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LGP pivots harder for Euro cannabis market

19 May 2022 10:28
ASX: LGP

Little Green Pharma has struck a $7.5 million take-or-pay deal with Four 20 Pharma, introducing its new high-THC cannabis strain into Germany.

The company’s largest single-strain off-take contract comes on the heels of its recent $9m offtake with vertically integrated producer Demecan.

Under the agreement, Four 20 will purchase $7.5m of product over 30 months representing a ‘revolutionary step’ in LGP’s supply processes and contract portfolio entering the German market predicted to be worth EUR 9.08 billion by 2028.

The company said its new partner held a highly successful track record of supplying products to the European market.

“Another significant milestone in LGP’s continued growth of its Danish Facility and an exciting development in supply processes that promises to shorten supply timelines for future key strains dramatically,” chief executive Fleta Solomon said.

The company remain focused on increasing sales while carrying on education and research into the sector.

First product deliveries are expected late next quarter or early in the new financial year.

Material Terms of Agreement

  • Term is 2.5 years, with a minimum annual purchase commitment of $3.5 million per year following a 6-month ramp-up
  • Fixed price indexed to Danish CPI
  • Take-or-pay commitment requires Four 20 Pharma to purchase minimum quarterly quantities each quarter of white-label bulk SMS strain or pay liquidated damages equal to the purchase price if make-up quantities are not purchased in the subsequent quarter
  • Agreement subject to the following conditions precedent: sufficient data to support a shelf life of at least 6 months, entry into GMP Quality Agreement, and the grant of approvals to supply the strain into Germany, which conditions precedent must be satisfied within 6 months of Agreement execution
  • Supply of the product is exclusive to Four 20 Pharma in Germany
  • Agreement includes payment of development fee to help defray the cost of strain development, in equal tranches after completion of stability testing and first product supply

LGP’s Australian Stock Exchange-listed share price has risen 4.62 per cent today, selling at 34c (9.42 am UTC+ 8 hours).

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