Last week’s article on pot stocks pointed out that it’s one thing to cultivate the stuff in view of supplying the medical market that locally is in its infancy. But refining the healing herb is not exactly like canning baked beans: specialist facilities are required and, unsurprisingly, they will be heavily regulated.
According to Althea (AGH) chief, Josh Fegan, there are “quite a few” labs in the country that are compliant with Good Manufacturing principles (GMP) and thus suitable for cannabis processing.
Althea is planning an $11 million growing and processing facility across four hectares leased at Skye, in Melbourne’s outer east. Under the company’s somewhat ambitious timetable, the facility will be completed by the December quarter of this year and the first finished product will appear from June next year.
While a latecomer to the sprouting ASX cannabis cohort – the company listed in November last year -- Althea is already supplying the local market with material sourced from its 25% Canadian shareholder Aphria.
Acknowledging doctors as the true gatekeepers of cannabis therapies, Althea created a web portal called Concierge to enhance the medicos’ and patients’ understanding of the largely unapproved treatments, currently available only under the Therapeutic Goods Administration’s Special Access Scheme.
So far, 354 patients have been prescribed Althea products across a network of 109 doctors, mainly for pain but also for mental health conditions including post traumatic stress disorder and anxiety.
In keeping with the requirements of the Special Access Scheme, these patients have failed orthodox treatments. Given the regulatory hurdles required, the current market is minute: Althea adviser Pac Partners estimates 2832 patients were approved for cannabis prescriptions at the end of 2018, with 2178 of them actually treated.
Based on the Canadian experience, Althea adviser Pac Partners estimates an eventual Australian market of 250,000 patients.
Althea intends its imported Canadian supply to be a stop-gap measure, ahead of commissioning of the Skye facility that’s slated to produce 300 kilograms a year (with an eventual capacity of 20,000 kg).
Pac Partners estimates overall current local demand of a mere 362 kg, of which Althea provides 62kg (a 17% market share).
Given the low local demand relative to likely supply, forging export markets will be crucial to achieving economies of scale.
In this respect, Althea is planning an entrée into Britain, which last year legalised medical cannabis and which has similar patient access arrangements to Australia.
“There’s no doubt the UK will be a bigger market than Australia,” Fegan says.
Closer to home, drug-wary South Korea and Thailand last year legalised medical cannabis and Malaysia and Indonesia are looking to follow suit.
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