Revenue in the medical cannabis manufacturing sector is expected to grow to $31.2 million in 2020-21, up from $5.4 million in 2019-20, following a favourable determination by the Australian Therapeutic Goods Administration (TGA). In December, the TGA gave the green light for low-dose cannabidiol (CBD) to become available over-the-counter at pharmacies without a prescription.
‘The strict regulatory framework regarding the manufacture of medical cannabis products has limited the sector’s growth over the past five years. However, the recent determination by the TGA to allow over-the-counter CBD products to be sold without a prescription is expected to drive significant revenue growth in the years ahead,’ said IBISWorld Senior Industry Analyst, Will Chapman.
The medical cannabis manufacturing sector produces a range of medicines based on two cannabinoids found in the cannabis plant: cannabidiol (CBD) and tetrahydrocannabinol (THC). CBD is a non-psychoactive substance that studies have indicated may help with pain relief as an anti-inflammatory and that can act as an anti-convulsant. THC is a psychoactive substance that studies have indicated can reduce pain and nausea, improve appetite and alleviate insomnia. About 600,000 Australians use marijuana for medical purposes, according to the Australian Institute of Health and Welfare. In 2019, 11.7% of people (or about 2.5 million Australians) aged 14 and over used cannabis for recreational or medical purposes in the previous 12 months.
‘Domestic production is still ramping up and rising demand for medical cannabis products in both domestic and export markets is anticipated to support strong growth in 2021. It will take time for new medical cannabis products to be approved, but medicines derived from cannabis will eventually appear on pharmacy shelves,’ said Mr Chapman.
Increased clinical research globally will likely encourage domestic regulators and doctors to expand the range of conditions treatable with medical cannabis. In addition, advances in medical cannabis technology, such as custom cannabinoids for specific conditions, are anticipated to further boost market acceptance of medical cannabis.
‘Overall, medical cannabis manufacturing revenue is projected to rise at an annualised 79.1% over the five years through 2025-26, to $575.2 million. IBISWorld anticipates employment in this industry to reach 1,500 by 2025-26,’ said Mr Chapman.
Major players in the cannabis industry
As the sector is still in the start-up phase of development, industry profitability has remained negative. Profitability is anticipated to improve as more local manufacturers launch and establish their products in local and export markets.
‘The sector already includes several notable players, and others have begun operations as recently as November 2020. Some of these players could become major producers over the next five years, particularly if recreational use of cannabis is legalised in Australia,’ said Mr Chapman.
A key player to watch is Little Green Pharma Limited, which reported sector-specific revenue of $2.2 million in 2019-20, equivalent to 30.5% of total industry revenue. The company was granted a permit to expand its cultivation facility in July 2020, which will enable it to expand production to 110,000 bottles of cannabis oil annually.
Cann Group Limited, another of the sector’s major players, reported sector-specific revenue of $600,000 in 2019-20, representing market share of 24.0%. Cann Group expects revenue to rise significantly in 2020-21 as it delivers a new CBD oil-based formulation to domestic and export customers.
‘The growth opportunities in the budding cannabis industry have not gone unnoticed by Australian financiers. In March 2020, start-up CannaPacific secured a $3.5 million debt facility from Westpac. Cann Group secured a $50 million credit facility from NAB in November 2020,’ said Mr Chapman.
Outlook for legalisation
It is uncertain if Australia will follow the path of Canada and some American states by legalising cannabis for recreational use over the next five years. However, this legislative hurdle is unlikely to prevent the growth of a strong domestic medical cannabis industry. Nevertheless, domestic medical cannabis manufacturers must still meet significant regulatory hurdles to get their products approved for domestic use by the TGA. Currently, no cannabis-derived medicines are listed on the Australian Register of Therapeutic Goods for domestic supply.
‘For many start-up cannabis businesses, the ultimate goal is to have the medical benefits of cannabis recognised and their products accepted among medical professionals. Achieving the listing of cannabis products on the Pharmaceutical Benefits Scheme would be a major win for cannabis products,’ said Mr Chapman.
For more information, to obtain industry reports, or arrange an interview with an analyst, please contact:
Jason Aravanis
Strategic Media Advisor – IBISWorld Pty Ltd
Tel: 03 9906 3647
Email: mediarelations@ibisworld.com
