Australia's cannabis sector is finally maturing

Market watchers would know that Australia’s cannabis sector has had its share of ups and downs over recent years.

But coming off the back of the 2019 bear market, Cannatrek CEO Tommy Huppert says the industry has taken some important steps forward this year.

“The industry without a doubt has matured in 2020, it’s going through an evolution,” Huppert told Stockhead.

The unlisted Cannatrek has cannabis cultivation facilities in Queensland and Victoria, but operates a ‘seed to patient’ business model as opposed to just cultivating and on-selling produce to other companies.

“As a cultivator, to be able to have a touchpoint all the way to the patient is a key mark of success, and that’s what we’ve been aiming for,” he said. “Now we’re ready to scale up with a proven business model.”

More to do

Huppert admits the industry, investors and medicinal cannabis patients may have expected progress to take months rather than years.

But he thinks just as Rome wasn’t built in a day, nor can an entire industry be established in such a short period of time.

“From 2016 [we saw] legislation, then in 2017 companies got a license — then people saw share prices doubling and tripling – that was a bit of hype,” Huppert said.

“Suddenly in 2018 we had a few [more] companies by 2019 there was a legitimate supply chain being created in Australia.”

“Whether that’s from imported medicines arriving, or doctors getting more comfortable prescribing. And now Australia-wide, we’re close to 50,000 approvals — that’s quite a significant achievement isn’t it?”

“So here we are in 2020, I think we’ve done a great job,” he said.

“We’ll grow as the industry grows”

Huppert told Stockhead his company was seeing the same growth the broader sector was experiencing. It had seen record revenues and sales as well as doctors’ prescriptions.

Cannatrek still intends to list on the ASX but will fall short of the time frame it had indicated last year. It will hold back from a public listing until the time is right.

“Our intention has always been to list but wanted to make sure we list as a proven business model,” he said.

“We’ve been fortunate to raise funds for our project in excess of $15m, and we’ve raised that privately. We are looking over the next 12-18 months to list the project when the timing is right.”

“Obviously the environment has to be appropriate, we’ve gone through challenging times as an economy. I know LGP [Little Green Pharma (ASX:LGP) – a local producer which listed in February] have listed but as you know listing has its advantages and disadvantages.

“We want to set ourselves up for fantastic entrance into the public markets.”

But not too fast

Nevertheless, Huppert is keen not to grow too fast, citing the struggles of companies in the Canadian market which ran ahead of themselves.

“We’ll grow as the industry grows – as CEO I am making sure we reduce risk, by not growing too big too quickly as we’ve seen in Canada,” he said.

“I think that’s a real point to note, finding that balance. You hear stories out of Canada about growing too big too quickly and suddenly you have a lot of companies doing same thing.”

“I think Australia is not there at all, it’s the opposite – there’s no [local] production. So we’ve got to get that balance right to support Australian industry but I think we’re going to get there.”

Huppert says that from an industry standpoint, the main disappointment locally is that Australian companies in the space are still too reliant on imports.

But he predicts that domestic production will rise in 2021, and flow-on benefits will follow.

“I think we’ll see local production ramp up significantly and you’ll see a lot more local products come on the market. That in turn will create a more even playing field on prices, and better access for patients,” he said.