Investee Company Update: Little Green Pharma Ltd

RNS Number : 1584I

Seed Innovations Limited

01 December 2022

 

Seed Innovations Ltd / AIM: SEED / Sector: Closed End Investments

1 December 2022

SEED Innovations Limited

("SEED" or the "Company")

Investee Company Update: Little Green Pharma Ltd

SEED Innovations Ltd, the AIM-quoted company investing in fast-growing and industry-leading businesses with a focus on the medical cannabis, health, and wellness space, is pleased to note an announcement released on the ASX by its portfolio company, Little Green Pharma Ltd ('LGP'), regarding its half year results for the period ended 30 September 2022.  The Company owns 7,324,796 ordinary shares in LGP representing 2.8% of LGP's issued share capital.

The following extract from the announcement is set out without material changes or adjustments and the announcement in full can be accessed from the link below this section.

REVIEW OF OPERATIONS

Overview of Company strategy & business model

In contrast to many of its Australian peers, the Company's business model is an export-oriented, vertically integrated cultivation and manufacturing business operating in both hemispheres, with inhouse R&D capability and product distribution via a broad network of independent distributors in Australia and Europe.

LGP believes this model provides robust control of the production and supply chain and, coupled with a diversity of distribution partner options, provides the product supply and quality reliability needed to compete effectively across all market segments, particularly as the markets mature and there is consolidation. This model provides implicit competitive advantages such as:

• ownership of the underlying IP associated with both the manufacturing processes as well as the specific genetics

• flexibility to respond to changing market and supply chain dynamics and profitability

• improved quality control as well as reduced cost and reliance on third party vendors

• cost reductions resulting from economies of scale

• inhouse R&D and manufacturing IP enabling new and innovative products and broader product suites in a more timely manner

• reduced reliance on third parties for continued market participation

The Company believes these advantages successfully position it to compete strongly in its key markets including Australia when the new GMP requirements come into place in July 2023.

Robust revenue growth

The Company continued its record of strong revenue growth during the reporting period, with a significant increase in revenue to $9.2 million, up 25% compared to the 6 months to 31 December 2021 and (up over 130% from the corresponding 6 months to 30 September 2021).

Significant growth in European presence

Consistent with its long-term growth strategy, the reporting period was marked by a significant expansion in the Company's presence in European markets, as the Company signed four new agreements for the supply of LGP branded oils and white-label flower products from its Australian and Danish facilities into Germany and the United Kingdom.

In July 2022, the Company also appointed  Ms Beatriz Vicén Banzo, based in Spain, as its third independent non-executive Director. Ms Vicén Banzo had previously held the position of Director of Public Affairs and Quality for Bayer's Spanish division where she had been employed since August 2011, during which time she had been responsible for quality assurance, regulatory affairs, pricing and market access across pharmaceuticals, consumer health, and radiology and intervention.

Operational update

During the period, the Group successfully delivered products into Australia, Denmark, Germany, France, Italy, the United Kingdom, and Belgium with the Company seeing strong sales growth, particularly within the flower category.

The Australian operations continued at a steady state, while the optimisation programme at the Company's Danish facility continued, with the implementation of an automated packaging machine, the right-sizing of the operational team and a review of its standard operating procedures.

The Company also expanded its genetics development programme to produce several new cultivars for proposed supply into Europe and Australia, as well as progressing a suite of over 20 new cultivars in various stages of development.

Due to the war in Ukraine and acute gas shortages across Europe, power costs also continued to rise, with Denmark seeing increases of over 100% in power prices during the reporting period and over 400% since the beginning of the war. These costs have been mitigated to an extent through the installation of LED lighting and other power reduction strategies.

TGA infringements

On 28 September 2022, the Company received 28 infringement notices valued at $372,960 from the Therapeutic Goods Administration ("TGA") in connection with alleged unlawful advertising of its medicinal cannabis products. Since that time the Company has successfully applied for two extensions of time until 20 December 2022 and has now filed detailed appeal submissions with the TGA in relation to the notices.

Research and Development update

The Company continues to progress its strategy regarding development of a Schedule 3 CBD product as well as continuing its research into the proposed development of novel product formulations and delivery methods. The Company also received preliminary analysis from the QUEST Initiative demonstrating a significant improvement in participant wellness and health-related quality of life. Findings from this interim analysis are being prepared for submission to relevant peer-reviewed scientific journals, with the detailed findings being available at that time. To date, the QUEST Initiative has been fully funded by study fees payable by participants for the supply of discounted study medicines.

Reset Mind Sciences demerger

The proposed demerger of Reset remains a high priority for the Company, with the ultimate timing of the demerger subject to prevailing market conditions. Upon the demerger Reset will reimburse LGP for costs it has incurred as part of the demerger.

EVENTS SUBSEQUENT TO BALANCE DATE

Subsequent to the reporting period:

· On 24 November 2022 the success of the Company's export strategy was formally recognised by its win in the International Health category at the 60th Australian National Export Awards and also at the WA State Export Awards in October 2022.

· On 24 November LGP Denmark delivered 6,500 units (10 gram alubags) of its first three new high-THC LGP-branded flower products to LGP Australia, representing its first commercialisation of developed cultivars under its genetics development programme. The Company anticipates delivering a fourth new flower product concept into Australia in December, as it continues development of a further 10 new cultivars for supply into Australian and other markets in the coming periods.

· On 22 November 2022 the Company received its research and development incentive rebate of $2.3 million associated with the eligible expenditure in the prior financial year. As a result, the debtor financing with an amortised cost of $1.9 million was settled.

· On 21 November 2022 the Company announced that it had lodged a default notice in relation to its agreement with Four 20 Pharma.

· On 21 November 2022 the Company announced the French Government had extended the French Trial by 12 months.

· On 3 November 2022, the Company drew down on its equipment finance lease of $2.0 million with the National Australia Bank secured over equipment at its Western Australian facility.

· On 2 November 2022, the Company announced a $4.0 million share placement and $2.0 million Share Purchase Plan for ordinary shares at $0.20 together with a free-attaching option for each share purchased exercisable at $0.25 within 18 months from issue. The Placement subsequently settled on 8 November 2022 and the SPP offer is scheduled to close on 19 December 2022.

· On 25 October 2022 the Company appointed BDO Audit (WA) Pty Ltd ("BDO") as its auditors following the resignation of Deloitte Touche Tohmatsu. The decision followed a competitive tender with LGP selecting BDO given their reputation and experience with similarly sized companies to LGP. The appointment will be presented for approval at the next Company meeting of shareholders.

· On 4 October 2022, the Company signed a supply agreement with German cannabis distributor Cannamedical for the supply of bulk medicinal cannabis from Denmark to Germany.

The announcement can be viewed in full on LGP's website via the following link: 

https://investor.littlegreenpharma.com/site/investor-centre/asx-announcements  

- Ends -

For further information on the Company please visit:  www.seedinnovations.com   or contact:

Ed McDermott Lance de Jersey	SEED Innovations Ltd	E:  [e-mail]
James Biddle Roland Cornish	Beaumont Cornish Limited, Nomad	T: (0)20 7628 3396
Isabella Pierre Damon Heath	Shard Capital Partners LLP Broker	T: (0)20 7186 9927
Catherine Leftley Isabelle Morris Max Bennett	St Brides Partners Ltd, Financial PR	E:  [e-mail]

Notes

Seed Innovations Ltd

SEED Innovations is an AIM quoted investment company focused primarily on disruptive high growth life sciences and technology businesses particularly within the medical cannabis arena. The Company's strategy is to identify early-stage opportunities that have an upcoming investment catalyst and grow its portfolio in terms of value whilst limiting the number of investee companies to a level where relevant time can be devoted to each.

About Little Green Pharma

Little Green Pharma is a global, vertically integrated and geographically diverse medicinal cannabis business with operations from cultivation and production through to manufacturing and distribution. The Company has two global production sites for the manufacture of its own-branded and white-label ranges of GMP-grade medicinal cannabis products, being a 21,500m2 cultivation and 4,000m2 GMP manufacturing facility capable of producing over 20 tonnes of medicinal cannabis biomass per annum located in Denmark (EU) and an indoor cultivation and manufacturing facility located in Western Australia capable of producing ~3 tonnes of medicinal cannabis biomass per annum. Little Green Pharma products comply with all required Danish Medicines Agency and Therapeutic Goods Administration regulations and testing requirements. With a growing range of products containing differing ratios of active ingredients, Little Green Pharma supplies medical-grade cannabis products to Australian, European and overseas markets. The Company has a strong focus on patient access in the emerging global medicinal cannabis market and is actively engaged in promoting education and outreach programs, as well as participating in clinical investigations and research projects to develop innovative new delivery systems. For more information about Little Green Pharma go to: www.littlegreenpharma.com

 

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