Australia's medicinal cannabis market is booming, with prescriptions almost doubling over the past year. This trend is expected to continue as awareness continues to grow and more doctors begin prescribing medicinal cannabis for pain relief and the management of chronic illnesses

As well as offering an alternative to traditional therapies for patients with a range of conditions, this growing industry also offers opportunities for investors looking to back stocks that offer sustainable growth.

Growing demand

Doctors who prescribe medicinal cannabis in Australia need to obtain approval from the Therapeutic Goods Administration (TGA), the government's regulatory authority for medicines and other therapeutic products and treatments. Under the special access scheme, most cannabis approvals fall under Category B – prescribed for chronic illness and pain relief. A smaller number of approvals fall under Category A – prescriptions for terminally ill patients.

The TGA approved 10,755 cannabis prescriptions in July 2021, up from only 5,564 a year earlier. This significant increase in such a short space of time likely reflects the growing awareness of the availability of medicinal cannabis and its therapeutic benefits. With the TGA downgrading medicinal cannabis from a Schedule 4 to a Schedule 3 substance, customers can also buy certain products over the counter without the need for a prescription, improving access and familiarity further.

How medicinal cannabis works

Although still controversial, cannabis has been shown to be an effective natural remedy that helps to treat a number of health conditions and symptoms, including relieving pain, vomiting and inflammation (swelling). It also has antioxidant properties for broader health and wellness benefits.

There can be side effects involved in cannabis treatment, such as drowsiness, dizziness and difficulty with concentration or memory. Cannabis products approved for medicinal use in Australia are specially formulated to minimise side effects and maximise their therapeutic benefits.

Overcoming stigma

Uptake of medicinal cannabis may be rapid, but it's still held back by the social stigma of cannabis' associations with recreational drug use that make many hesitant to consider it. This is despite the compound responsible for the drug's 'high' being removed from medicinal cannabis products approved by the TGA.

Another barrier to growth is the lack of training in medicinal cannabis for Australian doctors, most of whom are only now catching up. Training around cannabis has traditionally only concerned the negative effects, so many doctors are having to reconsider their attitude and build knowledge of the treatment before they can recommend it as an option for patients.

Investing in medicinal cannabis assets

Revenue from medicinal cannabis in Australia is projected to double to $200 million in 2021 by industry researcher FreshLeaf Analytics. Any growing industry is of interest to investors, and there are numerous companies with direct or indirect exposure to medicinal cannabis listed on the ASX. 

Epsilon Healthcare Limited (ASX:EPN)

Barclay Pearce Capital client Epsilon Healthcare (ASX:EPN) is a diversified global healthcare and pharmaceuticals company that owns a number of medicinal cannabis assets.

These assets include the Tetra Health clinic, the largest cannabis manufacturing facility in the Southern Hemisphere, and the Medimar Platform, an end-to-end eCommerce solution for cannabis and nutraceuticals.

In 2021, Epsilon Healthcare and The Valens Company announced an exclusive five-year partnership. The first purchase order for $500k was made in September 2021. 

In line with growing medicinal cannabis prescription approvals by the TGA, Tetra Health had a record half-year in H1 2021 in revenue and patient numbers. A new clinic was launched in Melbourne in partnership with TerryWhite Chemmart Hawthorn (TWCH is one of the largest medicinal cannabis dispensing pharmacies in Australia) with further locations planned in Sydney and Brisbane for 2021 off the back of this strong growth.

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