Australia Cannabis Investing: What You Need to Know

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 Narcotic Drugs Act 1967. Cannabis companies have been cropping up in the country in the years since then.

While the cannabis industry is still young, Australia’s agricultural sector is well established and one of the largest contributors to GDP. According to the Australian Bureau of Agricultural and Resource Economics and Sciences, the nation’s agriculture output was valued at AU$92 billion in the 2022 to 2023 period. The country’s agriculture export prowess means it may be able to capitalise on the trend of moving medical marijuana products internationally.

However, unlike medical cannabis, recreational cannabis use isn’t legal in most parts of Australia. The exception is the Australian Capital Territory, which in early 2020 made it legal to grow, possess and personally use small amounts of cannabis. That said, according to the Australian Institute of Health and Welfare (AIHW), cannabis is the most widely used illicit drug in the country. According to a 2019 research study, at that time more than 40 percent of Australians in were in favour of legalising marijuana entirely.

Medical cannabis in the country is overseen by the Office of Drug Control, which issues three types of licences: research, manufacturing of a drug or product and cultivation or production of medical cannabis. As of May 2023, a total of 48 cannabis cultivation or production licences and 27 manufacturing licences were held by medical cannabis companies in Australia.

Medical cannabis users do face a bit of difficulty accessing the drug. Patients can only receive medicinal cannabis products via a specialist and then may have to wait up to a month for government approval. Still, a 2021 survey of medical cannabis users showed that legal medical cannabis use is on the rise in the country; 37 percent of respondents had a legal prescription for cannabis compared to just 2.5 percent in 2018.

Australia cannabis investing: How to invest

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

Elixinol Global (ASX:EXL) 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 skincare products, Elixinol is a retail provider on the CBD side of things, with dietary supplements and topical cannabis products. Elixinol has focused on building a solid global footprint with operations in the Americas, Europe and Asia.

In its FY 2022 annual report, Elixinol made improvements to its revenue despite rising costs. Its profitability rose 26 percent from the previous year. In 2023, the company is focusing its attention on a prospective acquisition of The Sustainable Nutrition Group (ASX:TSN), which could improve the company’s manufacturing capacity.

Another big player in the Australian space is Cann Group (ASX:CAN,OTC Pink:CNGGF). Established in 2014, Cann Group was the first cannabis company to be issued a cannabis research licence and the first to be issued a medical cannabis cultivation licence by the Australian government.

It has since worked to develop and supply cannabis, cannabis resin and medical cannabis products to patients for everything from multiple sclerosis to chronic pain. It does so using its own dry cannabis flower, which puts it ahead of the pack in a market that is still largely driven by imports.

Cann Group has the capacity to produce 12,500 kilograms per year of dry cannabis flower for international and domestic medical cannabis markets at its Mildura growing facility in Victoria, which it completed in 2022 with support from the National Australia Bank.

There is also Althea Group (ASX:AGH), a producer, supplier and exporter of pharmaceutical-grade medicinal marijuana; it received its licence to cultivate medical cannabis in 2018. Currently, the company operates in regulated medical cannabis markets, including Australia and the UK.

In late 2020, the company received approval to sell cannabis products in Germany. The approval made Althea Germany’s first commercial supplier of made-in-Australia medical cannabis products. The German medical cannabis market is expected to be worth approximately AU$2.4 billion by 2025, as per the Market Herald.

Althea has made outreach an important part of its business model, as shown by its Althea Concierge platform, a free online service that allows healthcare professionals to access treatment plans with information about specific Althea cannabis products.

In its financial year 2022 to 2023 results, Althea reported a record AU$36.38 million in cash receipts and AU$25.09 in revenue, up 62.2 percent and 22.3 percent respectively over the previous year.

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), are in the region as well. Aurora has a partnership with MedReleaf Australia, a pharmaceutical cannabis company, and together they provide Aurora's products using their MedReleaf Concession Scheme. The program supports "those with Pensioner Concession Cards, Commonwealth Seniors Health Cards, Health Care Cards, and Veterans Cards" and offers compassionate pricing.

In 2018, Canopy launched Spectrum Cannabis Australia, a medical cannabis company. Now called Spectrum Therapeutics, the company, which remains a subsidiary of Canopy Growth, states it is developing "innovative cannabis-based products to create a range of effective formulations and delivery mechanisms and research their therapeutic effects."

Australia cannabis investing: Future outlook

According to Grand View Research, in 2022, the legal cannabis market in Australia — a category that includes medical cannabis and hemp products — was valued at US$66 million, up from US$51.8 million in 2021. The firm forecasts a stronger future, with a projected compound annual growth rate of 29.6 percent into 2030 to reach a total of US$540.6 million in revenue that year.

Alongside the legalisation of medical cannabis was the legalisation of overseas exports in 2018, and Australia had big plans for the growth of its international presence at the time. “We’d like to be potentially the world’s number one supplier,” said Australian Health Minister Greg Hunt on a local radio station that year. This has yet to come to pass; as of 2023, the top 15 largest cannabis companies were all located in either Canada or the United States. That could still change, as Australia is well-positioned to break into Asia, a region that seen the legalisation of medical cannabis in countries such as South Korea and Thailand in recent years.

There has also been talk about the legalisation of cannabis for recreational use in response to growing support for complete cannabis legalisation across the country. In August 2023, a Senator put forth the first Federal cannabis legalisation bill in Australia, named the Legalising Cannabis Act 2023. According to the bill's summary, if passed, the bill "(e)stablishes the Cannabis Australia National Agency as a statutory agency to register cannabis strains and regulate activities relating to cannabis including: growing and possessing cannabis plants; manufacturing and selling cannabis products; operating cannabis cafes; and importing and exporting cannabis products."

Overall, the growth of the country’s medical cannabis industry — and the Australian marijuana companies that exist within it — is a growing opportunity. Additionally, while recreational cannabis remains illegal, investors should keep an eye out for updates on the Legalising Cannabis Act 2023, as well.