Little Green Pharma (ASX: LGP) has delivered a stellar September quarter, positioning itself as a strong contender in the increasingly competitive medicinal cannabis space. CEO Paul Long recently provided an update to investors, where he outlined LGP’s achievements, including a sharp 40% revenue growth to a record $10.2 million, and—crucially— achieving cash flow positivity without any Government rebates. What’s driving this momentum? The company’s strategic expansion into Europe and a finely-tuned approach to product segmentation are setting the stage for future growth.
To access the investor webinar use this link: https://youtu.be/vE0tpPU1MG0?si=3rw0hTAdNi7MH4Y4
Revenue growth and path to profitability
The standout news this quarter is LGP’s milestone shift to cash flow positivity. While LGP has been growing steadily, this quarter’s leap forward reflects years of groundwork. Long credits the team’s focus on balancing operational efficiencies with market expansion, particularly across Europe. He noted that the results weren’t buoyed by one-off gains, indicating that LGP’s financial improvements were generated from growth across its entire portfolio.
To achieve this, LGP has been cautious yet proactive with cost-saving initiatives, including a restructuring of its Busselton facility in partnership with a former head grower. This collaboration brings a high rental yield for LGP while reducing operational costs by $500,000 annually, and it’s expected to impact cash flow positively over the coming quarters.
Scaling up in Europe
Europe is at the heart of LGP’s growth plans, with Long emphasising the substantial market potential across key regions, especially Germany. Germany’s regulatory environment for medicinal cannabis has begun to ease, and this shift is sparking a notable uptick in demand—a trend LGP is well-positioned to capitalise on, thanks to its 30-tonne capacity Danish facility, located strategically just hours from the German border. With almost all product entering the German market immediately sold, Long anticipates this market will play a central role in LGP’s future growth.
In the UK, LGP’s distribution partnerships are generating increasing monthly demand, and while prescriptions are currently limited to specialist doctors, Long believes that as regulatory conditions evolve, this market too will open up considerably.
Poland presents an equally compelling case; LGP is one of a select few cannabis suppliers in this highly regulated market, where entry requires extensive dossier submissions akin to pharmaceutical protocols. This gives LGP an early-mover advantage, with significant growth potential as demand rises.
France is another significant frontier. LGP has supplied cannabis to a government-run pilot program, which has entered a transition period ahead of a pending open medicinal market, granting LGP a unique foothold. Long pointed out that as regulations advance, the company is well-placed to take a first mover advantage in a market that is expected to be significant in years to come.
Domestic market share and product segmentation
While European markets hold immense potential, Australia remains a bedrock for LGP, where it has carved out a commanding position. Key to this success is LGP’s fast-moving consumer goods (FMCG) approach, which tailors products to distinct consumer segments. Under its premium LGP brand, the company offers high-grade medicinal cannabis, while its CherryCobrand caters to cost-conscious consumers with smaller-format products derived from the same high-quality strains.
This segmented approach has been highly effective in building customer loyalty across different price points, while also expanding LGP’s share of a medicinal cannabis market that Long estimates serves over a million Australians. This division is also being mirrored in Europe, as LGP fine-tunes its offerings to meet regional preferences, a move Long attributes to their Australian success.
Reset Mind Sciences and psychedelics
LGP’s interest in the burgeoning psychedelics field is materialising through its Reset Mind Sciences division. Reset Mind Sciences focuses on treatments for mental health conditions like depression and PTSD and recently completed recruitment for a study on psychedelic therapies, set to conclude by year-end. Additionally, LGP’s partnership with Health Insurance Fund of Australia (HIF), which supports Reset Mind Sciences’ clinic in Western Australia, is noteworthy: HIF is anticipated to cover up to 80% of treatment costs for members, making these treatments more accessible. Long believes this unique insurance-backed model will support a gradual but steady patient flow.
Financial strength and asset-backed stability
A solid financial position bolsters LGP’s ambitions. With $4.8 million in cash and just $3.3 million in debt, LGP has the resilience to fund its strategic initiatives. Adding further value is LGP’s ownership of tangible assets, including its state-of-the-art Danish facility. Acquired from Canopy Growth for a fraction of its original $120 million build cost, this 30-tonne capacity site has no debt attached, granting LGP a competitive edge. Long argues that the industry’s capital-intensive nature and current undervaluation of cannabis stocks could lead to further consolidation, with LGP well-placed for potential mergers and acquisitions should the right opportunity arise.
Alex Waislitz’s Thorney Investment Group recently raised its stake in Little Green Pharma (ASX: LGP) to 19.8%, signalling a deepened commitment to the medicinal cannabis leader. “Little Green Pharma has established itself as a leading medicinal cannabis player in Australia,” Waislitz commented, “With its Danish facility, we believe it is the best positioned of the Australian-listed medicinal cannabis companies to take advantage of deregulation in Europe.” Thorney’s increased shareholding coincides with a period of record-breaking growth for LGP, led by its European expansion and positive cash flow for the first time.
Positioning for future growth
Despite the recent success, Long remains cautious about projecting uninterrupted growth, noting that the industry has historically been cyclical. Nonetheless, he highlighted that LGP has sustained a four-year compound annual growth rate (CAGR) of 35%, a figure the company could potentially surpass in FY2025, according to recent analysis by Canaccord Genuity.
Additionally, Long addressed the broader market outlook, suggesting that the medicinal cannabis industry’s evolution will continue to filter out weaker players. He pointed to recent regulatory scrutiny and media attention on misconduct within the industry as positive forces, ultimately leading to a smaller pool of reputable, quality-focused companies. For Long, this shift aligns well with LGP’s growth trajectory and brand ethos, as it positions itself as a reliable player focused on patient outcomes.
As 2025 approaches, LGP’s focus is clear: build on its strong domestic position, expand aggressively in Europe, and bring its Reset Mind Sciences division to scale. With a mix of cost-saving initiatives, targeted product segmentation, and growth in high-demand markets, Little Green Pharma is steering through an industry landscape that’s both challenging and ripe with opportunity.
Contact details:
David Tasker
Chapter One Advisors
T: +61 433 112 936
E: dtasker@chapteroneadvisors.com.au
