A significant revenue increase combined with reduced research expenditure allowed Little Green Pharma to cut its first-half operational losses, as incoming chief executive Paul Long warned that the medicinal cannabis market faces "inevitable consolidation" in 2024.
Long, who succeeded Fleta Solomon in August, said LGP would be "actively looking" to grow the company during a period when a number of smaller operators are expected to come under pressure.
While stopping short of confirming an active acquisition strategy, Long indicated the company would evaluate opportunities as industry consolidation accelerates.
Long also said LGP was well placed to capitalise on European opportunities arising in 2024, and that the company would "relentlessly" chase market share growth in Australia.
The remarks accompanied results from the WA-based company showing a 37% rise in revenue for the six months to September 30, driven primarily by flower sales, which surged 90% to A$7.5m.
That growth helped absorb a 7% drop in oil volumes, figures that further reflect the shift in consumer preference toward dried flower products.
LGP's recently launched vape cartridges generated $180,000 in sales over the period.
The combined effect of stronger revenues and a 41% reduction in research and development spending drove net losses from ordinary operating activities down 72% to $2m.
The company's Australian operations brought in revenue of $10.8m, compared with $7.9m in the prior corresponding period, while its Denmark-based European division contributed nearly $2m, up from $1.2m.
LGP held $6.2m in available cash at the close of the reporting period.
Long said the company remained confident that Australia's medicinal cannabis market would keep expanding in 2024, with LGP intent on pursuing market share "relentlessly".
With more than 100 companies competing for sales and approximately 700 products available to prescribers, some form of consolidation was unavoidable, he said.
"Current market competition will result in consolidation… that will absolutely happen," Long said. "We also expect a few of the smaller players to drop out of the market in the not too distant future."
When asked whether LGP might pursue merger or acquisition opportunities amid such industry change, Long said: "The evolution will be no different from any other market in that you end up with a number of large providers over a period of time.
"We will be actively looking to be part of that growth strategy."
Long also touched on recent discussions around an adult-use market in Australia, suggesting that legalisation "is on the horizon".
Such a development could create "a potential upside" for established producers, particularly if alcohol and tobacco companies were barred from entering a legal industry, he said.
On the European front, Long highlighted France — where LGP has been participating in a medicinal cannabis trial — and Poland as key growth targets, while sentiment in the UK market is also improving "after a few flat years".
LGP will be among just three suppliers permitted to operate in France during a nine-month transition period once the trial concludes in March — Aurora and Panaxia being the other two — while Poland's strict regulatory requirements mean competition there is likely to remain limited, Long said.
The eastern European country is expected to receive its first shipment of LGP product shortly.
Germany, too, will offer a growing opportunity once regulations are finalised, with the company's 30-tonne capacity Danish facility located just two-and-a-half hours from the border, he added.
Long said: "Having previously undertaken a campaign of significant cost reduction over the past 24 months, our primary focus for the coming period will be revenue growth.
"In addition to the expansion and diversification of our product offering, in particular into new markets like France and Poland, as well as continuing to supply into Germany, the UK, and further into Scandinavia, we will be relentlessly pushing for market share in Australia."
Update December 7: France has signed into a law a bill that will allow the supply of medicinal cannabis beyond the post-trial transition period. Potential suppliers must receive official authorisation which Long said LGP is well-positioned to receive.
"Our active involvement as a continuous supplier to the French pilot program positions the company to be the major player after the transition period," he said.
"This will involve us submitting a technical dossier that will adhere to upcoming specifications, expected to be released before the end of the transition period."
Long added that France could become "one of the largest medicinal cannabis prescribing countries in the world", with LGP at the forefront of the market.
The supply of medicinal cannabis in France will be subsidised.
