Medicinal cannabis firm collapses owing more than $7m

One of the first companies in Australia licensed to cultivate medicinal cannabis racked up losses of more than $7m but only managed to sell about $5000 worth of product before collapsing.

One of the first companies in Australia licensed to cultivate medicinal cannabis racked up losses of more than $7m but only managed to sell about $5000 worth of product before collapsing.

Administrators Cor Cordis were appointed last month to Sunshine Coast Tikun Oceania, formerly known as Medifarm, after the company failed to make inroads into the fledgling medicinal cannabis market, whose supporters include the late Olivia Newton-John.

The company, which owes creditors up to $4m, was founded in 2015 by medical entrepreneurs motivated by an eight-year-old cancer sufferer whose parents had to illicitly obtain cannabis oil to relieve the symptoms of chemotherapy. The boy died of the illness but not before being helped by the medicine.

The company changed its name to Tikun Oceania in 2020 to reflect its partnership with Israel’s Tikun Olam, which pumped $10m into the business.

Cor Coris administrator Stephen Earel said the company only managed to start generating revenue last year after accumulating operating losses of $7.1m. Cannabis oil is produced from the harvesting of flowers from the cannabis plant.

Federal Health Minister Greg Hunt is seen inspecting the cannabis plants at the opening of Tikun Oceania, then known as Medifarm, on the Sunshine Coast in 2019

“Between April 2019 and December 2020 about 44,000 plants appear to have been harvested which yielded 1,167kgs of flowers,” said Mr Earel in a report to creditors. “Sales revenue from cannabis oil during this period only amounted to about $5000.” Mr Earel said he is now seeking expressions of interest in the business.

He said factors behind the collapse of the business included poor strategic management, a limited distribution network and under capitalisation. In December, four of the five directors of the company resigned with Tikun Olam relinquishing their shareholding.

The company does not appear to to have a manufacturing facility that meets regulatory requirements and instead relies on third parties, Mr Earel said in the report.

The company had invested hundreds of thousands of dollars in security gear at its undisclosed Sunshine Coast production facility to protect it from theft.

Medifarm claimed to be a pioneer in an industry expected to eventually be worth $100 million and $200 billion worldwide.

In October 2016, the Federal Government started a national licensing scheme for the growing and manufacture of medicinal cannabis and controls all its regulatory aspects.

In 2018, the company held a symposium at the University of the Sunshine Coast to educate medical professionals about the uses of medicinal cannabis and legal requirements.

The company said it was working with some of the world’s best cannabis plant strains developed after decades of research in Israel. The prescription-only medicine is used to treat everything from pain relief for cancer and arthritis to epilepsy and multiple sclerosis.

According to a study from FreshLeaf Analytics, the value of the medicinal cannabis market in Australia reached $95 million in 2020 but the growing number of operators, including an increasing number of ASX-listed firms, had depressed prices.

Cannabis plants growing at Medifarm on the Sunshine Coast in 2019.