Epsilon Healthcare (ASX: EPN) will make its Queensland-based production facility available to Canadian medicinal cannabis maker The Valens Company under a long-term partnership designed to boost Valens’ regional profile.
The agreement will give Valens access to Epsilon’s manufacturing expertise and offer Valens the opportunity to further its international expansion to GMP (good manufacturing practice) markets in Latin America, Europe, UK and the Asia Pacific.
Based in Southport, Epsilon’s manufacturing facility is the largest cannabis extraction plant in the southern hemisphere with TGA (Therapeutic Goods Administration) and European Union GMP capability.
Its establishment in 2019 paved the way for Epsilon (then THC Global) to become one of the most competitive cannabis producers in the global export market.
GMP products made at the facility will be sold in Australia and New Zealand through Valens’ wholly-owned subsidiary Valens Australia Pty Ltd and distributed by its partner, Australian medicinal cannabis access company Cannvalate Pty Ltd.
Cannvalate represents Australia’s biggest network of prescribing doctors and dispensing pharmacists, supporting the second largest cannabis market outside of North America.
First orders manufactured under the Valens-Cannvalate alliance are expected to be delivered in the coming weeks.
The new partnership includes an operational consultancy agreement which will see Valens grant Epsilon a licence to use a degree of its intellectual property and know-how at the Southport facility.
It also includes an exclusivity arrangement which stipulates that Valens will only sell or supply medicinal cannabis products into the Australian and New Zealand markets which have been produced at Southport.
Additionally, Valens will fund all operational and capital expenditure of the facility for the duration of the partnership on a reimbursement basis in return for having access to up to 85% of planned manufacturing output on a prioritised “first right of refusal” basis.
Epsilon chief executive officer Jarrod White said the new partnership would complement the company’s own growth.
“We are excited to be working with Valens during such a flourishing time in its corporate trajectory,” he said.
“It is a critical next step for us as we look to expand our global footprint with established partners, and increase our production throughput as a contract pharmaceutical manufacturer of scale.”
In conjunction with the Valens deal, Epsilon will shell out $4.3 million to acquire Cannvalate subsidiary AlternaMed Pty Ltd and its portfolio of novel cannabinoid therapeutic agents targeting irritable bowel syndrome, menstrual pain and smoking cessation.
Under the terms of the acquisition, Cannvalate will receive 28 million Epsilon shares at $0.15 each, adding to its existing portfolio of 2 million Epsilon shares through a related entity.
Cannvalate will have the right to nominate one director to join the Epsilon board, and will provide advice on matters including the launch of the Medimar e-commerce platform for nutraceuticals and cannabis; the development of clinical trial drug manufacturing capabilities; and the roll-out of business development support services.
On completion of the acquisition, Cannvalate will provide ongoing support to Epsilon in the development and commercialisation of AlternaMed’s novel therapeutics.
Through a separate Cannvalate agreement, AlternaMed has access to a warehouse for controlled prescription drugs which is operated by Sigma Pharmaceuticals and which Epsilon is permitted to use for the distribution of its products.
The completion of the AlternaMed acquisition is subject to the execution of definitive agreements under Epsilon’s partnership deal with Valens.