Cannabis company Elixinol Global (ASX: EXL) has unveiled a new manufacturing and supply agreement with Altmed Pets, otherwise known as Pet Releaf, in a deal that has the potential to add significant value to its balance sheet in the near term.
The deal is worth US$18 million (A$26.8 million) over the next 18 months with a further extension potentially on the cards.
Elixinol Global specialises in selling hemp-derived CBD dietary supplements, hemp food and wellness products, but also holds an active manufacturing licence for medicinal cannabis products.
The company’s core businesses include a US-based entity that manufactures and distributes industrial hemp-based dietary supplements and skincare products.
Also, Elixinol operates Hemp Foods Australia, a leading hemp food wholesaler, retailer, manufacturer and exporter of bulk and branded raw materials, as well as Nunyara Pharma, a company first set up in 2014 to participate in the emerging Australian medicinal cannabis market.
Nunyara holds a manufacturing licence and its application for cultivation to the Office of Drug Control is currently pending approval.
Pet products boost
Pet Releaf has positioned itself as a pioneer in developing CBD-based products for dogs and cats, claiming that it is “changing what healthy means for pets”.
Its products are sold in over 4,000 independent pet stores across the US as well as through online channels to reach a global market.
The company currently operates the largest Certified USDA Organic hemp farm in the US courtesy of a joint-venture.
Elixinol has exclusively produced and supplied CBD extract sourced from USDA Organic certified hemp strains grown specifically for Pet Releaf since the company’s inception in mid-2014.
The exclusive agreement between the two companies is expected to leverage seed to sale supply chain efficiencies, facilitate “extensive scalability”, as well as providing in-house scientific expertise and proprietary processing technologies, according to Elixinol’s chief technology officer Gabriel Ettenson.
As an indicator of growing businesses and an expanding market presence, Elixinol acquired a 25% equity interest in Pet Releaf in April this year.
The agreement between Elixinol and Altmed Pets has signed for an initial 18-month term which could potentially be renewed “annually for multiple years”, according to Elixinol.
The agreement guarantees that Pet Releaf will purchase a minimum of US$18 million (A$26.8 million worth of products over the next year and a half with Pet Releaf paying a deposit of US$1.8 million (A$2.7 million) by way of three equal payments during the term of the agreement.
“This exclusive agreement with Pet Releaf further strengthens our relationship and ensures Pet Releaf’s products will have scalability and ongoing quality of supply. The agreement is consistent with Elixinol’s growth strategy, increasing distribution of our branded products through partnerships with trusted and highly regarded brands,” said Mr Stratos Karousos, chief executive officer of Elixinol Global.
Elixinol shares were up around 2.4% in midday trade to $2.97.