REG - Seed Innovations Ltd - Investee Company Update: Little Green Pharma Ltd

Seed InnovationsAnnouncement

01/12/2022 07:00

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

 

- Ends -

 

For further information on the Company please visit:  www.seedinnovations.com
(http://www.seedinnovations.com/)   or contact:

 

 Ed McDermott       SEED Innovations Ltd         E: info@seedinnovations.co (mailto:info@seedinnovations.co)

 Lance de Jersey
 James Biddle       Beaumont Cornish Limited,    T: (0)20 7628 3396

 Roland Cornish     Nomad
 Isabella Pierre    Shard Capital Partners LLP   T: (0)20 7186 9927

 Damon Heath        Broker
 Catherine Leftley  St Brides Partners Ltd,      E: info@stbridespartners.co.uk (mailto:info@stbridespartners.co.uk)

 Isabelle Morris    Financial PR

 Max Bennett

 

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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