These are the 'watershed' reforms ASX cannabis investors should look out for

There’s no doubt that Australia’s strict regulatory environment has forced local cannabis companies to walk a slow and steady path towards commercialisation.

And while recreational users may regard widespread legalisation as the one and only watershed moment, a paradigm shift of that nature still looks unlikely.

Instead, companies looking to build market share in the medicinal space are focused on other regulatory developments that will shape the sector in the months and years ahead.

Speaking with Stockhead this week, Zelira Therapeutics (ASX:ZLD) managing director Richard Hopkins pointed to the implementation of new rules last year — which freed up doctors to prescribe medicinal cannabis products without having to refer patients to a specialist — as an important development.

“Like any drug now, the beauty is that the widest possible audience can now prescribe it to their patients. I think that’s going to be a real catalyst for growth in this country,” he told Stockhead.

The WA government approved the new prescription rules last November, joining Queensland, NSW and Victoria which already had similar laws.

And industry expert Rhys Cohen, principal consultant at FreshLeaf Analytics, expects there’ll be more “watershed” developments ahead — although specific companies will have their own interpretation of their relative use cases.

While Cohen acknowledged removing the requirement of a second opinion for cannabis prescription was important, he also highlighted a number of anticipated reforms that have the potential to change the outlook going forward.

Key potential developments include:

The Pharmaceutical Benefits Scheme subsidising cannabis medicines;
Reformation of driving laws to ensure medicinal cannabis users aren’t caught out under the existing framework; and
The down-scheduling of low dose CBD.

In Australia, low-dose cannabidiol (CBD) products are classified as a Schedule 4 drug, which means they are only available via prescription.

But following a regulatory review, a decision by the Therapeutic Drug Administration (TGA) is now forthcoming on whether to create a Schedule 3 — or pharmacists only medicine — category for CBD products.

What would recreational legalisation mean for medicinal space?

A big milestone for pot stocks more broadly would be legalisation from a recreational perspective.

(Currently, the only state or territory where pot possession is legal is the ACT, although that ruling may still prove to be in contradiction with federal legislation).

However, Dr Hopkins said that the process of legalising THC products in other jurisdictions hasn’t necessarily led to a thriving cannabis economy.

While Zelira is not in recreational cannabis and Dr Hopkins noted the company has no formal view, he said recreational legalisation mat not be be entirely positive.

He cited the example of Canada, where cannabis has been legal since 2018, arguing it had “muddied the waters” for companies in the space. However, letting GPs self-prescribe in the local market has been an entirely positive move.

“We don’t say much on that space, it’s not where we operate but it [recreational legalisation] might be something that can complicate things for patients,” he said.

“That is why we like having a medicinal focus. But the key is to ensure as many patients and doctors can get access to medicinal cannabis – that’s changing.”

FreshLeaf’s Cohen was more neutral on the issue, at least from the side of medicinal stocks as opposed to cultivators – of which there are some on the ASX.

“As far as an industry goes or companies go, I think no one who is involved with cultivating cannabis would argue against expanding the kinds of cannabis products that can be consumed and expanding the consumer base – that’s attractive for those businesses,” FreshLeaf’s Cohen said.

“For companies that are focused on producing new cannabis therapeutics, the ability for consumers to access cannabis without a prescription may prove a short term risk.”

“But if the long term objective of these companies is to produce medicines that have been proven to be effective then normalisation of cannabis medicine shouldn’t be harmed by the legalisation of recreational cannabis.”

“However, there’s a lot of moving parts here so it’s hard to make a hard, fast call on that,” Cohen said.