B2B pharmaceutical company and medical cannabis cultivator ECS Botanics (ASX: ECS) has secured an offtake agreement to supply medical cannabis dried flowers to Perth-based medical cannabis company MediCann Health over the next five years. As per the agreement, ECS will supply $24 million of pharmaceutical-grade cannabis dried flowers to MediCann starting January 2024.
This agreement follows ECS Botanics locking in two binding offtake agreements in June 2023. First, it entered into a contract to supply Melbourne-based medical cannabis company Entoura with a minimum of $10.2 million of medicinal cannabis dried flower over three years. Second, it shook hands with Sydney-based Precision Pharmaceuticals, agreeing to an estimated $1.7 million of GMP-manufactured medicinal cannabis dried flower over 12 months, reviewed annually.
ECS Managing Director, Nan-Maree Schoerie, said, “This agreement not only reinforces our dedication to meeting the growing demand for affordable, accessible, and effective medicinal cannabis products but also marks another milestone following our June 2023 agreements, totalling $11.9 million. These partnerships highlight the strong local demand for our GMP-certified, pharmaceutical-grade cannabis and provide ECS with a solid foundation to continue to deliver profitable growth.”
MediCann is a medicinal cannabis healthcare provider connecting patients with experienced local doctors and pharmacists for cannabis-based treatment. Under the offtake agreement, ECS will exclusively supply two strains of GMP medicinal cannabis dried flower to MediCann.
In FY23, the Company reported a revenue surge of 117% on FY22 to $15.6 million. As it signed new clients and production contracts, it saw a 51% production increase over the 2022/2023 season, recording 4.2 tonnes of medicinal cannabis produced. ECS ended the year with a cash balance of $2.5 million.
New protective enclosures and production improvements have been set up to increase crop yields in outdoor fields and make growing seasons longer. Both ECS and Medicann expect the volumes ordered under the Offtake Agreement to exceed the minimum annual volumes.
MediCann Founder and CEO, Matt Shales, added, “It has been highly rewarding to work closely with ECS over the past number of years, and we are delighted to strengthen our partnership even further as we secure an exclusive long-term supply agreement with ECS Botanics for its high-quality Australian grown flowers. We look forward to continuing our mission to improve the quality of life of people in need of these products and to continue to build on our partnership with ECS Botanics for the long term.”
The delivery of more than four tonnes of dried cannabis flower will begin in January 2024, spanning five years. Until then, Medicann Health will receive its supply of medicinal cannabis dried flowers as per the existing agreement. The Offtake Agreement specifies annual quantities of each strain developed by ECS, which will be exclusively provided by ECS to Medicann Health.
If Medicann fails to purchase the specified volumes, it will be responsible for 80% of the unpurchased quantity in any given year.
Alinda is a Business Reporter for The Sentiment
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