Australian medical cannabis company Little Green Pharma (ASX: LGP) has reached a major offtake agreement with Demecan to distribute cannabis products across Germany. With the German medical cannabis market estimated to be worth €7.7bn (A$11.2bn) by 2028, this opportunity marks a massive milestone for the Company.
In July 2021, LGP acquired a world-class cultivation site in Denmark to produce 12 tonnes per annum of dried cannabis products. The development fell in line with their plans to ramp up production to meet the future market demand while white-labelling their medicines for supply into the global market. This most recent agreement has allowed the Company to offload a sizable amount of their product and guarantee sales.
In the agreement, LGP will supply three high-THC flower strains at 450kg per annum to Demecan, with expected annual sales revenue representing €6m (A$9m). The supply agreement is secured for 3-years, where Demecan will have exclusive rights to be the first receiver of products produced by LGP.
Demecan is located in Berlin, Germany and focuses on the cultivation, importation and wholesale of medical cannabis. Having partnered with a European wholesale company, LGP is now positioned with a foot in the door for future growth opportunities around Europe.
“The agreement gives LGP access to some of the best in-class distribution services in Germany and potentially across Europe as the parties look to roll out these strains across the EU,” said Little Green Pharma CEO, Fleta Soloman.
“This is perfectly aligned with our longstanding strategy to gain market share in Europe, and also marks a significant turning point for the LGP Denmark facility, being the first in what we hope is a suite of high-volume purchase agreements.”
In their last half-year report, LGP posted a revenue increase of 94% from $3.5m to 7.3m, where $7.2m is solely accounted for by the sales of medical cannabis. This significant increase is from a series of developments where the Company saw its products distributed to Germany, the United Kingdom, France, New Zealand, Brazil, Poland, Lithuania and Denmark.
For the majority, LGP shares have been tracking down since reaching a high of $1.01 in February 2021, however, since then shares have fallen to a modest $0.45 at the time of writing.
Trading Desk Assistant at Emerald Financial
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