CannTrust Holdings Inc. is investing $6-million in Australian cannabis grower Cannatrek Ltd., becoming the latest Canadian licensed producer to establish a foothold in the developing market with export potential.
Ontario-based CannTrust will take a 19.8-per-cent stake in Cannatrek, a cannabis importer and distributor, currently building a greenhouse facility in the state of Queensland. Cannatrek describes itself as Australia’s first vertically integrated cannabis company, with federal and state licenses for cannabis research, cultivation, manufacturing, sales and import.
Australia's medical cannabis market is still in its infancy, with only slightly more than 1,000 patients registered in the country, according to a new report by UK-based cannabis consultancy Prohibition Partners. That hasn’t stopped Canadian LPs, several of whom already ship to the country, from establishing a presence on the ground.
· In May 2016, Canopy Growth Corp. took an 11-per-cent stake in AusCann Group Holdings Ltd. In April, 2018, it launched a separate venture, Spectrum Cannabis Australia, saying it would invest $16-million in the State of Victoria over the next four years.
· In March, 2017, Aurora Cannabis Inc. took a 19. 9-per-cent stake in Cann Group Ltd., then upped its stake to 22.9 per cent in December, 2017.
· Aphria Inc. holds a 25-per-cent stake in Althea Company Pty Ltd., having invested AUD$3.4-million in the company’s IPO round last month, and AUD$5-million pre-IPO.
· In February 2018, Cronos Group Ltd. launched a 50/50 joint venture with NewSouthern Capital Pty Ltd, called Cronos Australia Pty Ltd.
· Tilray Inc. has been exporting product to Australia since 2016, through Sydney-based subsidiary Tilray Australia & New Zealand Pty Ltd.
For all of these companies, Australian investments are a long-game. The country legalized medical cannabis in 2016, but has seen little uptake from patients and doctors, thanks to a patchwork of restrictive rules at both the federal and state levels.
Because cannabis is not on the regular registry for authorized therapeutic drugs, doctors have to apply to become “authorized prescribers” and then apply to the federal Therapeutic Goods Administration as well as state health authorities on a patient-by-patient basis. There have been recent efforts to streamline the process, but patient uptake remains limited. Since 2016, only 1,059 patients have been prescribed medical cannabis
“Doctors remain wary of its benefits and this reluctance has curtailed the growth of the national cannabis market with numerous anecdotal evidence to support the difficulties of obtaining medical cannabis,” according to the Oceania Cannabis Report published by Prohibition Partners.
From a production perspective, cultivators are limited by a cap on medical cannabis production that matches overall supply to domestic medical demand. And domestic cultivators are also competing with Canadian importers; in 2017, Canadian companies shipped 145 kilograms of cannabis oil to Australia, according to Prohibition Partners.
The assumption, however, is that Australia will follow Canada’s medical cannabis trajectory over the past decade and a half, from several thousand patients to hundreds of thousands. Prohibition Partners suggests that the country’s medical market could be worth US$2.1-billion by 2028.
Exports from Australia may be an even bigger opportunity for Canadian companies setting up joint ventures in the country. In February, 2018, the Australian federal government approved cannabis exports, opening up a lucrative market for Australian farmers. (Australia already produces a large share of the world’s legal narcotics, much of which comes from the island of Tasmania.)
“In the medium-term, we expect Australia to act as both a production and distribution hub for the majority of the countries in Oceania, whilst also representing the largest market value in the region,” Prohibition Partners said.
While the focus has been on Canadian investment in Australia, there has also been some money moving in the opposite direction. On Monday, B.C.-based Valens GroWorks Corp. announced that it was selling one of its two Dealers Licenses to Australian company RotoGro International Limited for $11-million.