products at steep discounts, and pricing in the Australian market is on par with Canada, the report found.

But the “race to the bottom” on price will be great for patients, it added.

Developments with TGA and New Zealand

A recent interim decision by Australia’s Therapeutic Goods Administration to allow low-dose CBD oil and lozenges be made available in pharmacies could expand patient numbers to up to 2 million, generating up to $200 million in revenue, the report found.

Such products are currently require a doctor’s prescription, hindering uptake.

But it will be challenging to produce efficacy data for such low doses of CBD products, the report says.

“This raises substantial questions around the ability of any company to successfully register its product, even if the regulatory pathway exists,” the report says.

It’s also not clear whether New Zealand’s cannabis referendum in mid-October will pass and even if it does, legalisation will take time. If it comes to pass, FreshLeaf expects that licenses will be “hotly contested” and the first products won’t come to market before 2022.

Aussie cannabis industry set for painful shakeup – report

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