ECS Botanics poised to benefit from shift to ‘cannabis phase two’

Special Report: As cannabis gains more and more mainstream acceptance, ECS Botanics (ASX:ECS) founder and Managing Director, Alex Keach says the industry is clearly in transition – and low-cost players will benefit.

It’s been a monumental two months for the marijuana movement with another five US states legalising both recreational and medical weed; the US House of Representatives voting in favour of decriminalising cannabis at the federal level; the United Nations’ Commission on Narcotic Drugs removing cannabis from a list of the world’s most dangerous drugs; New Zealand coming close to legalising recreational cannabis; and Australia’s Therapeutic Goods Administration loosening regulations on CBD oils and capsules so they can be available without a prescription.

Keach calls it “cannabis phase two” and says companies and investors need to be ready.

“The landscape has changed, the regulations have changed, attitudes have changed, the red tape has been cut, the market is bigger but it’s still working itself out.

“It’s seen that first phase of speculative hype, but the next phase will be more considered.”

Subtler changes

There have been other regulatory changes that are less headline-grabbing but still meaningful to those in the industry, Keach says.

He compares the regulations around cannabis to how aciclovir cold-sore cream was initially treated by regulators. When the antiviral cream first came on the market in the 1990s patients needed a prescription. But as the evidence grew in support of a good safety and efficacy profile, the product became less tightly regulated and is now available in service stations and supermarkets .

“The implications of some of these plans are huge, but they’re not instant,” he says.

For example, when Australia lifted its ban on medical marijuana in 2016, cultivation was tightly regulated and producers had to use indoor growhouses or greenhouses.

More recently, regulators have realised that there’s reduced security concerns around hemp cultivation, as the Cannabis sativa varieties contain negligible amounts of THC and less likely to get anyone high.

Keach says he’s always tried to position ECS for where the industry is headed, not where it’s at now. That’s why the company is building a major outdoor cannabis project in Tasmania that will be able to produce raw materials for medicinal manufacture at a fraction of the cost of the indoor producers.

“Sunkissed cannabis is the best cannabis,” he argues. Cannabis cultivators only resorted to indoor grow rooms in the past because their crop was illegal, and they needed to hide from authorities.

“We don’t grow wine under lights,” he argues. Nor are Tasmania’s poppies, used in the opioid industry, an indoor grown.

Keach sees ECS’ capex (capital expenditure)-light business model as one of its biggest advantages – along with Tasmania’s ideal climate for cannabis cultivation.

“People that can scale at low cost can create massive opportunities,” he says.

This article was developed in collaboration with ECS Botanics, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.