Creso Pharma Ltd (ASX:CPH) (OTCMKTS:COPHF) (FRA:1X8) has witnessed a strong first quarter, with total revenue rising by 237% from the preceding quarter, marking the company’s evolution into a broader-based pharmaceutical company, according to non-executive chairman Adam Blumenthal.
The surge in the group’s revenue growth during the quarter highlighted the growing demand for the company’s products, as regulatory shifts across cannabis industries globally continue to unlock growth opportunities.
At the end of the quarter, the company had $18.6 million cash, providing considerable financial flexibility.
Creso’s Blumenthal said: “This quarter marked Creso’s evolution into a broader-based pharmaceutical company.”
During the quarter, the company entered into a transformational agreement to buy established psychedelics company Halucenex Life Sciences Inc, which will strengthen the company’s position in Canada, as well as lead to new market entries and commercialisation opportunities.
The purchase provides Creso Pharma with entry into the emerging global market for psychedelics medicines, which is estimated to be worth up to US$100 billion.
The proposed acquisition provides Creso Pharma with a first-mover advantage into the psychedelic medicines sector and marks the first 100%-owned psychedelic medicines company listed on the ASX.
Creso Pharma will also emerge from the acquisition as a best-in-class provider of cannabis, cannabinoids and psychedelics alternative medicines to meet the large unmet need for treatments to improve mental health and wellbeing.
Since March 15, when the company announced the proposed acquisition, Halucenex has undertaken significant preparatory work for its upcoming Phase II clinical trial, in anticipation of the grant of its Dealers License, which it expects to receive imminently.
Blumenthal said: “Having undertaken a thorough search for quality, complementary acquisition opportunities, the company successfully identified and secured an agreement with psychedelics company, Halucenex, which, if approved by shareholders, will represent a significant milestone for the company, as it looks to commercialise new psychedelic-assisted psychotherapy treatments.
“Halucenex has made considerable progress during the quarter and provides Creso with access to another lucrative vertical.”
Raised A$18 million via strongly supported placement
During the quarter, the company raised A$18 million from institutional, professional and sophisticated investors through the issuance of around 94.7 million new fully paid ordinary shares at A$0.19 per share.
The placement was heavily oversubscribed and strongly supported by a range of local and international groups including Australian businessman John Langley Hancock, S3 Consortium Holdings Pty Ltd and independent global fund manager L1 Global Master Opportunities Fund, among others.
The company also intends to seek shareholder approval to issue placement participants one option for every four shares issued, which will be exercisable at A$0.38 each on or before a date that is 12 months after the date of issue.
The funds raised through the placement will be deployed to undertake psychedelic clinical trials upon completion of the Halucenex transaction, advance sales of nutraceutical products globally and increase marketing of cannabis products through Canada.
Creso pursues US OTC listing
During the quarter, Creso significantly progressed its application to dual list on the OTCQB market in the US, which is earmarked for the second quarter of 2021.
The decision to advance the dual listing initiative follows growing interest from North American investors, following the announcement of the proposed acquisition of Halucenex, as well as the company’s planned expansion into the US cannabis market.
The dual listing will give the company access to a deeper capital market, providing North American investors with accessibility and liquidity to invest in an established cannabis and psychedelics medicines business.
New business tie-ups
During the quarter, Creso’s wholly-owned Canadian subsidiary, Mernova Medicinal Inc secured new purchase orders (POs), with a total value of C$145,192 (A$150,770) from the Ontario Cannabis Store (OCS) and Yukon Liquor Corporation.
The new POs include a second from OCS and a third from Yukon Liquor and highlight an ongoing shift towards a recurring revenue model for Creso Pharma.
This new PO from the Yukon marks the second order for pre-roll joint range Ritual Sticks, which provides multiple growth opportunities for Mernova and access to a large potential customer base.
It also includes the first order for the new Ritual Green one-ounce bag offering introduced by Mernova so consumers can secure a larger supply of its leading cannabis strains at a volume discount.
It also signed a bilateral commercial agreement with Cannabis Queen, South Africa, to market and distribute Creso’s cannaDOL topical line and cannaQIX® tea range in African countries.
This agreement will also see Creso Pharma market and distribute Cannabis Queen’s anti-ageing Serum 30ml and Argan & Cannabis Hair Treatment 50ml products in Switzerland and Europe.
During the quarter, Creso’s target acquisition Halucencex signed a non-binding letter of intent (LOI) with leading nanotechnology company Sixth Wave Innovations Inc (CNSX:SIXW) (OTCMKTS:ATURF) to assess molecularly imprinted polymers (MIPs).
Blumenthal said: “The Creso group more broadly has also made a series of advancements, underpinned by a number of distribution agreements, LOIs and new market entries, all of which will unlock further value for our shareholders.
“The significant rise in quarter-on-quarter, as well as year-on-year revenue, demonstrates Creso’s upward growth trajectory and we look forward to continuing to deliver strong sales growth as we begin to scale up activities and further commercialise our business divisions.”
During the quarter, the US Democratic party won power in the US Senate, increasing the likelihood of the decriminalisation of cannabis and the passing of the Marijuana Opportunity Reinvestment and Expungement (MORE) Act.
Cannabis legalisation in the US would provide a major market opportunity for Creso Pharma and it is very well placed to capitalise on this.
Should legalisation occur, Creso Pharma can expedite its scale-up of Mernova’s operations to service the US market.
Management will continue to pursue additional opportunities to ensure it is advantageously positioned.
In Australia, the OTC sale of low-dose CBD products in pharmacies was made possible after the Therapeutic Goods Administration (TGA) down scheduled low-dose CBD preparations from Schedule 4 (Prescription Medicine) to Schedule 3 (Pharmacist Only Medicine).
This is a major development for the Australian medicinal cannabis industry, which is expected to exceed over A$200 million per annum.
Creso is now progressing a number of value accretive opportunities, including initiatives through its existing agreement with Martin & Pleasance to unlock value for shareholders.
Story by ProactiveInvestors
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