ECS Exclusive: How we pulled off the biggest cross-border pot deal in Aussie history

On Tuesday, northern Victorian quiet achiever – the medicinal cannabis cultivator and manufacturer ECS Botanics (ASX:ECS) – revealed it secured a stunning five-year, $24 million deal to supply Perth-based MediCann Health with its top (medicinal cannabis dried flower) strain.

The deal builds on the existing two-year contract and expects to deliver over four tonnes of dried cannabis flower over five years. The highlights:

• Binding agreement secured with MediCann Health to supply $24 million of medicinal cannabis dried flower
• Supply will commence in January 2024 with over four tonnes of dried cannabis flower to be delivered over five years
• Under the agreement, ECS will supply two ECS strains of GMP medicinal cannabis dried flower exclusively to MediCann
• Builds on existing two-year contract highlighting the strong demand for ECS flower, the benefit of the recent capacity upgrades and ECS’ strong foundations as a globally competitive business

Both ECS and MediCann expect the volumes ordered under the Offtake Agreement to exceed the minimum annual volumes.

Overnight, Stockhead was delighted to speak with Nan-Maree Schoerie, managing director at ECS Botanics.

Stockhead: Hi Nan-Maree, thanks for taking the time. First up, I’d like to know just how big of a deal this offtake deal is for the company?

Nan-Maree: The offtake agreement with MediCann Health is really a momentous milestone for ECS Botanics.

This agreement not only reinforces our dedication to meeting the growing demand for affordable, accessible, and effective medicinal cannabis products but also amplifies ECS’ market presence and financial outlook. And the fact that Medicann are an existing client – that makes it even more rewarding – because based on their previous experience with us and the quality of our work, they’ve sought to secure ECS product for the next five years. And that feels pretty great.

Also, let me say contracts such as this one and the $10.2 million three-year agreement with Entoura announced just a few months ago are a testament to the company’s position as a leading provider of pharmaceutical-grade cannabis dried flower and will be transformative for ECS’s business operations as we continue to expand our GMP pharmaceutical grade facility to cultivate and manufacture cannabinoid medicines.

Stockhead: Do we know where this mega deal will go down in the annals of Aussie medicinal cannabis history?

Nan-Maree: We are not aware of any other Australian offtake agreements of this magnitude, even though the cannabis industry in Australia is growing very rapidly.

This deal highlights the transformational time in the industry where retailers are gaining confidence in their future and the growth and maturity of the industry.

It also cements ECS Botanics’ position as a leading player in this high growth sector and MediCann’s confidence in growing consumer demand for affordable, accessible, and effective medicinal cannabis products.

Stockhead: Okay. What does an agreement like this one mean for the Aussie med-can industry – are we going to see more of these coming out of or across the country, and does it mean that the sector is finally starting to deliver?

Nan-Maree: A deal of this magnitude has far-reaching implications for the local industry as it signifies the growing demand and potential for medicinal cannabis in Australia and internationally.

We have secured $45.8m in large offtake agreements since December, each larger than the one before, and we expect to see more of these strategic partnerships and deals from the industry in the future, reflecting the maturation of the medical cannabis sector.

I reckon the Medicann agreement sets a promising precedent for the industry’s continued growth and development. And we’re really pleased to be out front representing.

Stockhead: Given the… substantial supply requirements as per the agreement, can you provide some insight into how ECS plans to scale-up its production and ensure consistent delivery of what is seriously pharmaceutical-grade (cannabis dried flower) to MediCann Health? And will you be able to amp up further capacity to meet other contracts amid growing demand?

Nan-Maree: We recognise the substantial supply requirements stipulated in the agreement with MediCann Health as a critical aspect of our commitment to the partnership.

Our philosophy has always been to grow with the market and we have already invested in expanding our facilities and will be leveraging the recent capacity and production enhancements, including the implementation of additional protective cropping enclosures, expanding the growing season and increasing outdoor grow areas, aligning our production capabilities with the growing demand articulated in the agreement.

So our approach to scaling production is underpinned by rigorous quality control measures and adherence to Good Manufacturing Practices (GMP) to ensure that every batch of ECS cannabis dried flower meets what are of course very stringent pharmaceutical-grade standards as expected by MediCann  as well as the broader medicinal cannabis market.

Ultimately, the way we go about our business is simple – ECS Botanics is absolutely dedicated to fulfilling our obligations under the agreement – while upholding the highest standards of quality, consistency, and reliability in the delivery of medicinal cannabis products.

And most importantly we also remain just as committed to the ongoing research and development initiatives we have on the go. They’re aimed at optimising cultivation techniques, refining strains, and enhancing overall efficiency.

We’re actively exploring opportunities for further capacity enhancements, which may involve expanding our cultivation footprint or deploying advanced cultivation technologies.

Originally published in Stockhead