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Cannasouth commissions growing facility as it gears up for international exports

NZX listed medicinal cannabis company Cannasouth expects to be ready to export pharmaceutical grade cannabis flower in early 2022 after completing commissioning of its Waikato-based growing facility.

Cannasouth’s joint venture partner, Cannasouth Cultivation Limited, which has developed a next generation controlled environment agriculture (CEA) sealed greenhouse has its first commercial harvest expected in December 2021.

At the company’s AGM today, Cannasouth Chief Executive Mark Lucas told investors the facility will produce up to 1,800kg of pharmaceutical grade cannabis flower each year with the ability to scale the facility by four times as demand requires.

“Current wholesale pricing estimates for quality medicinal cannabis flower ranges between NZ$3,500 per kg and NZ$10,000 per kg, depending on the cannabinoid content, market and quality standard achieved,” he said.

“Using a market price of NZ$4,500 per kg, phase one of our cultivation facility has the potential to produce approximately $8 million in annual revenue.

“Our innovative facility design will give us premium flower produced at a highly competitive production cost, while also greatly reducing our carbon footprint over indoor growing operations.”

Cannasouth has focused on developing Good Agricultural Collection Practices (GACP) and Good Manufacturing Practice (GMP) compliant facilities and processes from the beginning. Mr Lucas said this will allow Cannasouth to access high-growth, high-value export markets.

“Once our growing facilities have been successfully certified, we will be in a position to produce premium quality GACP/GMP compliant cannabis flower for the highest value export markets.

“We have significant demand for this flower from prospective customers in these markets and we are regularly being approached to enter into supply agreements from offshore parties.

“We are in negotiations now to place our first commercial scale harvests with export customers.”

Cannasouth is on track to be one of the first New Zealand companies to export pharmaceutical grade cannabis flower to international markets, where there is currently strong demand for high-grade product.

Colorado-based Vera Cultivation, a successful competitor in the USA cannabis flower market, has supported Cannasouth with the design of its growing facility. A service agreement between the two companies will see Vera continue to support Cannasouth as it moves into commercial cultivation. 

Alongside exporting pharmaceutical grade cannabis flower, Cannasouth also has three imported medicines being assessed by the Medicinal Cannabis Agency (MCA) for supply to the New Zealand market.

If successful in the assessment process, Mr Lucas said the products would give Cannasouth “early mover” advantage in the New Zealand market, an additional revenue stream and valuable real-world market data.

“Cannasouth is focused on delivering returns to our investors by pursuing multiple opportunities to generate revenue,” Mr Lucas said. “At the same time, we are working hard to deliver much needed quality medicines to patients as quickly as possible, while we continue work on producing our own medicines here in New Zealand.”

Mr Lucas said the global medicinal cannabis industry is complex and highly regulated.

“There is a lot of confusion and misinformation among the public, investors, patients and prescribers about the sector.

“Medicinal cannabis products in New Zealand and in many key export markets are regulated as pharmaceutical medicines. GMP operating standards are high, and so are the barriers to entry.

“To compete in the global medicinal cannabis sector requires significant investment in people, facilities, equipment, R&D and Quality Management Systems. This is a pharmaceutical business. There are no shortcuts.”

Mr Lucas said Cannasouth had invested heavily in its people and its research and development capability to ensure it can unlock intellectual property for new cannabis-based therapeutics in New Zealand.

To that end, the company is continuing to develop Midwest Pharmaceutics - a Hawkes Bay-based cannabinoid processing, extraction, ingredient and medicine manufacturing facility, of which Cannasouth owns 60 percent.

“Cannasouth has built the foundations that will enable us to become a serious global player in the medicinal cannabis industry,” said Mr Lucas. “We are excited to now be entering the revenue generating phase of our development.”

Cannasouth Growing Facility