Melodiol Global Health has agreed to sell its Mernova facility in Canada for up to A$14.2 million in a deal that would wipe out the company’s secured debt but leave it reliant upon third party production.

The ASX-listed parent of Health House has signed a non-binding letter of intent with Canada-based Nacerna Life Sciences to sell the 2,230 square metres building for an initial $12m. A further $2.2m will follow if the buyer hits certain production targets.

Melodiol will turn to third party producers to manufacture its Ritual product range

Melodiol, which has a market capitalisation of $1.1m, flagged the possible disposal of the Mernova facility and land last month, indicating that a leaseback arrangement may form part of any deal.

But the transaction with Nacerna does not include that condition, and would leave Melodiol without a production facility for its core Ritual brand, which it will retain.

The company said it will purchase third party flower in an “attempt to continue marketing its Ritual products in the Canadian marketplace, thereby aspiring to retain some level of sales”.

Ritual accounted for $6.9m of revenue in FY24, 32% of its total.

Melodiol chief executive William Lay said the sale will significantly improve the company’s balance sheet and free up additional working capital for Health House and Creso Pharma Switzerland.

“Following the expected repayment of all secured debt, the company will be in a stronger financial position and able to focus all of its efforts on continued growth in the remaining business units while aggressively pursuing its long-term strategic objectives of group cash flow positivity,” he said.

Nacerna has an exclusivity period of 60 days to conduct due diligence on the facility.

Steve has reported for a number of consumer and B2B titles over a journalism career spanning more than three decades. He is a regulator contributor to health journal, The Medical Republic, writing on...

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