Why is the Little Green Pharma (ASX:LGP) share price in the green today?

Key points

• Little Green Pharma made a key announcement regarding an exclusive distribution agreement in Greece.
• It is an exclusive four-year agreement to supply and distribute LGP-branded products.
• Both parties will share product revenues on a 50:50 basis.
• The Little Green Pharma share price has grown 9% in the last 12 months.

The Little Green Pharma Ltd (ASX: LGP) share price shot out of the gate today and is now 0.84% higher at 60 cents, having earlier been up 3%.

Investors are responding positively after Little Green Pharma made a key announcement regarding an exclusive distribution agreement in Greece.

The announcement builds on another distribution agreement the medicinal cannabis company signed in Germany just two days ago. Let’s take a closer look.

What’s boosting the Little Green Pharma share price?

The Little Green Pharma share price is on the rise after the company announced it has signed an exclusive four-year agreement with Greek company PharmaServe for the distribution of LGP-branded oil medicines and cannabis flowers in Greece.

The company says PharmaServe has operated as a distributor of pharmaceutical and healthcare products in Greece since 1984.

“With a population of around 11 million, there are no registered medicinal cannabis products in [the Greece] market,” the company says.

“LGP anticipates PharmaServe will be one of the first distributors to apply for a medicinal cannabis Marketing Authorisation in Greece, giving LGP a significant foothold in a new, currently under-served market in the EU.”

It is also the first agreement to utilise the company’s Danish facility outside Australia and Denmark.

Under the agreement, LGP-branded cannabis medicines will be supplied and distributed in Greece for a minimum 2-year period.

After 2 years, PharmaServe “may also require LGP to supply co-branded cannabis medicines in addition to the LGP-branded medicines for prices to be agreed”.

The agreement is also conditional upon PharmaServe achieving minimum revenues of 600,000 euros per year.

Both parties agree to exclusively work with each other. PharmaServe will avail from promoting any other cannabis medicine in Greece while Little Green Pharma will exclusively supply its products over the contract length.

The financial terms of the deal benefit both parties fairly equally. For instance, Little Green Pharma will supply its medicines from its Australian and Danish facilities, and will share product revenues on a 50:50 basis.

Both arrangements are subject to LGP receiving certain minimum prices per unit and subject to deposit prepayment terms.

Management commentary

Speaking on the announcement driving the Little Green Pharma share price, chief executive officer Fleta Solomon said:

The agreement represents the continued fulfilment of LGP’s strategic imperative to grow significant market shares in key markets across the EU. With the addition of Greece to the LGP distribution footprint, LGP aims to capture a market that is currently significantly underserved and overlooked by other medicinal cannabis producers.

With a population of [approximately] 11 million and no currently registered cannabis medicines, the market for medicinal cannabis in Greece represents another attractive opportunity for LGP’s broader international growth ambitions.

The Little Green Pharma share price (blue) has grown around 9% in the last 12 months and is trading flat this year to date at the time of writing.

As the graph shows, it is now at a crossroads with the benchmark S&P/ASX 200 Index (ASX: XJO) after wiping substantial value from its previous highs.

The post Why is the Little Green Pharma (ASX:LGP) share price in the green today? appeared first on The Motley Fool Australia.

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Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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