Growing market share is priority work for local medicinal cannabis producer Little Green Pharma

Sixteen months after making its ASX debut, vertically integrated exporter of locally-grown cannabis products Little Green Pharma (ASX: LGP) is proving there is really nothing “little” about its business at all.

Founded in 2016 to improve a young patient’s quality of life, the then privately-owned company started its journey with one of the first few licenses to grow medicinal cannabis in what was an emerging industry.

Two years later, it began selling the nation’s first Australian grown cannabis medicines to local patients and by January 2020, had sold more than 7,600 bottles domestically and helped over 2,300 Australians with a raft of health conditions.

The company has since seen a significant increase in sales, with more than 60,000 bottles sold to date and reported sales revenue of $2.45 million for the recent quarter ending 31 March 2021.

Driving the vision

Founder and managing director Fleta Solomon drives the strategic vision of the business and has been the force behind Little Green Pharma’s rise from a medicinal cannabis start-up to an industry-leading brand.

She is focused on accelerating the company’s growth strategy, increasing market share and maximising economies of scale by expanding the operation beyond domestic reach.

“Our first goal was to establish sales in Australia to demonstrate market validity and support pathways to the bigger prize of global sales,” Ms Solomon told shareholders last year.

“The generation of commercial sales in international markets is absolutely our primary target and this is where we aim to make our future profits.”

Secret location

The public seems to be scrambling to get its hands on the 50ml bottles produced by Ms Solomon’s company in a hydroponic cultivation facility at a secret location in Western Australia’s sprawling south-west.

Patient numbers continue to increase with over 2,400 new patients being prescribed Little Green Pharma medicines in Q3 2021 (2,700 in the prior Quarter), bringing the total number of lifetime patients to 11,9000 and 510 lifetime Australian prescribing doctors. The company now has approximately 20% of the Australian market for medicinal cannabis oils.

The growing facility comprises nine flowering rooms equipped with a number of automated technologies to enhance cultivation effectiveness including rolling benches, computer-timed LED lighting, climate control, and irrigation control, two mother plant rooms and two vegetation rooms.

In October, the facility was granted a Good Manufacturing Practices (GMP) licence by the Therapeutic Goods Administration.

The licence gives Little Green Pharma the authority to operate its in-house and vertically-integrated cannabis cultivation, production, manufacturing and wholesaling supply chain for domestic and international markets.

Ms Solomon said the growing facility is well-positioned to keep up with demand, having been recently re-rated from 100,000 bottles per year of production to approximately  300,000 bottles per year, using about 3 tonnes of homegrown raw biomass (or cannabis flower) annually.

If space runs out, the company has access to 3,000sqm of adjacent land for expansion purposes, and if flower stocks run low, it can turn to third party supply lines of high-quality raw materials.

“We have access to more than enough raw biomass for our anticipated sales volumes,” she said.

“We are not just limited to our internal capabilities.”

Offshore moves

Little Green Pharma made its first offshore move in April last year, when a batch of Australian medicinal cannabis products was shipped to the United Kingdom under a purchase agreement with LYPHE Group.

By November, Little Green Pharma had secured its second international deal, this time to export the largest Australian commercial order to date of locally-grown and GMP-manufactured medicinal cannabis oils into the lucrative, higher-margin German market.

An initial 2,400 branded bottles valued at over $600,000 was shipped for batch testing and sale by local pharmaceutical company CC Pharma GmbH.

The deal saw Little Green Pharma become the first Australian company and the third global medicinal cannabis manufacturer to deliver full-plant extract oils into Germany, after Canadian producers Tilray and Aurora Cannabis.

It ended a lengthy and detailed process of negotiation, quality inspection and audit, and procurement of German and Australian narcotic licences and permits.

Strict framework

The timeline was reflective of a strict regulatory framework relating to the export of medicinal cannabis products to the European Union.

Ms Solomon observed at the time that “the shipment we sent [to Germany] was strategically important as it proves out a pathway for future sales volumes in a market which could be worth up to $2.36 billion by 2025”.

“We are one of the few companies globally at the moment that has the manufacturing capability to deliver our medicines into Europe… it is a huge market to be targeting and it is big news for our company and for Australia.”

Germany is the third largest medicinal cannabis market globally behind the United States and Canada; the largest market in Europe; and is currently the largest offshore market for Australian producers.

Patients in Germany are covered by private health insurance for medicinal cannabis products which is expected to drive significant market growth.

Health rebates

In a similar win for local candidates, in late 2020 Little Green Pharma recently cemented a partnership with Health Insurance Fund of Australia to offer a $80 rebate on all medicinal cannabis scripts to eligible members, and an additional $25 rebate where Little Green Pharma products are prescribed.

It is the first time a major Australian health fund has publicly declared its support for access to medicinal cannabis treatments.

Ms Solomon said the deal reflects increasing community interest and scientific evidence supporting medicinal cannabis as a treatment option for Australian patients.

“This [partnership] is meaningful because it opens up patient access for the entire medicinal cannabis industry in Australia; it proves the role medicinal cannabis has to play in the medical field and shows it is becoming a more accepted treatment; and it sets the bar high for other insurers to follow suit,” she said.

“Our work is about changing people’s lives in a positive way and improving access and affordability is a part of that.”

Key European markets

Little Green Pharma continues to move towards its aspiration of dominating key European medicinal cannabis markets.

In January, the company was selected as a primary supplier for a French national trial of medicinal cannabis products in the treatment of clinical conditions which are resistant to conventional medicines, in partnership with pharmaceutical distributor Intsel Chimos.

The trial will test the efficacy, safety and quality of medicinal cannabis for domestic consumption and may catalyse its legalisation in France, which is estimated to have a market value of $6.3 billion at maturity.

The following month, Little Green Pharma exported its first commercial shipment of cannabis flower medicines to Deutsche Medizinalcannabis GmbH under a three-year purchasing agreement.

Under the terms of that deal, the company will sell and export up to 1,000kg of its cultivated and dried cannabis flower or 48,000 units of its branded medicinal cannabis oil product per year.

And in April, Little Green Pharma made its entry into the Danish market when it signed a five-year agreement with Balancial Danmark ApS for the domestic sale and distribution of its branded oils.

Denmark has just announced it will make permanent the country’s current interim cultivation and export regime, as well as extending its pilot medicinal cannabis trial for the treatment of Danish patients for a further four years. The trial to date had allowed most patients to claim a 50% rebate on their prescriptions, with terminally ill patients receiving full reimbursements.

Buoyant and optimistic

Ms Solomon said the company remains buoyant and optimistic as it continues to grow its share of the Australian market while expanding into Europe and other high-volume, high-margin offshore centres.

“We have the people and tools we need to deliver on our vision,” she told investors recently.

“Armed with hard-won expertise and world-class facilities, we stand poised to advance the Australian cannabis industry and become a truly global player.”