Epsilon Healthcare (ASX:EPN) share price rockets 24% on new agreement

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The Epsilon Healthcare Ltd (ASX: EPN) share price is off to the races today, currently up 20% at 15 cents apiece after hitting an intraday high of 16.5 cents at midday.

Below, we take a look at the new manufacturing agreement that appears to be spurring investor interest in the ASX medicinal cannabis company.

What new manufacturing agreement was announced?

Epsilon Healthcare’s share price is soaring after the company reported it has executed a binding term sheet and manufacturing agreement with Cannim Australia Pty Ltd.

Cannim, established in 2017, cultivates cannabis in Jamaica and Australia. The privately held company has engaged Epsilon as its Australian GMP manufacturing partner.

Epsilon’s Southport Facility in Queensland will produce medicinal cannabis products from marijuana supplied by Cannim for supply into Australian and global export. Epsilon will receive payment from Cannim for its manufacturing services on a per-order basis

The initial agreement runs for 2 years.

According to the release, the first cannabis derived dried flower products have already been delivered and are available to patients by Epsilon under Cannim’s HummingBud brand.

Under the binding term sheet, the companies have agreed to further collaboration and manufacture over next 2 years.

Management commentary

Commenting on the agreement, Epsilon Healthcare CEO Jarrod White said:

Matching our high-volume EU GMP compliant Southport Facility with Cannim’s high volume GACP Jamaican medicinal cannabis places both companies in a strong position to deliver significant volumes of high-quality medicines for both the Australian and global export markets.

The partnership contemplates all areas of the Epsilon value chain, from local import and handling of dried product expertise, to export, and assisting in the logistics and distribution of the final product. This is reflective of the significant progress and capability improvements at our Southport facility in the preceding 12 months.

Epsilon Healthcare share price snapshot

Despite today’s big boost, the Epsilon Healthcare share price remains down 36% year-to-date. By comparison the All Ordinaries Index (ASX: XAO) is up 12% so far in 2020.

The last month has been kinder to Epsilon Healthcare shareholders, with shares up 19% since 21 September.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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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