Little Green Pharma’s Danish operation will provide more than 1.3 tonnes of white-label flower to German distributor Demecan in a deal the Perth company said could generate A$27 million in revenue over the next three years.
Under the terms of the agreement, LGP Denmark will supply three high-THC strains to Demecan, each containing more than 22% THC.
To maintain strain exclusivity, and following a ramp-up period of between six and 12 months, Demecan will be required to purchase at least 450kgs of each strain, annually.
LGP, which acquired the Danish facility last year from Canopy Growth, said the deal will generate annual revenue of $9 million.
The agreement builds on an existing relationship between LGP and Demecan. The parties began working together in early 2020 with LGP supplying up to 1,000kg of dried flower or 48,000 units of oil per year.
But the announcement of a new deal failed to excite the market with LGP shares opening this morning at $0.43c, down 3%.
Demecan also has first rights to purchase the strains for supply to the remainder of the European Union, with the exception of Poland.
LGP has a 12-month window to develop the strains.
LGP chief executive Fleta Solomon described the deal as a “turning point” for its Danish facility.
“Demecan is a longstanding supporter and distributor of LGP’s medicinal cannabis products. 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,” she said.
“The agreement 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 underpinning the facility’s arc towards profitability and full production.”
Demecan managing director Philipp Goebel said it marks the beginning of a “highly mutually beneficial partnership” that will provide “high-quality LGP medicinal cannabis products to our patients and patients in Germany, and beyond”.
“We have been very happy with the quality of medicinal cannabis products produced by LGP’s Australian assets to date, and in particular their Florestura product which has been rated one of the top flower products in Germany,” he said.
“We are also now very impressed with their new genetics following our recent site inspection of LGP’s Danish facility and look forward to seeing what they can produce for us over the coming months.”
