Will Australia become Asia's 'clean green' medicinal cannabis supplier?

Will Australia become Asia's 'clean green' medicinal cannabis supplier?

From powdered milk to multivitamins to fresh fruit, Australian and New Zealand products command a health premium in Asian markets but can the medical cannabis industry leverage this 'clean green' image and follow suit? 

Cann Group (ASX: CAN) CEO Peter Crock believes they will, and this was a driver for the company securing a 20 per cent stake in Auckland-based Pure Cann in April.

"New Zealand are on the verge of getting a medical cannabis legislation through that's expected to be in September this year," Crock tells Business News Australia.

"They're going to have legislation put in place that will allow for an industry to be established in New Zealand - we see that as an opportunity as we'd always expected to service the Asian region."

Cann Group has now produced more than 40 crops at its two facilities in undisclosed Melbourne locations, and in March it acquired a Mildura property which is expected to be operational in the second half of 2020.

The group is aiming for scale and its trans-Tasman tie-up may be complementary for greater ambitions.

"Establishing and setting up this size of operation, we are waiting to be able to service more than just the Australian market," says Crock, noting medicinal cannabis is now legal in South Korea and Thailand while Malaysia is making moves in that direction.

"I don't believe China would be the market but eventually I think will be an interesting market as well in terms of how sought-after product is that's produced under the TGA (Therapeutic Goods Association) standards here in Australia.

"You've seen that through a number of nutraceutical products and vitamins that make their way to China...we think there is going to be significant growth in that whole region."

However, Australia is still a far cry from realising that kind of cultivation potential. Crock emphasises all Australian patients are currently serviced by imported products, and in Cann's case that comes from its biggest shareholder, Canada's Aurora Cannabis (TSX: ACB).

At the moment Cann is delivering its Melbourne-grown cannabis to manufacturing partner IDT Australia (ASX: IDT), as well in the form of resin to projects like the Victorian Government's access scheme for epilepsy patients.

"It is still embryonic here but it's starting to move," he says.

"A month ago it was over 5,000 patients who had gone through the Special Access Scheme approval, and I'd say by now it'd be over 6,000 because it's growing at more than 1,000 a month.

"The Federal Government and the [Victorian] State Government are all looking to have an Australian industry service that patient base, and that's what we're setting up to do."

Based on the legalisation experience of other developed nations like Canada and Germany, Crock believes there will be 100,000-300,000 patients in Australia that would use medicinal cannabis.

"That's going to be significant. When you've got that patient base that can support the business here, that's when you'll see things start to settle down," he says.

"I think you'll see some of the speculation come out of it where there are people rushing in to try and make a quick buck in space and think it's the latest, greatest thing; it's something else though to have proven capability and to be able to produce.

"We are not the largest - I'm not saying we are - but we're definitely setting up to be the most significant local supplier in in the short, medium and long term."

The executive also cautions against believing the hype with a lot of budding cannabis producers.

"There are a few that have announced that they're planning to expand to a certain capacity, but when you dig into it, you find that stage one is a fraction of what they're talking about doing," he says.

"I got some advice from a Canadian connection early on the piece who said to be aware of what's happening around you, but don't be changing plans based on what people say they're going to do - 80 per cent of Canadian announcements have amounted to nothing.

"It's a case of believe it when you see it."

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