Update: A Supplementary Prospectus was lodged with ASIC on 9 January - available here
Little Green Pharma Ltd (ASX: LGP) was founded in 2016 with the aim of improving the quality of life for a child debilitated by seizures through the use of a patented small particle formulation and to take advantage of opportunities relating to the emerging medicinal cannabis industry in Australia and in certain international jurisdictions.
Together with its exclusive manufacturing partner and via its distribution arrangements, LGP operates a vertically integrated medicinal cannabis business comprising cultivation, production, research and development, manufacturing, and distribution of medicinal cannabis products.
As the first Australian company to achieve production of a locally grown medicinal cannabis product for patient use, LGP has a track record of nearly two years of successful cannabis cultivation. Over this period LGP has invested significantly into product development, sales and marketing and cultivation capabilities with the aim of becoming a leading Australian medicinal cannabis company.
LGP produces locally grown product in final dose form that has been used by more than 1,400 patients in Australia, with over 4,500 bottles of medicinal cannabis oil sold. The Company is currently expanding its cultivation facility to have capacity to produce sufficient cannabis flower to manufacture more than 110,000 bottles of medicinal cannabis oil per annum.
Internationally, LGP recently received its first commercial order of 2,400 units to be distributed to Germany, fulfilment of which is expected to take place following completion of the cultivation facility expansion. LGP has also entered into proof-of-concept conditional agreements in Canada and New Zealand.
LGP Product Sales and Patient Numbers
1. Bottles Sold Compound Monthly Growth Rate since January 2019
2. Fulfilment of order is expected to take place following completion of cultivation facility expansion
LGP is looking to undertake an IPO on ASX to raise up to $10 million via the issue of up to 22.2 million shares at an offer price of $0.45. The Company will have an indicative market capitalisation of approximately $60 million at maximum subscription.
Key Offer Statistics
1. As at the date of the Prospectus, it is proposed that a further 375,000 Shares will be issued to Mr Michael Lynch Bell and Dr Neale Fong, subject to Shareholder approval, prior to Admission.
2. On listing, 1,500,000 Shares will be issued to Mr Angus Caithness and 738,890 Shares to certain employees.
3. This assumes the issue of Shares on or about 21 January 2020 and this number will increase if the Convertible Notes convert on a later date.
4. Options with an exercise price of $0.30 and expiry dates of 31 July 2020, 31 December 2020, 31 January 2021 and 28 February 2022.
5. 2,036,768 Options, each with an exercise price of $0.42 and expiring 31 July 2022 and 2,036,768 Options with an exercise price of $0.48 and expiring 31 July 2022.
6. Comprises 1,000,000 Performance Rights currently on issue and 6,000,000 Performance Rights to be issued, subject to Shareholder approval, prior to Admission.
7. Calculated by multiplying the total number of Shares on issue after completion of the Offer by the offer price of $0.45 per Share. The price at which the Shares trade on ASX may be above or below this amount.
Funds raised from the Offer will be applied as follows:
For further information on the Key Offer Statistics and Use of Funds, please see the Prospectus.
LGP, together with its exclusive Manufacturing Partner and via its distribution arrangements, operates a vertically integrated medicinal cannabis business, comprising cultivation, production, research and development, manufacturing, and distribution of medicinal cannabis products.
The Company has invested significantly into product development, sales and marketing and cultivation capabilities to become a leading Australian medicinal cannabis company. Nearly two years of successful cultivation has allowed LGP to produce locally-grown product into final dose form with more than 4,500 bottles of medicinal cannabis oil sold to more than 1,400 patients in Australia.
LGP Business Model
1. If the Manufacturing Partner wishes to terminate the agreement for convenience it can only do so after 22 November 2023 and with 12 months’ notice, meaning the earliest date on which the manufacturing agreement could be terminated is 23 November 2024.
2. Subject to the Company receiving the Maximum Subscription under the Offer
LGP’s cultivation facility, located in Western Australia, operates an indoor, closed-loop hydroponic system to ensure cannabis plants are cultivated under highly specific climate, light, and irrigation control at all times.
There are currently two flowering rooms operating in the cultivation facility which have the capacity to produce cannabis flower to manufacture approximately 15,000 bottles of medicinal cannabis oil per annum. Following the completion of a planned expansion of its cultivation operations, which is targeted for completion in Q1 CY2020, and subject to Office of Drug Control (ODC) licensing and permitting, a total of nine flowering rooms are scheduled to be operational along with two vegetative and two mother rooms, together with drying, manufacturing and storage capability at premises on an adjoining site. At full capacity it is expected that the cultivation facility will have the capacity to produce sufficient cannabis flower to manufacture more than 110,000 bottles of medicinal cannabis oil annually, the equivalent of approximately 1,750kgs of dry cannabis flower.
LGP’s cultivation facility in Western Australia
LGP has entered into an exclusive six-year agreement with its manufacturing partner (Manufacturing Partner), a fully licensed TGA GMP-certified pharmaceutical manufacturing company in Western Australia, to manufacture final dose form medicinal cannabis products on LGP’s behalf.
LGP’s medicinal cannabis products are manufactured by the Manufacturing Partner on a semi-automated production line on a batch-by-batch basis in accordance with applicable GMP guidelines in facilities audited and certified by the TGA.
The Manufacturing Partner has the ability to produce oil, gel cap, suppository and sublingual spray products, and is anticipated to be able to manufacture dry cannabis flower in early 2020. The Company is actively monitoring market demand, with a view to determining which delivery systems are preferred in the various potential markets.
LGP has developed a proprietary range of LGP-branded products suitable for distribution in the domestic and certain international markets. The current product range comprises the “Classic” line of oil-based oral medicinal cannabis products, providing three oil formulations with different THC:CBD ratios.
LGP has sold over 4,500 units of product since launch with approximately 45% of patients using LGP products prescribed for the first time over the 3 months prior to the date of the Prospectus. LGP is continuing its stability testing which is currently for 24 months in cold storage conditions (2-8°C) and twelve months at ambient conditions (below 25°C). Such stability testing is commercially recommended for many domestic and international distributors to sell pharmaceutical products.
In addition to oil-based products, LGP is also able to produce dry cannabis flower meeting TGO93 requirements. Interest for dry cannabis flower has been expressed from distributors in European markets.
Overview of LGP Product Range
1. Fulfilment of order is expected to take place following completion of cultivation facility expansion
LGP is also considering developing a “Plus” product range. Plus would combine the Classic product with the Company’s small particle formulation technology to potentially enable reduced dosing requirements compared to LGP’s current Classic oil line. LGP also plans to develop a line of “Plus Natural” products, which would use LGP’s patented small particle formulation containing higher ratios of carboxylated cannabinoids.
LGP currently distributes its products across Australia via its Australian distribution partners and intends to continue growing its market penetration and market awareness of its medicinal cannabis products within Australia. As it expands, LGP also proposes to capitalise on Australia’s international reputation for trusted and high-quality products by exporting its products offshore, including to Germany, the UK, Canada and New Zealand.
LGP currently sells and distributes its medicinal cannabis products in Australia through Oxford Compounding Pty Ltd for patients in Western Australia and Health House International Pty Ltd for patients in other states and territories.
As of October 2019, more than 1,400 patients in Australia have used LGP’s products.
Cumulative Number of Australian Patients using LGP Products
Internationally, LGP has identified Germany as a highly prospective territory for market entry, as medicinal cannabis products have been approved for reimbursement through health insurance. The Company has recently received its first commercial order of 2,400 units to be distributed to Germany. Fulfilment of this order is expected to take place following completion of the cultivation facility expansion.
LGP has also entered into proof-of-concept conditional purchase orders with parties in Canada and New Zealand for the sale of LGP products.
LGP believes that its brand recognition and reputation as a medicinal cannabis provider will likely be derived from its commitment to clinical development activities aimed at developing innovative products, including novel delivery systems and precisely formulated cannabinoid products, as well as improving the methods, processes and technologies employed to manufacture such products on a commercial scale.
The Company has a number of clinical development activities underway, including:
LGP holds all licences and permits required in Australia to cultivate, produce and sell medicinal cannabis products, and all licences to import and export medicinal cannabis products offshore. The Company’s Manufacturing Partner holds all relevant licences to import and export medicinal cannabis products as well as all licences and permits to manufacture and distribute finished medicinal cannabis products for Little Green Pharma. The Company holds the following licences and permits:
A summary of the licences and expiration dates is provided in Section 3.10 and 9 of the Prospectus.
LGP operates in the medicinal cannabis industry. Medicinal cannabis is defined as cannabis products used under recommendation by a medical professional for a defined medical condition. These products are typically provided in the form of either
An increasing number of countries are introducing legal frameworks that allow for the cultivation, manufacture, sale and consumption of cannabis products under appropriate licensing arrangements. This has significantly increased the availability of medicinal cannabis and has stimulated the number of patients and authorisers. Over the past two-to-three years alone, countries including Germany, UK and Australia have introduced legislated legal frameworks for medicinal cannabis. Over time, consumption will be further stimulated as medicinal cannabis becomes available in additional countries.
Countries with Legal Framework for Medicinal Cannabis, 2019
Michael David Lynch-Bell – Independent Non-Executive Chair
Michael is an experienced corporate finance executive and consultant. Michael was appointed on 13 November 2018. His early Ernst & Young career was focused on auditing clients within the oil and gas sectors and later added mining to his portfolio. Michael also led Ernst & Young’s UK IPO and Global Natural Resources transaction teams in the Transaction Advisory practice.
Fleta Jennifer Solomon – Managing Director
Fleta drives the strategic vision of the business and as Managing Director of LGP has grown the company from a medicinal cannabis startup to an industry-leading medicinal cannabis brand in Australia. Fleta has 17 years’ experience in corporate and consumer health markets. Over ten years, Fleta established, grew and sold one of Australia’s largest providers of workplace health services
Angus McDougall Caithness – Executive Director
Angus is an experienced corporate finance executive and consultant in Australia and international markets. Angus has ASX experience as a non-executive Director of Lindian Resources Limited (ASX:LIN), CFO of Hunnu Coal (ASX:HUN) and Company Secretary for the IPO of Haranga Resources (ASX:HAR).
Dr Neale William Fong – Independent Non-Executive Director
Neale is a registered medical practitioner with over 35 years in senior leadership roles in private hospitals, the public health systems, management consulting, academia, health research, aged care and not for profit organisations. He is currently Chair of the Western Australian Government Country Health Service Board, Professor of Healthcare Leadership at Curtin University, Executive Chairman of Bethesda Health Care and a Director of a number of health-related start-up companies.
Bhavesh Morar – Chief Financial Officer
Bhavesh has extensive experience in finance, commercial, business turnarounds and change management. Prior to LGP, Bhavesh held senior finance roles with BHP for 11 years in their nickel business and global functions.
Paul Long – Chief Operating Officer
Paul is a key executive driver of the Australian operational team at LGP as well as leading the export growth opportunities into Germany, United Kingdom, Canada and New Zealand. Paul has a successful track record across multiple health related organisations in Australia. Paul founded one of Australia’s largest workplace health companies in 2004.
Craig Basson – Company Secretary
Craig is a Fellow of the Institute of Chartered Accountants, a Fellow of the Governance Institute of Australia, a graduate of the Australian Institute of Directors’ Course and holds a Bachelor of Commerce (Hons) degree in accounting and finance.
An investment in Little Green Pharma Ltd is subject to a range of risks including but not limited to failure to maintain required licences, facility expansion, reliance on key personnel, key inputs for growing medicinal cannabis, agriculture and export and import risk. For more information read Section 6 of the Prospectus. These risks should be considered in detail.
Section 734(6) disclosure: The issuer of the securities is Little Green Pharma ACN 615 586 215. The securities to be issued are ordinary shares. The disclosure document for the offer can be obtained by clicking on the link above. The offers of the securities are made in, or accompanied by, a copy of the disclosure document. Investors should consider the disclosure document in deciding whether to acquire the securities. Anyone who wants to acquire the securities will need to complete the application form that will be in or will accompany the disclosure document (which can be done via the electronic application form which will become available by clicking the bid button above).
OnMarket has a limited allocation. The offer may close early and the 'Pay By' dates may change. Duplicate bids under the same investment profile, investor name or residential address may be cancelled.
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Little Green Pharma Ltd (ASX: LGP) is a leading Australian medicinal cannabis business and was the first Australian company to achieve production of a locally-grown medicinal cannabis product for patient use. With nearly two years of successful cannabis cultivation, LGP produces locally grown product in final dose form that has been used by more than 1,400 patients in Australia, with over 4,500 bottles of medicinal cannabis oil sold.
LGP is currently expanding its cultivation facility to increase production capacity to more than 110,000 bottles of medicinal cannabis oil per annum, and has recently received its first commercial order of 2,400 units to be distributed to Germany.
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