Little Green Pharma, ECS Botanics upbeat on Germany's legalisation of cannabis

Little Green Pharma, ECS Botanics upbeat on Germany's legalisation of cannabis

Little Green Pharma (ASX: LGP) founder and executive director Fleta Solomon.

Perth-headquartered medicinal cannabis company Little Green Pharma (LGP) is bullish on opportunities in Germany after the country legalised the drug on Friday with certain limitations, including personal possession of up to 25g, allowing three marijuana plants per household, and the establishment of non-commercial clubs for cultivation and distribution with caps on membership and volume.

Whilst the bulk of LGP's medicinal cannabis sales are in Australia, its presence in Europe has been steadily rising with a manufacturing facility in Denmark and a network of distributors throughout the continent.

In the December half the company achieved its first positive adjusted EBITDA result of $700,000 since acquiring the Danish facility for CAD$20 million ($22.6 million) in mid-2021.

In today's announcement, the company welcomed the German Bundestag's vote in favour (with 407 for and 226 against) of the removal of cannabis from the Narcotics List from 1 April 2024. 

"This represents the most significant legislative change in global cannabis markets since Canada legalised cannabis in 2018," the company says.

"Germany is currently the largest medicinal cannabis market in Europe. The change will make it the largest federally legal cannabis market globally, and is anticipated to result in an increase in the number of patients and consumers by multiples while catalysing similar changes across Europe."

LGP notes that removing cannabis from Germany's Narcotics List means the existing medical access pathway will be "substantially improved" through the removal of prescribed conditions, narcotic reporting, and pharmacy stockholding limitations; and the easing of the rules around telehealth services, e-scripts, and direct delivery to patients.

"The new laws present LGP with a unique opportunity given its well-established partnerships with multiple German distributors, large bank of cannabis genetics, and ownership of the largest and most advanced EU GMP recognised medicinal cannabis facility in Europe strategically located just two hours from the German border," the company states.

"Ongoing EU GMP standards for medicinal cannabis will also continue to constrain North American non-GMP supplier participation in the market."

LGP shares rose 12 per cent when trading opened on Monday at 14 cents per share (cps), although they have dipped back to 13cps.

The news also follows a breakthrough in France in late 2023 when new laws were established to govern the supply of medicinal cannabis as a pilot program nears its end in March 2024, involving a budget of €10 million ($16.6 million) for the supply of medicinal cannabis to existing pilot patients.

LGP has been a participant in the pilot program since 2021 when French pharmaceutical distributors, Intsel Chimos and Centre Lab, were appointed as the primary supplier and distributor of LGP's 1:20 THC:CBD and CBD50 medicinal cannabis oils in the treatment of certain clinical conditions, sourcing both products from its Australian operations.

"Our previous experience in France enables us to streamline the evaluation process, given that our technical details are already known to the regulatory authorities, and that our products’ safety and efficacy have been conclusively demonstrated over the past few years," LGP CEO Paul Long said in December.

"Importantly, the amendment specifies exclusive access to supplying the French market will be granted solely to European registered companies who have a partnership with a French pharmaceutical establishment.

"With our Danish entity fulfilling the necessary European Supply Authorisation requirements for France, LGP, along with our distribution partners Intsel Chimos and Centre Lab, is extremely well positioned to capitalise on long-established relationships with existing patient, hospital prescribers and pharmacy networks during the transitional phase and beyond."

Another Australia-headquartered medicinal cannabis company that is optimistic about the announcement in Germany is ECS Botanics (ASX: ECS), highlighting German Health Minister Karl Lauterbach's intentions for the new legal framework to undermine the black market, protect smokers from contaminated cannabis and cut revenue streams for organised crime gangs.

ECS has an ongoing supply agreement worth at least $9.9 million over three years with German company Ilios Santé to supply four medicinal cannabis strains into that market.

The company explains Ilios Santé was chosen as ECS’s entry partner into Germany due to its ability to harness its fully licenced wholesaler network with the required authorisations and permissions to import, and distribute medical cannabis products, and adapt to changes in cannabis legislation as access was made easier.

ECS claims its partnership positions the company to effectively navigate, and contribute to, the developing German market, addressing the demands of both medicinal and future recreational use.

"This is the type of step-change legislative development that will create a reverberation across not only Germany, but the broader EU as medicinal cannabis becomes more mainstream as a treatment for several conditions," says ECS managing director Nan-Maree Schoerie.

"Germany is an evolving and very large market opportunity for ECS and we believe this legislative change will make doctors much more comfortable prescribing medicinal cannabis.

"ECS has been expanding its growing, cultivation and pharmaceutical grade manufacturing operations to service the $60 million in contracted agreements we have signed in several markets in the last 18 months, and in preparation to manufacture for expanding export opportunities that will occur because of bills like this."

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