Queensland Bauxite (ASX: QBL) and Algae.Tec (ASX: AEB) have teamed up to develop cannabinoid-based products for the animal market in what Queensland Bauxite labels as a “ground breaking” agreement.
Under the proposition, Queensland Bauxite’s 55%-owned subsidiary Medical Cannabis will provide its low THC Delta 9 cannabis cultivars to Algae and assist Algae in establishing a breeding program to produce stock for veterinary medications, supplements and animal therapeutics.
Medical Cannabis will retain the right to develop the cultivated cannabis stock for human medical research and development.
According to Queensland Bauxite, the agreement makes Algae one of the few Australian cannabis companies to have a legal source of cannabis plants as well as starting material, genetics and hands on experience.
Combining resources will enable Algae to fast-track its research into using cannabinoids in animal treatment options, with a view to launching products on the market in 2018.
“We knew the securing of a certified starting material would be a key component to our future endeavours – this agreement far exceeds this and will build on our available expertise in the field and consolidate to a far greater degree the groundwork we have already done in a relatively short time,” Algae executive chairman and managing director Malcom James said.
“There’s no doubt we have secured one of the most coveted assets in the medical cannabis industry – being our own exclusively lawful and licenced cannabis seed bank for our further business development,” Mr James added.
As part of the agreement, Algae will retain exclusive distribution rights for its products around the world.
Medical Cannabis will also benefit from the collaboration using Algae’s research and development to further its strategy for producing medicinal cannabis products in humans.
The agreement terms involve Medical Cannabis becoming a 19.99% shareholding in Algae. Medical Cannabis will also gain a 5% royalty on any human applications arising from Algae’s animal products. Medical Cannabis will also be entitled to appoint its own representative to Algae’s board.
“The nature and spirit of this agreement indicates the high level of cooperation needed to be demonstrated by intelligent companies to achieve meaningful outcomes in the shortest possible time lines,” Medical Cannabis technical director Andrew Kavasilas said.
Queensland Bauxite shares were up 16% at A$0.058 in late morning trade, with Algae.Tec up 22.5% to be at A$0.025.