Medicinal cannabis company ECS Botanics (ASX: ECS) is quickly growing its international sales pipeline following their acquisition of Murray Meds last month, securing UK pharmaceuticals company The Armour Group on a 3-year export deal.
The agreement will be for the sale, export and distribution of medicinal cannabis products in the UK for clinical trials initially, with plans to also distribute to TAG’s established channels in Germany pending product registration.
Assuming minimum order volumes are met, the agreement will increase ECS Botanic’s revenue by $500,000 but the Company expects the order sizes to increase after 12 months as European customers increase their exposure to medicinal cannabis products.
“This is a great result as Murray Meds starts its journey as part of ECS Botanics, and a strong base from which to expand our penetration into the export market, particularly in Europe,” said ECS Botanics Managing Director, Alex Keach.
“Fewer Australian companies are cultivating their own supply for export into Europe, we believe this illustrates the strong supply and manufacturing foundations ECS is building which supports our ability to supply high quality EU GMP compliant final dose medicine at low cost.
“TAG has a strong ecommerce platform which it will leverage to distribute the products initially in Germany, followed by the UK and other European countries.”
Core to winning this supply contract was last month’s acquisition of Murray Meds, a cannabis cultivator in Victoria which holds a Cultivation, Research and Manufacturing Licence from the Australian Office of Drug Control and permits to cultivate and produce 3,500 kilograms of medicinal cannabis.
In northwestern Victoria with the optimal climate for cultivating cannabis, Murray Meds is one of the lowest cost producers in Australia with production costs below 60c/gram.
Excluding the revenues generated from Murray Meds which will be accretive towards future ECS financials, ECS Botanics reported $383k in cash receipts for the Quarter ending 31 December 2020 but is expected to increase those numbers once Murray Meds and their manufacturing capacity are fully integrated into ECS.
ECS shares responded well to the UK supply contract to open at $0.074, a rise of 8.8% on their previous $0.068 close.
Alfred Chan is an Analyst at Emerald Financial, specialising in ASX-listed small cap companies.
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