Neptune Wellness Solutions Inc. (NASDAQ and TSX: NEPT) has signed an extraction deal to process 44,000 kilograms of hemp biomass with an unnamed partner.
In a statement Tuesday, the company said the six month contract will produce crude and distillate extracts from hemp biomass in four different installments. That’s a project worth at least $16.5 million, Neptune said — pending any new upheavals in the Canadian cannabis market.
The 44,000 kilograms of hemp will be processed at Neptune’s main Sherbrooke facility in Quebec. At 50,000 square feet its one of Canada’s largest cannabis processing operations, Neptune Cannabis Business president Michel Timperio told Mugglehead in an October interview.
— Michael Cammarata (@mikecammarata) May 19, 2020
This new contract further strengthens Neptune’s business-to-business sales model, Neptune COO David Mayers said in a statement.
“With this partnership we are in an even stronger position to serve and provide value to our Canadian [licensed producer] customers, while generating high margin revenue opportunities through the processing of hemp or cannabis extracts for a variety of product forms,” Mayers said.
As Canadian laws around cannabis production change to allow for more outdoor cultivation, many LPs are abandoning their indoor facilities in favour of al fresco crops. But what outdoor cannabis makes up for in affordability, it can lack in cannabinoid potency or terpene profiles, leading a lot of outdoor producers to grow crops designated for extraction — which is good business for companies like Neptune.
Read more: Outdoor cannabis licences almost double
This is leading Neptune to accelerated growth in its health and wellness portfolio, which includes cannabis and hemp, Neptune Wellness Solutions CEO Michael Cammarata said.
“With our phase II extractor at Sherbrooke operational, we are now highly competitive on product offerings and pricing to Canadian LPs, giving our customers the edge to win at retail in cannabis 2.0.”
The company got its start extracting krill oil in the late ’90s before pivoting to cannabis extraction in 2016. In April, that flexibility let Neptune to pivot its North Carolina facility to produce FDA-approved alcohol-based hand sanitizer during the COVID-19 pandemic, boosting company stock over 25 per cent.
This contract is on top of Neptune’s long-term extraction agreement, signed June 2019, with Ontario-based The Green Organic Dutchman Holdings Inc. (TSX: TGOD) to process 230,000 kilograms of cannabis and hemp biomass over three years.
Company stock rose $0.22 on the news, to US$2.66 per common share on the NASDAQ.
Top image of Neptune’s Sherbrooke, QC, facility, September 2018. Submitted photo