Little Green Pharma eyes ASX listing to grow medical cannabis exports

Little Green Pharma ASX IPO cannabis LGP
Little Green Pharma plans to use its IPO proceeds to expand its WA-based medical cannabis cultivation business and build a manufacturing facility on site.

Australian medical cannabis grower Little Green Pharma plans to make its ASX debut next month, hoping to boost efforts to distribute its locally-grown products in international markets.

According to its prospectus lodged before Christmas, the company aimed to raise $10 million through the offer of 22.22 million shares at an issue price of $0.45 each.

The offer officially opened on Tuesday with lead manager Canaccord Genuity declaring it has already received commitments for the full $10 million.

Little Green Pharma managing director Fleta Solomon told Small Caps the company is “excited” to be conducting an initial public offering on the ASX.

“Little Green Pharma is strongly positioned to capture value from opportunities relating to the emerging medicinal cannabis industry in Australia and internationally,” she said.

“Its listing on the ASX will assist in raising awareness amongst investors and the wider public and providing the funds and momentum to accelerate its growth strategy,” Ms Solomon added.

The company is expected to list on the ASX on 7 February and will trade under the ticker code ‘LGP’.

First-mover advantage

In July 2018, Little Green Pharma became the first Australian company to sell locally-grown and GMP-manufactured medical cannabis products in the country.

Since then, it has sold more than 4,500 bottles of medicinal cannabis oil and by the end of 2019, the company estimated more than 1,400 patients in Australia were using its products.

Its WA-based indoor cultivation facility has a current production capacity of 15,000 bottles and plans are in place to expand this to 110,000 bottles in 2020.

Little Green Pharma’s three-product range is also anticipated to grow with future products in a proposed research and development pipeline.

In September 2019, it became the first Australian company to export its cannabis products to Germany.

The company also received a 2,400-bottle order from German distributor CC Pharma, with fulfilment expected to take place following the completion of this year’s cultivation facility expansion.

In addition, it has received conditional purchase orders for products from Canada’s CannMart and New Zealand’s Kariki Pharma.

Little Green Pharma has an exclusive six-year agreement with a WA-based manufacturer as well as ambitions to build its own manufacturing facility on its cultivation site.

In the chairman’s letter of the prospectus, Little Green Pharma chairman Michael David Lynch-Bell listed the company’s “first mover advantage” and “highly scalable production” as some of the key factors that position it to capture value from the emerging medical cannabis industry.

Intellectual property and clinical development

Little Green Pharma holds a patent over a small particle formulation with the potential to significantly reduce the cannabinoid dosage required to achieve a therapeutic effect compared to its existing products.

The company is currently scoping a product development validation project for the formulation.

It also teamed up with medical solutions company OBJ Limited (ASX: OBJ) last June to investigate using its transdermal patch technology to deliver cannabinoid therapy. The pair is working along with researchers at Curtin University in WA.

In addition, Little Green Pharma is involved with five clinical investigations studying cannabinoid medicines including the company’s own cannabis oil products.

Growth strategy and use of IPO funds

In its prospectus, Little Green Pharma said it hoped becoming a listed entity on the ASX would provide the benefits of an increased profile as well as access to capital markets and improve its financial flexibility to execute its growth strategy.

The company outlined a growth strategy comprising: the completed expansion of its cultivation facility and plans to build its own manufacturing facility; an expanded product range with the potential to include alternative medical cannabis forms and delivery systems; increased market penetration in Australia and expanded sales in Germany, the UK, Canada and New Zealand; and further clinical development.

A roughly equal amount of the IPO proceeds (up to $1.5-$1.65 million) has been earmarked for sales and marketing, research and development, system implementation and manufacturing site expansion.

Another 10%, or up to $1 million, of the funds has been budgeted for education and training activities, while regulatory compliance, listing costs, office costs and inventory build-up will make use of the remaining funds.

Experienced management and Canadian backing

Little Green Pharma’s board and management team comprises medical and scientific professionals including health start-up expert Ms Solomon as managing director, as well as experienced corporate finance executives such as Mr Lynch-Bell, who also holds board seats for London-listed companies Gem Diamonds (LSE: GEMD) and copper miner Kaz Materials (LSE: KAZ).

Little Green Pharma is currently 38.1% owned by Canadian cannabis investment firm Elixxer (TSXV: ELXR, previously known as LGC Capital).

A leading company in the industry, Elixxer also has investments in Jamaica, Switzerland, Italy and Canada, and sells its partner’s branded cannabis products in a variety of formats including medicines, cosmetics, tinctures, oils and seeds.

On admission to the ASX, Elixxer’s equity in Little Green Pharma is expected to dilute to 23.1%.

Ms Solomon also currently holds a 26.5% interest in the company, which is expected to dilute to 14.7% on admission.