Canadian companies have a bit of a head start on those from other countries where the legal cannabis framework is not as comprehensive or advanced. In many ways, countries around the globe look to Canada as a model. In fact, Australia has basically adopted Canadian medical regulations and is a few years behind Canada in terms of the development of the industry. With Europe and South America quickly developing, Thailand and New Zealand recently approving medical marijuana, and the Philippines looking like it might, the global cannabis market is coming into focus.
MediPharm Labs (TSXV: LABS) (OTCQB: MEDIF) (FSE:MLZ) is a Canadian company that sees the opportunity clearly and is executing on a comprehensive global strategy. Positioned as a cannabis extracts expert in Canada, the company is building out Australian operations while recently inking its first sale of cannabis oil to an Australian company. Its Canadian production facility is pursuing European Union GMP certification, which are the world’s highest standards. Once certified, the company will have export access to not only the European countries but to many other jurisdictions that rely on EU GMP certification to ensure quality.
Australia the First International Step
MediPharm Labs is a company of firsts. It was the first Canadian Licensed Producer to focus solely on extracts, bypassing the customary first step of attaining a cultivation license and moving straight to the oils and extracts. It won first place as the Cannabis Start-Up of the Year at the 2018 Canadian Cannabis Awards. MediPharm Labs’ deal to ship oils to Australia makes it the first Canadian extracts-only producer to export products there.
The two-year deal has MediPharm Labs selling cannabis resin to AusCann, an Australian medical marijuana company. AusCann will utilize the resin as the basis for its cannabinoid pharmaceutical product development, associated clinical trials, and for its introduction of hard-shell cannabinoid capsules to the country’s medical marijuana patients. AusCann also has a supply agreement with Canopy Growth, which has its own extraction capabilities. Importantly, Canopy Growth also has a major oil sales agreement whereby it has committed to purchase up to 900kg of cannabis concentrate from MediPharm Labs. Both companies recognize the value MediPharm Labs brings to the extract market.
AusCann CEO Dr. Paul MacLeman stated, “MediPharm Labs’ significant market share combined with proprietary methodology ensures reliable supply of pharma-grade cannabinoid extracts and AusCann’s continued ability to develop and deliver quality cannabinoid medicines for distribution in Australia. Critical to our process is repeatability in manufacturing, reliable dosing, and purity assurance. MediPharm Labs’ concentrates will form an important foundation to our products that will allow delivery of effective, trusted and safe medicines for the treatment of chronic pain.”
The Australian medical market is just getting off the ground. The government agency overseeing the medical cannabis applications, the Therapeutic Goods Administration (TGA), reports that it has approved over 3000 personal medical marijuana applications in the last year or so. The pace has picked up substantially, with the 37 approved applications from last February steadily increasing to 672 in January of this year. The TGA instituted an online system to accommodate the increasing demand in July 2018.
In 2010, a survey of Australians regarding cannabis use showed that around 750,000 people used the drug weekly, while about 300,000 smoked every day. So there is definitely a black market in the country ready for further legalization.
The Bigger Picture
MediPharm Labs is laying the groundwork in the emerging Australian market, not only with its export program but with construction of a production facility modeled after its Canadian operations. The company anticipates serving both the Australian domestic market and the broader Asia-Pacific export market from the new facility. That export opportunity is quickly expanding.
Artist impression of a MediPharm Labs production facility in Australia
New Zealand recently broadened its medical program, with the new government allowing more chronic pain sufferers and terminally ill patients access to the drug. The government also pledged to put full legalization on the ballot in 2020. In December 2018, Thailand became the first country in Southeast Asia to legalize medical marijuana. The Malaysian health ministry opened up the possibility of allowing medical use, saying it would consider legalization for certain health conditions if the treatment could be proven safe and effective. Even Philippines President Rodrigo Duterte, known for running ruthless and bloody anti-drug campaigns, has stated he would sign a medical marijuana bill currently under consideration in the country’s legislature.
By transferring its institutional expertise from Canadian operations into its fledgling Australian operations, MediPharm is positioning to capitalize on the cannabis awakening across the region. Its extracts form the basis for a myriad of cannabis products, both recreational and medicinal. Medical patients often shy away from smoking flower for the obvious health concerns, and recreational users in maturing markets demonstrate the same tendency. With capsules, oils, edibles, tinctures, creams, and other delivery mechanisms becoming ever more popular and practical, MediPharm Labs’ focus on the underlying active ingredients could prove prescient.
The company bears watching over the coming quarters with several potential catalysts on the horizon. The completion of construction and licensing in Australia, the expansion of capacity in Canada, the EU GMP certification of those facilities, the signing of more concentrate deals both domestically and internationally, the penetration of new international markets … all of these events appear likely in the near future, and bode very well for the implementation of MediPharm Labs’ comprehensive global strategy.
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