A Tasmanian company will grow medicinal cannabis for a company planning to produce products to treat chronic pain.
Westbury-based Tasmanian Alkaloids has entered a three-year agreement to supply cannabis resin to ASX-listed AusCann Group Holdings Limited.
AusCann will buy at least 30 per cent of its resin supply from Tasmanian Alkaloids during the three years, with an option to extend the agreement for another three years.
The deal is a step forward from a previous arrangement between the companies.
AusCann said the deal would allow it to secure raw material supply of the highest quality standards for its hard-shell capsules and product pipeline.
"We are delighted to continue the relationship with TasAlk, evolving into a supply agreement which benefits both companies," AusCann chief executive Ido Kanyon said.
"The supply agreement with TasAlk provides us with flexibility in managing our supply chain and costs and (to) maximise our value creation as we commence bringing our pharmaceutical cannabinoids-based product to market."
Tasmanian Alkaloids chief executive Doug Blackaby said: "This agreement is a welcomed milestone for both parties, providing TasAlk with a defined quantity of business and allowing continued freedom to operate across the full supply chain."
AusCann, which is headquartered in Western Australia, said its hard-shell capsules "address the critical need for stability and consistency of dose in cannabinoids-based medicines".
The company said it was initially targeting the treatment of chronic pain in Australia, while exploring export opportunities and expansion into other medical areas.
Tasmanian Alkaloids is better known for its poppy crops, which are used to produce opiate-based medications.
It has about 180 employees in Tasmania and has links with more than 300 Tasmanian farmers.