TIDMFFWD
FastForward Innovations Limited
22 June 2021
RNS REACH
FastForward Innovations Ltd / AIM: FFWD / Sector: Closed End
Investments
22 June 2021
FastForward Innovations Ltd
("FastForward", "FFWD" or the "Company")
Investee Company Update: Little Green Pharma Ltd
FastForward Innovations Ltd, the AIM quoted company focusing on
making investments in fast growing and industry leading businesses,
is pleased to note the announcement by portfolio company Little
Green Pharma Ltd ('LGP') of the acquisition of a fully operational
GACP cultivation and GMP licensed medicinal cannabis asset in
Denmark with the capacity to produce in excess of 20 tonnes of
biomass per annum including 12 tonnes per annum of dried cannabis
flower.
LGP acquired the facility for C$20 million, with 50% to be paid
on completion and 50% payable in 12 months' time.
The acquisition of the facility in Denmark is a strategic fit
with LGP's existing operations, immediately providing LGP with
additional cultivation and manufacturing capacity and accelerating
its planned capacity expansion by up to two years and is consistent
with LGP's EU expansion strategy.
Ed McDermott, CEO of FastForward Innovations, commented: "We are
thrilled to see the progress being made at Little Green Pharma, one
of our most recent investments in the medicinal cannabis space.
This acquisition of an already operational Danish facility will
expedite cultivation and manufacturing capacity in the EU,
accelerating LGP's growth strategy."
The announcement is set out below without material changes or
adjustments other than for the inclusion of links and can be viewed
in full on LGP's website via the following link:
https://investor.littlegreenpharma.com/site/PDF/b8e1531f-54ef-4a21-bbb6-3fc79533be57/LGPacquiresDenmarkfacilityandundertakesshareplacement
LGP TO ACCELERATE GROWTH STRATEGY WITH ACQUISITION OF
WORLD-CLASS PRODUCTION AND MANUFACTURING FACILITY IN DENMARK
SECURES ACQUISITION FUNDING WITH A$27.2 MILLION CAPITAL
RAISING
22 June 2021
Little Green Pharma Ltd (ASX: LGP, "LGP" or the "Company") is
pleased to announce the acquisition of a world class cannabis GACP
cultivation and EU-recognised GMP licensed cannabis production
facility located in Denmark ("Denmark Facility") as well as the
receipt of firm commitments to raise A$27.2 million by way of
placement to institutional and sophisticated investors
("Placement").
LGP plans to ramp up production at the Denmark Facility in line
with market demand and anticipates producing LGP-branded and
white-label medicines as well as bulk cannabis flower products for
supply into global markets.
The acquisition positions LGP as a leading global pure play
medicinal cannabis producer and owner of one of the largest
cannabis production assets in Europe.
The Denmark Facility
The Denmark Facility, which meets EU GACP cultivation standards
and holds an EU- recognised GMP manufacturing licence, is located
in regional Denmark. Comprising a 21,500 m2 cultivation site and
4,000 m2 post- harvest GMP manufacturing site, LGP's Denmark
Facility has the capacity to produce in excess of 20 tonnes of
biomass per annum including 12 tonnes per annum of GMP-manufactured
cannabis flower for supply as bulk and finished medicinal cannabis
flower products.
LGP acquired the Denmark Facility from Canopy Growth Corporation
(TSX:WEED, NASDAQ: CGC) ("Canopy") for a total consideration of
C$20 million ("Acquisition"). The Acquisition was executed via a
sale and purchase agreement ("SPA") to acquire 100% of the
securities in Canopy Growth Denmark ApS (hereafter "LGP Denmark"),
which owns and operates the Denmark Facility.
Under the terms of the Acquisition, the Company acquired LGP
Denmark for a total of C$20 million in cash, with C$10 million paid
at Completion ("Initial Consideration") and the remaining C$10
million payable in 12 months pursuant to a retained loan at an
imputed interest rate of 12.5%.
LGP plans to ramp up production at the Denmark Facility in line
with market demand and anticipates producing LGP-branded and white-
label medicines as well as bulk cannabis flower products for supply
into global markets.
The Acquisition positions LGP as a leading global pure play
medicinal cannabis producer and owner of one of the largest
cannabis production assets in Europe.
Acquisition Strategic Rationale
Accelerates planned capacity expansion and market
penetration
-- LGP was already planning to expand its cultivation and
manufacturing capacity to meet growing market demand - decision
point was build vs buy
-- Decision taken to buy:
o significantly accelerates planned capacity expansion by up to
two years
o enables faster market penetration and brings growth
forward
o LGP proposes to embark on a rapid, market- share acquisition
strategy by placing Denmark-produced strategically-priced new LGP
brands / strains and white-label products into EU and global
markets
Significantly increases capacity
-- Acquisition immediately increases LGP's cultivation capacity
to >23 tonnes per annum of cannabis biomass (up from 3 tonnes) -
a 8x increase
-- Significant production capacity ensures self- sufficiency and long-term security of supply
-- Provides future expansion capability in Europe
Consistent with expansion strategy
-- Acquisition consistent with LGP's EU expansion strategy and
clear strategic fit with LGP's existing operations and
capabilities
Platform to access EU markets
-- Provides platform to leverage the Company's early mover advantage in key EU markets
-- Additional capacity positions the Company to meet market
demand driven by LGP's established brand and distribution channels
in Europe
-- Location within EU avoids many EU export/ import barriers and
requires substantially less export and logistics resourcing than
sales from Australia into Europe
-- Improves distribution strategy by serving European customers from Europe
-- LGP Denmark has previously exported products to Germany, Australia and Czech Republic
Increased economies of scale
-- Efficiency gains through greater scale of operations
-- Denmark Facility expected to produce GMP medicinal cannabis
flower at superior economics (cost per gram) to West Australian
Facility
-- Further cost efficiencies driven by manufacturing and lab testing being performed in-house
-- Future cost efficiencies to be driven by additional automation
Attractive deal metrics
-- Acquisition consideration compares very favourably with facility investment to date
Superior cost of incremental capacity expansion and avoidance of
over-capitalisation
-- Acquisition consistent with LGP's strategy of acquiring or
building adequate capacity to meet market demand and avoiding
over-capitalization
-- Significantly lower cost of incremental capacity expansion
through acquisition, with acquisition cost of A$1.0 million per
tonne approximately one third of the A$2.7 million per tonne cost
of building equivalent capacity in Australia while also
representing a time saving of up to two years
Geographic diversification
-- Two strategically located production facilities from which
LGP can service Southern and Northern hemisphere markets
Continued medicinal cannabis focus
-- Maintains LGP's sole focus on medicinal cannabis
-- The Danish pharma and biotech industry is among the best and most innovative in the world
-- Ensures continued access to market jurisdictions and
investors that do not permit engagement with companies undertaking
recreational cannabis activities
Access to best practices and knowledge
-- LGP Group will benefit from internally sharing best-practice
cultivation, manufacturing, and pharmaceutical practices and
expertise
-- 60 staff with average of three years' cannabis industry
experience and trained by the world's largest cannabis company in a
country known for its high GMP standard
LGP's Managing Director Fleta Solomon said "The Acquisition is a
step change for LGP. We have been speaking for some time about the
need to increase our production capacity and the Denmark Facility
not only gives us the cultivation and manufacturing capacity we
need but does so immediately. We won't be constrained by the
two-year build and permitting time required to expand our existing
West Australian Facility.
"We are well positioned in the market to capitalise on the brand
equity LGP has built in Europe and Australia, with the Denmark
Facility providing immediate access to medical grade product at
volumes that will allow us the opportunity to accelerate our growth
strategy.
"We are confident this Acquisition is an efficient use of our
capital and will drive long term value for our shareholders. The
Denmark Facility provides more than eight times the capacity of our
previous planned production expansion.
"Purchasing the Denmark Facility provides both cost and time
savings and was a preferable option to building out production
capacity at our existing facility. We'll keep our foot on our
Australian property for longer term growth but are now able to
redeploy the significant capex investment we had planned.
"We greatly appreciate the support of our institutional
shareholders in helping us accelerate our growth strategy."
Hancock Prospecting's General Manager - Business Development Mr.
Dan Wade said "In supporting the Company's investment in its new
facility and becoming a substantial shareholder, we hope to help
many thousands of Australian and overseas patients access
much-needed cannabis medicines.
"We believe medicinal cannabis has a vital role in helping to
treat a range of chronic conditions, and we're pleased to support
an Australian medicinal cannabis company in LGP that continues to
put patients first and contribute to the development of this
helpful & emerging industry."
Placement Details and Use of Proceeds
LGP has received firm commitments to raise A$27.2 million
(before costs) from existing investors, including a A$15 million
commitment from Hancock Prospecting Pty Ltd ("Hancock
Prospecting"). Hancock Prospecting is one of Australia's largest
mining and resources companies and will hold over 10% of the
Company following the Placement.
Approximately 45.3 million new fully paid ordinary shares in the
Company ("New Shares") will be issued under the Placement at an
issue price of A$0.60 per New Share ("Issue Price").
Proceeds of the Placement will be applied to fund:
-- the Initial Consideration of the Acquisition;
-- capital expenditure works to permit scaling of the Denmark Facility to 50% capacity;
-- the build out of the Company's European sales team; and
-- working capital requirements.
The Issue Price of A$0.60 per New Share represents a 9.8%
discount to the 10-day Volume Weighted Average Price ("VWAP") up to
and including 18 June 2021 and a 7.7% discount to the last traded
price (as at 18 June 2021).
New Shares will be issued under the Company's available ASX
listing rule 7.1 (26,719,833 shares) and 7.1A (18,613,500 shares)
placement capacity and will rank pari passu with existing shares in
the Company. Settlement of the Placement is expected to occur on or
about Monday 28 June 2021.
Canaccord Genuity (Australia) Limited acted as Lead Manager to
the Placement.
Background to Denmark Facility and LGP planned integration
The Denmark Facility is currently operating at 25% of its
existing nameplate capacity and with current net monthly cash costs
of C$1 - 1.5 million. LGP will immediately prioritise reduction of
these cash outflows through a combination of sales ramp-up and cost
reduction projects and will target cash generation as soon as
practicable. LGP believes it can scale the Denmark Facility to 50%
production using its current resources and with only minimal
additional capex.
In addition, the Denmark Facility:
-- has inventory of approximately one tonne of cannabis flower
for potential sale into international markets, subject to relevant
import/ export regulatory requirements;
-- is significantly advanced along the marketing authorisation
pathway to supply a cannabis flower medicine into the Danish
market. The Company anticipates releasing such cannabis medicine in
early CY2022;
-- has an available footprint sufficient to accommodate
additional manufacturing equipment and operations for medicinal
cannabis oils or more complex formulations;
-- conducts all product testing inhouse (except for
microbiological and pesticide testing), which testing capability
could potentially provide a third-party testing service revenue
stream;
-- possesses world-class operational and quality teams, allowing
the sharing of global best practices within the LGP Group; and
-- is already engaged in various discussions with prospective
offtakers and distributors for its flower production.
Status of medicinal cannabis in Denmark
Denmark is a significant pharmaceutical producing country, with
17% of Danish exports comprising pharmaceutical or health-sciences
products.
The Danish medicinal cannabis industry currently operates under
a four-year pilot scheme ("Pilot Scheme"), which permits the supply
and prescription of medicinal cannabis products to Danish patients
and the cultivation, manufacture, and export of medicinal cannabis
to overseas markets.
The Pilot Scheme is due to end in December 2021 however the
Danish Parliament recently announced its intention to permanently
enshrine the cultivation, manufacturing, and export regime into
Danish law and to extend the local Danish prescriber Pilot Scheme
for a further four years. Under Danish law, medicinal cannabis
manufacturers may export cannabis medicines into countries that
also permit the sale of recreational cannabis products.
Status of West Australian Facility and planned capacity
expansion
The Company confirms its intention to continue to acquire the
properties underlying its West Australian Facility and adjoining
properties. Ownership of this land protects the significant
investment LGP has made in its existing cultivation and
manufacturing facilities and provides long term future growth
capacity.
The Acquisition significantly increases the Company's
immediately available cultivation and manufacturing capacity and
allows LGP to redeploy the significant capital investment
previously earmarked to expand cultivation capacity at its West
Australian Facility. The Company will continue to progress its
plans to expand manufacturing capacity at its West Australian
Facility to match its current cultivation capacity.
Material terms of the Acquisition
The material terms of the Acquisition are attached as Schedule 1
.
Release of trading halt
The Company confirms this announcement releases its current
trading halt.
Alistair Warren
Company Secretary
Little Green Pharma
E: alistair@lgpharma.com.au
M: +61 8 6280 0050
Fleta Solomon
Managing Director
Little Green Pharma
E: fleta@lgpharma.com.au
M: +41 782 260 200
Schedule 1
Material terms of the Acquisition
Under the SPA:
-- the Purchase Price for the Acquisition is C$20 million, with
C$10 million paid upon Completion and the remaining C$10 million
payable in 12 months pursuant to a retained inter-Group loan at an
imputed interest rate of 12.5% ("Retained Loan").
-- the Company acquired 100% of the securities of LGP Denmark on
a cash- free basis and free of all corporate debt other than the
Retained Loan above.
-- the Seller Group will not produce or export cannabis products
from Denmark or sell medicinal cannabis flower into Denmark for a
period of 24 months from Completion and will not purchase medicinal
cannabis flower from Denmark for 12 months from Completion.
The SPA is otherwise on industry standard terms.
Pursuant to the transaction, the Seller will provide certain
transitional IT services while LGP and LGP Denmark integrate their
operations.
Further, under Danish law:
-- there are no foreign acquisition approval requirements
applicable to the transaction nor any fit and proper person
requirements for incoming shareholders; and
-- it has been confirmed the Acquisition will not trigger any
cancellation or re-approval requirement of the underlying Asset
licences or approvals.
About Little Green Pharma
Little Green Pharma is a vertically integrated medicinal
cannabis business with operations from cultivation and production
through to manufacturing and distribution.
The Company has an indoor cultivation facility and manufacturing
facility in Western Australia for the production of its own-branded
range of GMP-grade medicinal cannabis products.
Little Green Pharma products comply with all required
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 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
***S***
For further information on the Company please visit www.fstfwd.co or contact:
Ed McDermott / Lance FastForward Innovations Email: info@fstfwd.co
de Jersey Ltd
James Biddle / Roland Beaumont Cornish Tel: +44 (0) 207
Cornish Limited, 628 3396
Nomad
------------------------ -----------------------------------
Isabella Pierre / Damon Shard Capital Partners T: +44 (0)20 7186
Heath LLP 9927
------------------------ -----------------------------------
Isabel de Salis / Charlotte St Brides Partners Email: info@stbridespartners.co.uk
Hollinshead Ltd,
Financial PR
------------------------ -----------------------------------
Notes
FastForward 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.
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