The purchase order received from The Valens Company is for the Australian and New Zealand markets, but marks the first step toward accessing bigger markets in Europe.
Following its long term exclusive deal with Canada’s The Valens Company last week, Epsilon Healthcare (ASX:EPN) announced today it has received the first orders totalling $540k.
The orders are for white-labelled cannabis products in various formulations produced at Epsilon’s Southport Facility, and to be sold in Australia and New Zealand.
Epsilon will aim to complete delivery of the first two pallets within the coming week.
Further deliveries for the New Zealand market are expected to be completed in the early calendar year of 2022.
Approximately 65% of the $540k order value is expected to be received this month, while the remainder is to be received when the last batch is delivered.
“This is a significant milestone for the partnership between Epsilon and The Valens, as it represents both Valens’ first sale of GMP product in the Australian and New Zealand markets, and Epsilon’s first manufacturing order under this new exclusive partnership,” commented Epsilon CEO, Jarrod White.
Both companies expect to see further orders of a similar or greater value to continue on an ongoing basis, particularly in the export market.
This is because Epsilon’s Southport Facility is capable of meeting the recent demand triggered by the global shift toward GMP (good manufacturing practice), and EU GMP production standard.
Jeff Fallows, president of The Valens Company, said that his company along with Epsilon is ready to take on the European market.
“The order represents Valens taking advantage of Epsilon’s large scale GMP manufacturing capability, with the capacity and means to provide further accelerated access to Europe through their TGA and EU GMP capabilities,” he said.
“Through Cannvalate’s significant local market presence and leading distribution platform, and with Epsilon’s manufacturing capability, Valens is well placed with strategic access to a market we see through recent trends being poised for dramatic growth.”
Strategic partnership
Under the partnership agreement, Valens will fund all operational and capital expenditure of the Southport facility, operated by Epsilon’s wholly owned subsidiary THC Pharma.
In return, Valens will be granted preferential access for up to 85% of the operational capacity over the next five years, with an option to extend the arrangement for a further six years.
The deal will also see Valens and Cannvalate source and deliver to Epsilon contract manufacturing opportunities for Epsilon to undertake at its Southport facility.
Cannvalate is Australia’s largest medicinal cannabis distributor and clinical research organisation, with an estimated market share of almost 50% of cannabis prescriptions in the country.
Through this three-way partnership, Epsilon is expected to receive the full value of all sales revenue passed through the Southport facility.
The 930 sqm purpose-built botanics extraction facility is capable of extraction of raw plant material, downstream purification, and isolation processing.
It has its own QC lab and Grade-D cleanroom space for the manufacture of oral dose format products.
The agreement includes an exclusivity arrangement where Valens will not sell or supply any medicinal cannabis products in Australia or New Zealand other than through the Southport facility.
Epsilon Healthcare is the first ASX-listed entity to fully own and operate end-to-end commercial medicinal cannabis production facilities under Australia’s cannabis regulations.
As part of the Valens partnership, Epsilon will also acquire AlternaMed from Cannvalate.
AlternaMed has a portfolio of three patent-pending applications for novel cannabinoid therapeutic agents, targeting irritable bowel syndrome, menstrual pain, and smoking cessation.
“Epsilon, Valens, and Cannvalate are looking forward to the receipt of more orders to come as we continue to expand our partnership and explore new markets together,” White said.
This article was developed in collaboration with Epsilon Healthcare, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.