Epsilon shares up 10pc after $3.6m loan extension and targeting to be EBITDA positive in 2022
Health & Biotech
Health & Biotech
A major partnership deal has provided a pathway for Epsilon to be EBITDA positive in 2022 as the company extends its $3.6m debt facility for 12 months.
Medicinal cannabis company, Epsilon Healthcare (ASX:EPN) is forecasting being EBITDA positive after entering into an exclusive partnership with Canadian-based The Valens Company.
Under the deal, Valens will fund all operational and capital expenditure of Epsilon’s Southport facility in Queensland, in return for preferential access for up to 85% of its operational capacity over the next five years.
Valens will use Epsilon’s facility for all production of medicinal cannabis products for sale in Australia or New Zealand, taking advantage of Epsilon’s GMP (good manufacturing practice) capability.
Epsilon CEO Jarrod White said the partnership means the company should now be profitable at an operating level next year.
“With our recently announced partnership with The Valens Company, we have a clear pathway towards being EBITDA positive into 2022,” White said.
“This partnership will be further strengthened by our significant production pipeline for the Southport facility through other recently announced partners including Cannvalate and Cannim.
Epsilon has secured an extension of its debt facility with Mitchell Asset Management for a further 12 months.
The loan terms remain the same with $3.6 million now repayable on October 31, 2022.
The original facility amount was $4 million with the company having made ~$400,000 in principal repayments over the first year.
White said the extension on the company’s existing debt facility will avoid the need for any further equity capital raising to repay debt at this time.
“Securing this extension of our debt facility places the company in a strong financial position to execute on our growth initiatives,” he said.
Epsilon has the largest GMP cannabis manufacturing facility in the southern hemisphere at Southport, which is attracting the interest from the medicinal cannabis community worldwide.
Last week, Epsilon announced it had signed a two-year deal with global cannabis powerhouse Cannim to be its Australian GMP manufacturing partner.
Primarily cultivating in Jamaica on a 500-acre farm under Good Agricultural and Collection Practice (GACP), Cannim has significant supply agreements for flower and oils into Germany, the United Kingdom and Australia.
The use of medicinal cannabis is continuing to grow on a global scale, although it remains mostly tightly regulated. In Australia, the Therapeutic Goods Administration (TGA) has permitted consumers to obtain low-dose cannabinoid (CBD) oils and pills from pharmacists.
The Epsilon share price was up 10.71% today to 16 cents.
This article was developed in collaboration with Epsilon, 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.