A sharp rise in revenue and fewer research costs helped Little Green Pharma narrow first-half operational losses as new chief executive Paul Long spoke of the “inevitable consolidation” of the medicinal cannabis market in 2024.
Long, who took over from Fleta Solomon in August, said LGP would be “actively looking” to grow the company during a period when several smaller operators are expected to struggle.
He stopped short of saying LGP was on the acquisition trail, but hinted it would explore opportunities as consolidation gathers pace.
Long added that LGP was well positioned to take advantage of European opportunities that will emerge during 2024 and said market share growth in Australia would be “relentlessly” pursued.
The comments came as the WA-based company reported a 37% lift in revenue in the six months to September 30, driven largely by flower sales, which climbed 90% to A$7.5m.
That helped offset a 7% fall in oil volumes in figures which further illustrate the growing preference for dried flower.
LGP’s recently introduced vape cartridges delivered sales of $180,000 during the period.
The dual effect of higher revenues and a 41% decline in research and development costs saw net losses from ordinary operating activities fall 72% to $2m.
Its Australia operation contributed revenue of $10.8m, up from $7.9m in the previous corresponding period, with its Danish-based European division generating almost $2m, up from $1.2m.
The company had $6.2m of available cash at the end of the reporting period.
Long said LGP remained confident that the Australian medicinal cannabis market will continue to grow in 2024, with the company determined to “relentlessly push for market share”.
But with more than 100 companies battling for sales, and around 700 products available for prescribers, consolidation was inevitable, he said.
“Current market competition will result in consolidation… that will absolutely happen,” Long said. “We also expect a few of the smaller players to drop out of the market in the not too distant future.”
Asked if there may be merger and acquisition opportunities for LGP during such industry consolidation, Long said: “The evolution will be no different from any other market in that you end up with a number of large providers over a period of time.
“We will be actively looking to be part of that growth strategy.”
Long also noted recent deliberations over an adult-use market in Australia, suggesting the possibility of legalisation “is on the horizon”.
That could create “a potential upside” for existing producers, particularly if alcohol and tobacco firms are excluded from participating in a legal industry, he said.
Turning to its European operations, Long singled out France – where LGP has been participating in a medicinal cannabis trial – and Poland for growth, while market sentiment in the UK is also improving “after a few flat years”.
LGP will be one of only three suppliers into France for a nine-month transition period once the trial completes in March – Aurora and Panaxia the other two – while Poland has such exacting requirements that competition is likely to be limited, Long said.
The eastern European country is expected to receive its first shipment of LGP product shortly.
Germany, meanwhile, will also present a growing opportunity when regulations finally change, particularly as the company’s 30-tonne capacity Danish facility is only two-and-a-half hours from the border, he said.
Long added: “Having previously undertaken a campaign of significant cost reduction over the past 24 months, our primary focus for the coming period will be revenue growth.
“In addition to the expansion and diversification of our product offering, in particular into new markets like France and Poland, as well as continuing to supply into Germany, the UK, and further into Scandinavia, we will be relentlessly pushing for market share in Australia.”
Update December 7: France has signed into a law a bill that will allow the supply of medicinal cannabis beyond the post-trial transition period. Potential suppliers must receive official authorisation which Long said LGP is well-positioned to receive.
“Our active involvement as a continuous supplier to the French pilot program positions the company to be the major player after the transition period,” he said.
“This will involve us submitting a technical dossier that will adhere to upcoming specifications, expected to be released before the end of the transition period.”
Long added that France could become “one of the largest medicinal cannabis prescribing countries in the world”, with LGP at the forefront of the market.
The supply of medicinal cannabis in France will be subsidised.
