On November 30th, ECS Botanics Holdings Ltd (ASX: ECS) announced that the company has scored a new multi-million dollar supply deal with major cannabis company Cannvalate.
The deal will see ECS Botanics supply cannabis resin to Cannvalate for the next three years. ECS Botanics will generate roughly $592,500 in revenue from the deal in the first year, and the agreement also comes with a minimum obligation of $4.9 million over the remaining years.
ECS Botanics will produce this cannabis locally in its Victorian facility with help from Sun Pharma (Sun Pharmaceutical Industries’ Australian subsidiary). Just last week, Sun Pharma and ECS Botanics signed a deal that will see ECS Botanics provide Sun Pharma with 600 – 1,750 kilograms of cannabis biomass over the next five years. Sun Pharma will then help turn this biomass into GMP resin with extraction equipment.Â
ECS Botanics supply deal with Cannvalate is a big deal for the company. Cannvalate represents 50% of the doctors who supply medical cannabis and runs Australia’s largest medical cannabis distribution network. ECS Botanics’ resin will also go to The Valens Company (TSC: VLNS) through a deal Cannvalate has with the Canadian cannabis company.
According to ECS Botanics, the supply deal will ensure Australian medical cannabis users continue to have enough of their medications, even as demand for medical cannabis skyrockets. ECS Botanics also noted that the Therapeutic Goods Administration (TGA) is expected to slap the industry with strict quality standards, and as a result, the demand for Australian-grown medical cannabis may be about to grow.
Cannvalate’s COO, Darryl Davies, celebrated the deal as a win for the industry as a whole.
To see a transaction of this magnitude between industry leaders working harmoniously together is a glimpse into the future of the Australian medicinal cannabis industry.
ECS Botanics will start supplying resin to Cannvalate within the next year. The supply agreement between the two companies will renew automatically at the end of the contract, provided neither company pulls out.
