Is Little Green Pharma the Most De-Risked Business in the Medicinal Cannabis Space?

2021 has already been a great year for medicinal cannabis producer, Little Green Pharma. Let's take a look at LGP's promising start to the year.

Founded in 2016, Little Green Pharma (ASX:LGP) began with the goal of alleviating the severity of seizures in epileptic children through the use of its novel patented small-particle medicinal cannabis formulation.

Now, the company has over 11,900 patients using its cannabis medicines and 510 prescribers of its products, as well as shipping medicinal cannabis into Europe to continue its goal of helping the greatest number of patients possible.

Little Green Pharma has developed into one of Australia's leading cannabis companies through cultivating and manufacturing medicines, and leading research efforts in order to propel the plant into the mainstream.

The company has made its growth strategy very clear to its investors – its primary target is the generation of commercial sales volumes in international markets.

This is how the company is proposing to execute:

European Expansion

Throughout the most recent quarter, LGP managed to embed itself into several key European markets, including France, Germany, and Denmark. Various estimates peg the European cannabis market to be worth between $20-$90 billion over the next five years, which is an astronomical rise over the €240 million the industry was believed to be worth in 2019.

France

In January, LGP became one of four companies selected as a primary supplier for two CBD medicines in a French medicinal cannabis trial alongside Aurora, Tilray, and Panaxia. LGP has delivered 4,800 units of cannabis medicines to the French national medicinal cannabis trial.

This could prove to be a pivotal moment for LGP, as the trial could determine whether medical cannabis is made legal in France. Currently, medical cannabis remains illegal in France, making it one of the stricter countries in Europe when it comes to cannabis policy.

The medical cannabis trial is surrounded by anticipation as it is intended to test the safety, and quality of medicinal cannabis medicines for the French public, recruiting 3,000 patients over its duration. Should the trial prove that cannabis is safe for patients in need, it will provide France a very powerful justification for the legalization of medical cannabis.

This is significant for LGP for a few reasons. It creates brand positioning and first mover advantage should the local legislation change. The company will be known to the French Government and the switching costs of medicines will likely result in happy patients sticking with their existing medicine.

This is a long-term play for the company which suggests management are in the medicinal cannabis space for the right reason and have a long-term business outlook.

Germany

Little Green Pharma also announced that it had exported its first commercial shipment of cannabis flower medicines to DEMECAN, a Deutsche Medicinal cannabis company.

In February, LGP shipped 500 x 15g units of high-THC cannabis flower medicines to its German partner. The company has since received an order for 9,000 units this quarter (Q4 2021) and 17,000 units for Q1 2022 from DEMECAN alone reflecting the demand coming out of the German market and the confidence in the quality of LGP medicines.

The agreement with DEMEMCAN has a three-year term with the capacity to ship up to 1,000kg of LGP cannabis flower, equating to 48,000 units of LGP Classic medicinal cannabis oil medicines per year.  Germany's medicinal cannabis market expected to reach AUD $12.22 billion by 2028.

Denmark

Little Green Pharma signed a fix-priced five-year distribution agreement with
Denmark-based Balancial to supply Little Green Pharma-branded cannabis oils and medicines.

Under the agreement, Balancial cannot manufacture or supply similar medicinal cannabis products until it has fulfilled purchases of 20,000 units of LGP products.

The agreement stipulates that Balancial must pre-pay 100% of the first shipment prior to delivery and pre-pay 50% of each subsequent confirmed purchase order.

Propelling Cannabis Studies

Little Green Pharma announced in February that the company is supplying cannabis medicines for a two-year-long Australia-wide medical cannabis study at the University of Sydney, designed to analyse the "quality of life and health economic impacts on patients with chronic diseases prescribed medicinal cannabis."

The study is called the QUEST Initiative, which is the QUality of life Evaluation STudy and has been described by The Federal Minister for Health, the Honourable Greg Hunt as a "significant Australian contribution to the global need for reliable, objective and clinically-relevant quality of life data for patients accessing medicinal cannabis treatments for a broad range of chronic conditions."

The world's largest observational study aims to recruit 2,100 patients as of the end of next month, and Little Green Pharma is the sole supplier for the study.

In addition to the QUEST Initiative, LGP also completed a clinical investigation during the quarter which involved over 150 patients prescribed LGP Classic 10:10 for the treatment of chronic refractory pain.

The results of the investigation are currently undergoing peer review and have been submitted to the scientific PAIN journal.

Rising Revenue and Patient Numbers

Little Green Pharma's strategy appears to be working.

By the end of December 2020, LGP made history when it achieved its maiden half yearly profit. In addition to the company's proven fiscal discipline, the number of cannabis medicine bottles sold in Australia significantly influenced this financial achievement – a rarity in the global medical cannabis space and it seems the only Australian medicinal cannabis producer to achieve this status to date.

By the end of March 2021, the company had nearly 12,000 patients and generated $2.46m in the quarter. Its estimated, based on recent announcements, that the company has sold more than 60,000 units of cannabis medicines in total, including flower and oils.

Having complete control across the value chain, Little Green Pharma is a proven medicinal cannabis producer selling its Australian medicines domestically and overseas. With $28.5m cash at bank, demonstrated operating cost efficiencies and a strong sales pipeline, LGP cements itself as a leading company in the global medicinal cannabis industry.

Disclaimer: Past performance is not an indicator of future performance.

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Louis O'Neill
Louis O'Neill

Louis is a writer based in Sydney with a focus on social and political issues. Having interviewed local politicians and entrepreneurs, Louis now focuses on cannabis culture, legislation & reform.