Why the Little Green Pharma (ASX:LGP) share price will be on watch today

The Little Green Pharma Ltd (ASX: LGP) share price will be on watch today after announcing progress on it first commercial exports to Germany.

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Little Green Pharma Ltd (ASX: LGP) shares will be on watch this morning after the company announced its first exports of cannabis flower medicines to Germany late Friday. The Little Green Pharma share price closed last Thursday’s session at 93.5 cents prior to entering a trading halt pending this announcement. 

How will the Little Green Pharma share price respond?

The Little Green Pharma share price will be in focus this morning after the company updated the ASX with this positive announcement shortly after market close on Friday.

According to its release, the company advised that it has shipped its first commercial shipment of cannabis flower medicines to Berlin-based Demecan.

Demecan is a company focused on the cultivation, importation and wholesale of medicinal cannabis in Germany.

The delivery, due to be completed some time this week, comprises 500 x 15g units of high-THC cannabis flower medicines. When the shipment arrives, the cannabis medicine will undergo ‘batch-testing’ before being released to the German public.

Previously, both companies conducted a 12-month audit and qualification process to ensure compliance with European and German regulations.

The purchase agreement in detail

Under the agreement, Little Green Pharma will supply Demecan with up to 1,000 kilos of cultivated dried cannabis flowers or 48,000 units of medicinal cannabis oil products per year. Either of the units can be combined during the course of the arrangement.

The 3-year deal, which begins on receipt of the first shipment delivery, excludes any minimum purchase quantities from Demecan.

Little Green Pharma noted that it does not consider the value of its initial shipment to be material.

Success on the horizon?

Little Green Pharma joins an exclusive group of international cannabis producers which can supply cannabis flower medicines to the German market. The company highlighted that it is only the second producer not requiring its cannabis flower medicines to be further treated upon delivery.

As published by ‘The Germany Cannabis Report’, Germany is Europe’s largest medical-grade cannabis market. It’s estimated that the sector will grow to 7.7 billion euros by 2028, with flower sales accounting around 21% in Germany.

Little Green Pharma plans to expand its revenue streams by offering cannabis flower medicines to Australian prescribers and patients this year.

Management commentary

Little Green Pharma managing director Fleta Solomon hailed the company’s progress, saying:

Our partnership with DEMECAN represents a significant foundation on which to build LGP’s access to the German market. For the past year, we have worked closely with DEMECAN through a highly rigorous audit and qualification process, to ensure LGP’s cannabis flower medicines meet all applicable EU GMP and German quality requirements.

In a particularly pleasing achievement, our cannabis flower medicines passed all microbiological testing without requiring irradiation; a testament to LGP’s ability to successfully cultivate and manufacture consistently high-quality cannabis flower medicines under indoor GACP and GMP conditions.

Share price snapshot

The Little Green Pharma share price has surged nearly 170% since its initial public offering (IPO) in February 2020. This is despite the company’s shares falling as low as 17 cents during the March 2020 crash. 

Based on the current Little Green Pharma share price, the company has a market capitalisation of around $77 million.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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