Hemp licences granted to Murray River Organics and Althea
Written on the 5 June 2019 by Matt Ogg
Two ASX-listed companies have received regulatory breakthroughs today after receiving hemp cultivation licences by Agriculture Victoria.
Shares in Murray River Organics (ASX: MRG) and Althea (ASX: AGH) rose by around 6.4 per cent and 10.2 per cent respectively in early trading.
The licence, formally known as an 'Authority for Low-THC Cannabis' for commercial purposes relating to non-therapeutic use, brings new diversification options to Murray River Organics which has traditionally focused on dried fruit production.
MRG will be able to grow the crop on its certified organic property in Nangiloc, Victoria, which chief executive Valentina Tripp says will complement the company's dried vine fruit business and a developing segment in value-added and organic products.
"The Australian hemp market is in its infancy; the Company now has the potential to be the first large scale grower of organic hemp in Australia to meet the strong demand in global markets," says Tripp.
"The growing demand for organic hemp-based foods is an emerging trend in the food industry and we believe this offers a unique opportunity for MRG."
The grower is also reviewing plans for the first phase of Project Magnum, a development of the 2,300 hectare Nangiloc property.
"This also affords us the opportunity of establishing and developing another vertical integration of production through to retail ready product while building strategic partnerships with such products," says Tripp.
"We are confident that growing organic hemp will contribute to the growth of the organic foods industry in Australia.
"Low-THC cannabis can be used in a variety of food products including snacks and beverages, as well as supplements, and the potential for the
agricultural sector in Australia to embrace crops such as organic hemp is exciting."
As one of Australia's leading cannabis companies, Althea has seen most of its recent development in the medicinal cannabis space with milestones for prescriptions.
But the new approval could give the business new avenues, and has coincided with the announcement of an exclusive agreement with Australia's leading tissue culture laboratory, Tissue Culture Australia.
Through the deal, TCA will assist Althea in developing proprietary tissue culture protocols for cannabis plants.
"Being granted the Hemp Cultivation Licence allows us to obtain hands-on production experience with cannabis plants in a tissue culture laboratory environment, immediately," says Althea's director of cultivation, Daniel Mansfield.
"We envisage our own cultivation capabilities being up to 10% more productive utilizing tissue culture techniques, as it will allow us to remove the traditional mother stock and propagation areas from our forthcoming production facility which increases our flowering capacity.
"Being able to familiarise ourselves with the tissue culture processes now puts us in a stronger position for when our Victorian facility is commissioned in 2020."
Althea highlights tissue culture has many advantages over traditional cannabis propagation in terms of yield size, disease resistance and superior control over genetics, and is rapidly becoming the preferred method for large-scale cannabis producers.
"Tissue culture allows for rapid multiplication of starter plants, meaning we will be able to reach capacity much faster than we could using traditional propagation methods at our Victorian production facility," notes Althea CEO Joshua Fegan.
"The intellectual property we intend to develop presents great commercial opportunities for Althea in hemp food and Isolated-CBD markets also, where large scale outdoor growers are beginning to use tissue culture starter plants as the source to plant out their crops.
"The uptake of non-therapeutic CBD products has been strong in Europe and the USA and consumers are beginning to ask questions about the source of the active ingredients going into these products.
"There is certainly a gap in the market for a supplier of high quality, pathogen free hemp plants derived from tissue culture."
Elixinol raises $50 million
In other news from the sector, Australia's largest listed cannabis company Exinol today announced it successfully completed a $50 million institutional placement to fund its ongoing expansion initiatives, particularly its growing US cannabidiol (CBD) business.
The group plans to issue approximately 12.8 million shares at A$3.90 per share, representing an 8.7 per cent discount to the last closing price as at Monday, 3 June 2019.
Dual-listed Elixinol, which is also listed with the ticker 'ELLXF' on the OTCQX, entered into a trading halt yesterday pending the announcement. Since re-opening shares have fallen 4.68 per cent to $4.07 at noon.
"I acknowledge the strong support of new and existing institutional investors to accelerate the Company's expansion in the US and globally," says Elixinol's global chief executive officer Paul Benhaim.
"We are witnessing an unprecedented positive shift in consumer appetite for CBD and hemp derived products.
"Elixinol plans to double its current production capacity in the US. Further, by securing additional raw materials, the Company will be well positioned to accelerate the growth of Elixinol branded CBD products and strategic opportunities."
This follows a $40 million placement completed in September to fund US and European growth initiatives, and combined these two placements account for close to 18 per cent of the group's market capitalisation.
SUDA reaches deal with Cann Pharmaceutical Australia
Elsewhere, Perth-based SUDA Pharmaceuticals has signed a binding term sheet for an exclusive licence with Cann Pharmaceutical Australia (CPA) to develop and supply an oral spray of pharmaceutical-grade cannabinoid derivatives.
Cann Pharmaceutical is a subsidiary of Israeli group Better Holdings and plans to develop the spray for treating drug-resistant epilepsy, melanoma and motion sickness.
CPA and SUDA are completing negotiations of the definitive agreement based on the terms of the binding term sheet, including an upfront fee of $200,000, a further $1.3 million linked to the completion of various milestones and achieving commercial sales targets, and royalty payments of 10 per cent in net sales.
"We are delighted to be working with CPA in the field of medical grade cannabis ("MGC") to assess the feasibility of formulating MGC utilising our OroMist® and Hydrotrope platforms," says SUDA CEO Stephen J Carter.
"We believe that our technology can offer unique advantages compared to other routes of administration which will further benefit patients seeking MGC therapy."
Business News Australia
Author: Matt Ogg