2 cannabis companies are making major moves in the Aussie market. They say Australia is ‘uniquely positioned’ to become a global leader.

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  • Last week, two cannabis companies with significant international footprints made major moves in the Australian market.
  • Since the import and sale of pharmaceutical-grade cannabis was legalised in 2016, companies have been negotiating strict TGA guidelines to enter what they see as a potentially enormous growth market.
  • “Australia is setting the benchmark” for the global manufacture and trade of cannabis, Fleta Solomon, managing director of Western Australia-based cannabis firm Little Green Pharma, told Business Insider Australia.
  • Visit Business Insider Australia’s homepage for more stories.

Last week, two players in the global pharmaceutical cannabis market announced major moves and fundraising in the Australian market, signalling that local growth in the sector is picking up speed.

On Tuesday, Western Australia-based company Little Green Pharma announced to the ASX it gained a major new investor, mining magnate Gina Rinehart, who put up $15 million for it to acquire a new cultivation and manufacturing facility in Denmark.

Part of an overall $27.2 million capital raise, Rinehart’s stake also affords her a 10% stake in the company.

The same day, Nasdaq-listed Clever Leaves, a US-based full-scale cannabis supplier, said it had partnered with its second Australian company, IDT Australia, to bring its pharmaceutical-grade product into the country — and announced it had made its first commercial shipment of high-THC dried flower down under.

Last year the company signed a deal with Australian company Cannatrek to sell white-label cannabidiol products into the country.

Clever Leaves went public last year and its shares are up 22% to date.

Since 2016, when medical cannabis was legalised in Australia, with amendments to the Narcotic Drugs Act permitting legally-grown cannabis, as well as the manufacture of medicinal cannabis products in Australia, investors have been eyeing a potentially enormous Australian market.

Medicinal cannabis industry researcher FreshLeaf Analytics has projected Australian industry revenue would double in 2021 to $200 million — and both companies told Business Insider Australia they see the local market as key to their future growth.

Offshore cannabis producers are increasingly eyeing the Australian market, Kyle Detwiler, CEO of US-based Clever Leaves told Business Insider Australia.

With a network of cannabis growing facilities in Colombia and Portugal, Detwiler said his goal is to grow the company’s network with a supply of raw products for the expanding sector.

“Our plans are to try to scale up the partnership with IDT,” he said.

Fleta Solomon, Managing Director of Little Green Pharma, told Business Insider Australia huge demand from Australia and overseas led to the latest funding round.

“We had a need to increase our production capability,” Solomon said.

“We’ve got such huge demand from Australia and overseas that we either had to expand our existing facility or to buy one that’s in existence,” she said, adding “it was a logical strategic step for Little Green Pharma.”

Investment in a facility with sector expertise was core to the decision to invest in Denmark, Solomon said, a factor that saved the company “two years worth of work” in scaling up their operations.

“The benefit of having these facilities is that our entire supply chain is now internal. We don’t need additional raw biomedical flour from any third parties – we can do it all ourselves because we’ve got that capacity.”

‘Australia is setting the benchmark’

Solomon said the latest investment is symbolic of increased interest, not just from international companies eyeing the market, but local investors looking to get into the space.

“We’ve got some of the biggest names in Australia supporting us,” she said.

The reason for the initial slow growth, she said, was a combination of factors, including the stringent regulatory framework of the Therapeutic Goods Administration (TGA), which has led to a high quality of trust in both the products and operations of organisations operating in the space.

The company saw “a lot of confidence in our business model, and particularly in our growth strategy. And over time, we’ve been able to prove to them and execute everything that we say that we’re going to do.”

In 2016, following changes to the law that allowed medical cannabis to be legally prescribed and used, product and patient approvals by the TGA were minimal.

Now, 120,000 patient approvals have occurred, 10,000 of which were in May. There are 45,000 active patients in Australia, and medicinal cannabis is used to treat over 215 different conditions.

“We’re starting to see a real shift from the illicit market to the legal market,” Solomon said.

“I think this puts us in an excellent position, because Australia has some of the best medicines in the world that can be exported,” she said. “And not all countries can do that.”

“So Australia is setting the benchmark.”

‘The world’s leader in medicinal cannabis’

“Although we have a small population in comparison to the rest of the world, we are actually really advanced in the medicinal cannabis space,” Solomon said.

It’s a perspective Detwiler shared, pointing to the long-term benefits of the TGA’s high barrier for entry.

“Pharmaceuticals have to be regulated very tightly,” Detwiler said, arguing it is a factor he believes will attract more international producers to the market.

Other countries might have lower bars for entry — he pointed to Canada’s crowded, 500-company deep market for recreational and pharmaceutical products — but said it can be rare to find simple things like labelling around shelf life.

“We’ve quickly emerged to be one of the world’s if not the world’s leader in medicinal cannabis,” Solomon said, because of the incredibly high hurdles the TGA places on companies seeking to trade in Australia, Solomon said.

“But once you’re over those hurdles, it’s a huge advantage, to export and to really play big…across the globe.”

By comparison, in the US (where cannabis isn’t federally legal) it is impossible for companies to export their product.

Solomon said that’s why she thinks “Australia is so uniquely positioned in the global medicinal cannabis space”.

“Having that economy of scale, which we otherwise wouldn’t have for a few years, is only going to help to bring medicine prices down.”

A $575 million opportunity

On top of projections for growth this year, research firm Ibisworld projects the Australian market could be worth $575 million locally by 2025.

This is leading ever-more international organisations to size up opportunities in Australia, Detweiler said.

He considers Germany, Israel, Australia, and Brazil as the main growth markets, with France, Mexico, the UK and Poland following behind as countries where demand exists but are “not as advanced in their legalisation.”

On the other hand, developed markets such as Canada that may have yielded opportunities, have blocked imports, which has led to a closed market of producers.

“I think Australia fits in sort of that nice middle ground where they don’t have a program,” Detwiler said.

“It is still on the early side, but there is a pretty clear path to growing over time.”