Epsilon Healthcare (ASX: EPN) has secured a 3-year Epsilon Healthcare Puro Manufacturing Agreement worth AU $6 million in forecast revenue. The contract sees wholly owned subsidiary Epsilon Pharma manufacture GMP-certified finished formulation products for Puro New Zealand Limited, Australasia’s only BioGro certified organic medicinal cannabis producer, targeting the UK market during Q1 2026 with subsequent European expansion.
The agreement is expected to deliver approximately AU $2 million in annualised revenue during 2026, representing roughly 25% of Epsilon Pharma’s 2025 revenue base. Full run rate is anticipated by Q3 2026, with revenue contributions commencing from Q1 2026. The partnership carries an initial 3-year term with a 120-day termination notice period.
What is contract development and manufacturing and why it matters for healthcare investors
Contract Development and Manufacturing Organisations (CDMOs) produce pharmaceutical products on behalf of other companies, handling everything from formulation development through to finished product manufacturing. These operations typically generate stable, recurring revenues underpinned by long-term supply agreements and technical relationships.
EU GMP (Good Manufacturing Practice) certification represents regulatory approval to manufacture products meeting European Union quality standards. This accreditation opens access to lucrative international markets where compliance requirements create significant barriers to entry. Epsilon’s EU GMP credentials position it among a select group of Australian manufacturers capable of servicing European export requirements, differentiating the company from competitors lacking international certifications.
For investors, CDMO operations offer predictable cash flows with high switching costs once manufacturing processes are validated and integrated. The regulatory complexity of pharmaceutical manufacturing creates meaningful moats around established operators.
Financial terms and revenue trajectory
The Epsilon Healthcare Puro Manufacturing Agreement structures commercial terms around Puro’s volume forecasts, with Epsilon receiving manufacturing services revenue over the initial 3-year period. Puro anticipates allocating half of its 2026 production to the UK export opportunity, signalling material throughput volumes for Epsilon’s manufacturing operations.
Revenue contributions begin during Q1 2026, ramping toward full run rate by Q3 2026. The agreement adds incremental revenue to Epsilon’s consolidated results while validating the company’s investments in EU GMP-compliant infrastructure and international export capabilities.
| Metric | Year 1 (2026) | 3-Year Total | % of FY25 Epsilon Pharma Revenue | Contract Term |
|---|---|---|---|---|
| Manufacturing Revenue | AU $2.0M (annualised) | AU $6.0M | ~25% | 3 years (120-day notice) |
The 25% contribution to 2025 Epsilon Pharma revenue demonstrates the material impact of this single contract on the subsidiary’s revenue base, while the extended term provides visibility over future cash flows.
Operational milestones and market entry timeline
Epsilon has outlined a clear execution pathway to achieve first product shipment during Q1 2026. The company must complete several regulatory and operational steps to enable compliant market entry:
- Obtain export licences under the Australian Office of Drug Control (ODC)
- Confirm GMP compliance with UK Medicines and Healthcare products Regulatory Agency (MHRA) requirements
- Finalise supply chain logistics, transport, and storage arrangements preserving product integrity
- Implement quality assurance protocols across production and distribution stages
These milestones provide investors with checkpoints to monitor management’s delivery against stated timelines. Successful execution positions Epsilon to reinforce its reputation as a globally competitive CDMO while establishing operational precedent for future international partnerships.
Strategic positioning in European medicinal cannabis markets
The Epsilon Healthcare Puro Manufacturing Agreement advances the company’s broader CDMO growth strategy by combining Puro’s organic cultivation credentials with Epsilon’s manufacturing and export capabilities. The partnership model enables both parties to access markets neither could efficiently serve independently.
Initial UK focus provides a foundation for expansion into broader European markets, where medicinal cannabis frameworks continue to evolve. Epsilon has stated its commitment to pursuing additional CDMO opportunities aligned with global footprint expansion, positioning this contract as a proof point for prospective partners evaluating manufacturing partnerships.
Peter Giannopoulos, Managing Director and Group CEO
“Our strategic agreement with leading New Zealand specialist cultivator Puro represents a significant milestone for Epsilon Pharma. This milestone is underscoring the commercial value of our investments in expanding both our manufacturing capabilities and international licensure.”
Europe represents a key strategic growth region for Epsilon, with the Puro partnership validating the company’s positioning as a scalable, internationally competitive CDMO partner capable of meeting stringent regulatory standards.
Puro New Zealand’s market ambitions
Puro New Zealand brings specific credentials to the partnership that underpin the commercial rationale for both parties. As New Zealand’s largest medicinal cannabis cultivator, Puro operates under unique regulatory settings enabling pharmaceutical-grade production at scale.
Key Puro credentials include:
- Largest certified BioGro cultivator in New Zealand
- Only BioGro certified organic medicinal cannabis producer in Australasia
- Pharmaceutical-grade product focus aligned with regulated international markets
Puro’s UK market focus forms a cornerstone of its European expansion strategy, with the company allocating 50% of 2026 production to UK exports. This volume commitment indicates meaningful throughput for Epsilon’s manufacturing operations while demonstrating Puro’s confidence in market demand.
Sank MacFarlane, CEO & Executive Director of Puro New Zealand
“The UK is a cornerstone market for Puro, and this partnership enables us to translate our organic, sun-grown New Zealand production into high-value finished products for patients and prescribers under the highest global standards.”
The partnership structure allows Puro to access EU GMP manufacturing capabilities without capital investment in Australian infrastructure, whilst Epsilon secures long-term supply agreements that optimise facility utilisation and skill deployment.
What this means for Epsilon Healthcare shareholders
The Epsilon Healthcare Puro Manufacturing Agreement delivers several investment case enhancements for (ASX: EPN) shareholders:
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New recurring revenue stream: The agreement adds approximately 25% to Epsilon Pharma’s 2025 revenue base, providing material incremental cash flows over the 3-year initial term with potential for extension.
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Infrastructure validation: The contract validates Epsilon’s EU GMP infrastructure investments and international export capabilities, demonstrating the company’s ability to convert capital expenditure into revenue-generating partnerships.
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Partnership expansion foundation: The initial UK focus with planned European expansion creates optionality for long-term partnership deepening as Puro scales its international presence and Epsilon proves manufacturing reliability.
The agreement demonstrates Epsilon’s transition from infrastructure investment phase toward recurring revenue generation, with clear visibility over the 3-year term and execution milestones enabling investor monitoring. For shareholders, the partnership validates management’s strategy of leveraging EU GMP certifications to capture international CDMO opportunities whilst establishing proof points for prospective partnerships evaluating Epsilon’s capabilities.
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