Cannabis microcap snags supply agreement with German major

A week after being hit with a $372,960 penalty by the TGA for alleged unlawful advertising of cannabis on 28 occasions, Perth-based cannabis microcap Little Green Pharma (ASX: LGP) has entered an exclusive supply agreement with its fourth key wholesalers and distributor in Germany.

Fixed price deal

The stock was up 2.13% at the open on the strength of EUR3m ($4.5m) a fixed priced deal to supply the German cannabis pioneer, Cannamedical, with the supply of bulk medicinal cannabis from Denmark to Germany over two years.

In addition to a manufacturing facility located in WA, the company has a manufacturing facility capable of producing over 30 tonnes of medicinal cannabis biomass per annum in Denmark.

First shipment by June 2023

Subject to a number of conditions, including entry into a QA Agreement, the company will develop product to meeting THC specifications and Cannamedical requirements.

Final development of the Product is expected within two to six months, with first shipment expected sometime between January and June 2023 depending on final product licensing requirements.

What is Cannamedical

To the uninitiated Cannamedical is a German-based pharmaceutical pioneer with licenses to import medicinal cannabis into Germany and distribute and export it within the EU.

Cannamedical has 25% of the German medical cannabis market, underpinned by a unique boutique product portfolio.

Since 2021, the company has been part of the Semdor Pharma Group – one of the leading specialty pharmaceutical groups in Europe specialising in narcotic and medicinal cannabis development, manufacturing, warehousing, and distribution.

Recent financials

Year-to-date the company’s share price has tumbled from around $0.63 to $0.24.

Consensus does not cover this stock.

Based on Morningstar’s fair value of $0.55 the stock appears to be undervalued.

At the half year ended 31 December 2021, the company reported a significant increase in revenue to $7,321,504, up 94% on the previous period.

The net loss from ordinary activities increased from a net profit after tax of $484,329 to a net loss after tax of -$8,557,855 due to the increased expenditure on the development of new medicinal cannabis strains at the Company's Danish facility.

Little Green Pharma share price snapshot.