THC Global set to scale-up high-value manufacturing capabilities in 2021

THC Global Group Ltd (ASX:THC) (FRA:9TH) is well-funded to pursue its new corporate strategy and repositioning towards high-value pharmaceutical manufacturing and healthcare leading into 2021. The company recently completed a strategic placement raising $2.75 million raised through issue of 11 million shares at $0.25 per share. This cash injection will be applied towards advancement of the Medimar Platform, a unique e-commerce platform connecting patients, pharmacies, and prescribers, streamlining distribution. Funds will also be used for expanding manufacturing capability for additional finished goods forms, and a move towards toll and contract manufacturing to drive volume of throughput and delivering increased revenue while reducing per-unit production cost. “Significant production capacity for 2021” THC Group CEO Jarrod White said last week: “Since assuming the management responsibilities of THC Global we have worked tirelessly as a group to assure the reduction of operating cash burn and redirection of corporate investment and working capital towards monetisation of the company’s significant core asset base, including the Southport Facility, one of the world’s largest GMP cannabis extraction facilities. “After attracting a strategic investment partner into the company, we have an increased confidence in the commercial value of the Medimar Platform, and the ability for the company to monetise its core manufacturing assets based on the new corporate strategy developed and put in place by this new management team. “Moving away from being an own-brand manufacturer and opening the company up to global contract manufacture opportunities in the cannabis sector combined with launching a new platform for medicinal cannabis medicines access in Australia will see the company utilising its significant production capacity far more over 2021.” Southport Manufacturing Facility During the COVID-19 travel restrictions, the company’s operations in Queensland expanded with the leasing of an additional adjacent warehousing facility in Southport, and the company started its first commercial production of TGA and EU GMP medicinal cannabis medicines from the facility. THC is now in the final stages of commissioning a new Process Control System (PCS) and Data Acquisition System (DAS) which will enable significant automation of the extraction process at Southport. Additionally, the company is about to start running trial batches in two 250-litre vessels in early January 2021 following completion of validation and qualification. This equipment and will be suitable for extraction of flower and bud or further process crude extracts (either CO2 or EtOH) and in addition to increasing volume, it will also provide far superior temperature control functionality for both the ethanol extraction and decarboxylation processes. The company is also applying to the TGA for approval for additional finished dosage forms to be produced at the Southport Facility. Additional licences and approvals The company currently has approval for oils and is expected to add inhalation including vapes, capsules, suppositories and ovules, and creams (in Q1 2021) to its TGA licence. Going forward, it will be seeking additional licences and approvals for an expansion of its storage and warehousing capability at the Southport Facility. An additional Schedule 8 licence is being progressed to allow Southport to warehouse, store and distribute S4 and S8 medicines not manufactured by the company - a key integration and automation feature of the new Medimar Platform. This will strategically position Southport as the largest TGA and EU GMP extractor and it will become the logistics and distribution hub for medicinal cannabis medicines in Australia and the wider South East Asia region with the Medimar platform. The facility and team are now preparing for the increased production volumes of medicinal cannabis medicines and the new logistics and distribution offering which is expected to start from Q1 2021. The Medimar e-commerce platform allows the ordering and dispensing of medicinal cannabis, reducing admin burden on prescribers and pharmacies, and is enabled by the company’s licenced distribution facility. Name change to Epsilon Healthcare The company plans to hold an Extraordinary General Meeting in January 2021 to discuss the placement and will also consider the change of the company’s name to Epsilon Healthcare Limited, furthering the company’s corporate repositioning. The change of name and branding supports a move towards patient-led healthcare and high-value pharmaceutical production with the company moving away from reference to ‘THC’ given perception that THC is related to the recreational cannabis market. Additionally, the company has advised that the ASX has confirmed that the ASX Code ‘EPN’ is available and has been reserved for the company pending the new name. Looking forward The future looks strong for medicinal cannabis with a shift in the USA and the UN towards positive policy and legislative stance changes. The company is well-positioned to be a globally significant exporter of TGA and EU GMP medicinal cannabis medicines with the capacity to process large volumes of cannabis and the potential to produce multiple dosage forms as finished goods for bulk wholesale or distribution through to patients. THC expects to achieve a number of key milestones in early 2021, including the launch of the Medimar Platform with a number of high-profile launch partners, and commencement of production of additional dosage forms at the Southport Facility including vape liquids, hard gelatin capsules, suppositories, ovules, and creams.