A multi-million-dollar supply and toll processing deal has been struck between subsidiaries of ECS Botanics (ASX: ECS) and Sun Pharmaceutical Industries, with the former agreeing to produce cannabis biomass for the latter's Sydney-based daughter company.
Sun Pharma, a subsidiary of one of the largest specialty generic pharmaceutical companies in the world, will have ECS Botanics MC supply no less than 55 per cent of its annual biomass requirements, which is yet to be specified.
Based on indicative volumes, it will equate to total revenue between $6.6 million and $9.8 million for ECS – representing a significant scale-up for the company’s operations.
“This arrangement positions ECS Botanics to capture a greater share of the existing medicinal cannabis oil market in Australia and overseas,” ECS managing director Alex Keach said.
“Furthermore, partnering with a globally significantly company is encouraging for ECS Botanics’ major expansion plans to drive revenue growth and continually lower production costs.”
As part of the agreement, Sun Pharma is installing a CO2 extractor at its Port Fairy pharmaceutical facility in Victoria to produce good manufacturing practice (GMP) decarboxylated winterised resin for ECS at a reduced rate.
According to the company, this has dropped the manufacturing cost of ECS oils by an estimated $2.5 million over the first five years and freed up $1 million of capital which was previously set aside for the installation of an extractor.
Over a five-year period, ECS will also supply between 600 kilograms to 1,750 kilograms of cannabis biomass, which Sun Pharma will use to produce GMP resin for the formulation of medicinal cannabis products.
As Australia shares parallel standards with European GMP, the Sydney-based hemp company is honing in the overseas market as well.
“Europe’s a huge market and we’ve got production capacity – so we’re just going for it. We’ve been signing deals already in Germany, UK, and Poland,” Keach told Business News Australia
“We share very similar pharmaceutical standards. By sharing those similar standards, it’s easy for us to do business with them.”
“Australia’s a small market that’s growing really strongly - but Europe’s mega.”
The deal has allowed Sun Pharma to enter the medicinal cannabis manufacturing industry with a strong 'anchor' client, ensuring the company a supply of cost-effective good agricultural and collection practices (GACP) grown biomass for years to come.
“Medicinal cannabis is a relatively young industry and engaging with a partner with years of GMP manufacturing expertise is good for patients,” ECS executive general manager Nan-Maree Schoerie said.
“Both companies aim to deliver high quality, affordable medicinal cannabis products.”
Help us deliver quality journalism to you.
As a free and independent news site providing daily updates
during a period of unprecedented challenges for businesses everywhere
we call on your support