Little Green Pharma signs three-year agreement with DEMECAN to supply cannabis products

Little Green Pharma ASX LGP medicinal cannabis Demecan supply
DEMECAN intends to purchase up to 1,000kg of dried flower or 48,000 units of medicinal cannabis oil from Little Green Pharma per year under a three-year deal.

Medical cannabis grower Little Green Pharma (ASX: LGP) has revealed plans to sell its classic medicinal cannabis oils and cultivated dried cannabis flower to Berlin-based Deutsche Medizinalcannabis (DEMECAN).

The three-year deal could see as much as 1 tonne of dried flower sold to DEMECAN per year.

DEMECAN received its medical cannabis growing licence from the German Federal Institute for Drugs and Medical Devices (BfArM) in May last year and intends to supply the Federal Republic of Germany with medicinal cannabis as of this year.

The agreement secures pricing that is a premium to Little Green’s medicinal cannabis oil products sold in Australia and from a commercial perspective, allows Little Green to expand its sales and distribution footprint in Germany to meet the growing demand for medicinal cannabis.

Currently, Germany represents a significant commercial opportunity for cannabis-related companies as the largest medicinal cannabis market in Europe, estimated to be worth €7.7 billion (A$12.5 billion) by 2028.

The number of prescriptions for medicinal cannabis in Germany is growing rapidly with over 95,000 prescriptions written in 2018 and more than an estimated 240,000 prescriptions expected last year.

Little Green said it expects Germany to remain a favourable market for the import of medicinal cannabis products due to “insufficient domestic supply as a result of significant delays in its domestic cultivation tendering process, with the first licences only awarded in 2019”.

Cannabis supply agreed

In a statement to the market earlier today, Little Green Pharma announced it had signed a binding three-year purchase agreement for the sale, export, and distribution of cannabis oils and flower with DEMECAN.

DEMECAN claims it’s the only German company covering the entire medicinal cannabis production chain, from cultivation to processing and manufacturing, through to distribution via pharmacies.

The company is currently the only producer of medicinal cannabis in Germany and is a strategically important partner for Little Green.

Despite the signed agreement being binding, Little Green confirmed that DEMECAN is not mandated to purchase a minimum volume.

However, Little Green declared it intends to sell and export up to 1,000kg of LGP-cultivated dried cannabis flower or 48,000 units of its classic medicinal cannabis oil product per year.

The agreement will commence as soon as the first commercial shipment is dispatched to Germany, which Little Green expects to take place in the second half of this year.

“Germany is home to the largest population in the European Union and a rapidly growing medicinal cannabis industry,” said Fleta Solomon, managing director of Little Green.

“However, patient access to medicinal cannabis in Germany has been limited to date, with inadequate domestic production that is unlikely to produce sufficient product to satisfy the German market in the near term,” she said.

With the agreement agreed and signed, there are still several hurdles both companies must clear before any commercial progress is made.

The agreement remains subject to Little Green obtaining all required approvals to export its products including any German-specific approval requirements and both parties entering into a GMP quality agreement, as well as, DEMECAN obtaining all approvals required to import cannabis products into Germany.

Another caveat to the deal is that if DEMECAN fails to place any commercial orders, or Little Green refuses orders amounting to at least 50% of the agreed quarterly quota for two consecutive quarters, then both parties will retain the right to terminate the agreement without further liability.