Jack Colreavy
- Aug 13, 2024
- 5 min read
ABSI - Medicinal Cannabis Pioneering Natural Medicine's Resurgence
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Last week I had the privilege of attending the launch of Wellness Life, an Australian medicinal cannabis brand formed through a joint venture between Wellnex Life (ASX: WNX), OneLife Botanicals, and Chemist Warehouse. The event highlighted the importance of prescription cannabis and the market opportunity for brands in Australia. This week ABSI will take a closer look at the medicinal cannabis sector in Australia and its growth opportunities.
It is important to appreciate that cannabis has been used for centuries as a form of medicine. The earliest recorded use is attributed to the Chinese Emperor Shen Nong in ~2,700 BCE to treat a variety of ailments, including pain and gout. In the early 20th century, cannabis was outlawed, driven out by a combination of social, political, and economic factors rather than purely scientific. As an example, it is speculated that media mogul William Randolph Hearst, who played a significant role in spreading anti-cannabis sentiment through his media empire, did so to protect his timber and paper industries from the emergence of hemp as a cheaper substitute for paper production.
A modern medical resurgence of cannabis sparked in the 1980s with the discovery of the endocannabinoid system (ECS). The ECS plays a crucial role in regulating a wide range of physiological processes to maintain homeostasis within the human body. This opened the door to further medical research and the eventual legalisation of medicinal cannabis in California in 1996, the first US state to do so, kicking off a wave of legalisation efforts globally and investment into the research of its therapeutic potential. As of 2024, over 50 countries have legalised medicinal cannabis in some form.
In Australia, medicinal cannabis was legalised on November 1st, 2016 through a Special Access Scheme B (SAS-B) and Authorised Prescriber (AP) route. These are regulatory pathways that allow healthcare professionals to access therapeutic goods for patients on a case-by-case basis. With time and experience, the doctor can become an AP which streamlines the process. In Australia, cannabis can be prescribed for a range of conditions including chronic pain, epilepsy, MS, cancer-related symptoms, sleep disorders, anxiety and PTSD.
Source: BPC, Statista
The legalisation of cannabis was a relief for many families relying on illegal and unreliable supply chains but was also seen as a financial windfall for entrepreneurs on the frontier of a new industry. Phytotech Medical Ltd was the first cannabis-related company to IPO on the ASX, trading on the 20th of January 2015 after raising A$5.9 million. Unfortunately for the first movers, the industry took longer to materialise than first forecasted. According to data from Statista, the size of the medicinal cannabis market was A$53m in 2016, A$54m in 2017, and A$59m in 2018. However, over this period the supply chain was maturing including the amount of APs in the market. As a result, the market grew at a CAGR of ~52% between 2018 and 2023 to circa A$477m in 2023. Looking ahead, strong growth is set to continue and the market is forecasted to be A$710m by 2029.
Importantly, these growth forecasts could be conservative as Australia’s largest pharmacy chain, Chemist Warehouse, makes a push to seize market share through a JV with ASX-listed consumer healthcare brand, Wellnex Life (ASX:WNX), and medicinal cannabis cultivator and manufacturer, OneLife Botanicals. Together the three parties have launched the Wellness Life medicinal cannabis brand.
Wellnex Life CEO, George Karafotias, with other Wellness Life stakeholders at launch.
Source: Wellness Life
Industry research estimates Chemist Warehouse has between 27% and 30% of the prescription medicine market in Australia. It stands to reason that this would be management’s long-term target for market share in medicinal cannabis. Therefore, the opportunity for Chemist Warehouse is A$200m+ by 2029. Importantly, a critical pathway to achieving this goal is by increasing patient accessibility. Instant Consult, a telehealth platform that counts Chemist Warehouse as an investor, is working with Wellness Life in doctor education to increase the amount of APs on the platform, making it easier for patients to consult with experts to see if medicinal cannabis is the right treatment option.
It is a difficult transition to change public opinion on cannabis for medicinal purposes after decades of propaganda deriding the drug. However, the tides are turning with forecasts for revenues to reach US$20.24 billion in 2024. Every day more clinical research is conducted on the benefits which should result in improved patient awareness and legalisation in new countries.
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