Avecho Biotechnology has entered into a licensing and supply agreement with Team SAAS to use its TPM formulation in recreational cannabis products in the US.
SAAS will sell a proprietary cannabis/TPM combination distillate for use in the manufacturing of recreational edibles in the States.
It has already received its first order from Big Chief, the largest recreational cannabis supplier in the country, and immediate commercialisation efforts will focus on California before expanding into other states.
Recreational cannabis is a rapidly growing market in the US, with sales totalling US$17.5b in 2020.
US-based SAAS was founded by former Bank of Queensland CEO Stuart Grimshaw and One Tech founder Alan Kwan, who have existing relationships with manufacturers in California, Oaklahoma and other states as well as large commercial distributors.
Under the terms of the five-year agreement, it will develop and commercialise a unique cannabis distillate that will be sold to recreational cannabis companies as a raw material for the manufacture of their own products.
Initial findings by SAAS suggest the inclusion of TPM in edible gummies containing cannabis may increase the onset, duration and magnitude of effect.
SAAS will buy TPM manufactured at Avecho’s Clayton, Victoria facility for an agreed fixed price. In addition, Avecho will receive a licence fee calculated at 50% of SAAS’ post-tax profit on sales, paid quarterly. The minimum licence fee payable within year one is US$1m, rising to $2.5m within the first two years, and $5 million in the first four years.
Avecho retains the rights to deal with retail-facing recreational cannabis companies that may want to include TPM in their own products.
In a statement to the ASX, Avecho said the agreement signals a strategic step forward in increasing the breadth of cannabis products and markets leveraging its TPM formulations.
This will occur in parallel with its existing work to register its CBD soft-gel product for sleep indications with the Therapeutic Goods Administration in Australia.
CEO Dr Paul Gavin said: “We have long held a firm belief that our work and technology in the pharmaceutical cannabinoid space would drive interest in the other cannabis markets, including recreational.
“There are no significant development costs or timelines required to commercialise this TPM/cannabis product, allowing Avecho to begin deriving revenue in the very near term while we continue to progress the longer pharmaceutical programs.”