Tuesday, 12 January 2021 14:10

Creso Pharma rides the positive cannabis tailwinds

Company News: Growing revenues put Creso Pharma in box seat to capitalise on positive cannabis momentum

Listed cannabis company Creso Pharma Ltd. (ASX: CPH) looks to have started 2021 as it finished 2020.

One of Creso’s key goals is to bring pharmaceutical expertise and methodological rigor to the cannabis world as it strives for the highest quality in its products and this goal looks to be paying off.

The company completed 2020 backed by a number of important milestones: 

  1. A growing number of Purchase Orders, which should soon equate to revenue.
  2. The appointment of former Canopy founder Bruce Linton as an Advisor to CPH.
  3. Regulatory Tailwinds, including the recent ruling by the EU’s highest court, the CJEU, which ruled that cannabidiol isn't a narcotic drug and as such CBD can be freely sold in the European Union (EU). This bodes well for sales of CPH products in Europe.

In the last two weeks, Creso Pharma has continued this momentum, by successfully delivering a second shipment of its cannaQIX® products to the subsidiary of Lupin International (NYSE:LUPIN), Pharma Dynamics South Africa and riding the coattails of news that the Democrats had taken control of the senate in the US.

This is of particular significance as a Democratic win is likely to catalyse constructive changes for federal cannabis reform: 2021 will see the first unified Democratic control of the White House and Congress since 2008, whereby such leadership has revolutionised their cannabis policy and support for reform.

Throughout the election, the Joe Biden campaign touted support for cannabis decriminalisation, with Kamala Harris pledging for it to be an administrative priority if she and Joe Biden were elected.

Importantly, the development enhances the potential for Marijuana Opportunity Reinvestment and Expungement (MORE) Act to be passed in the Senate, a bill which has the potential to considerably benefit Creso Pharma.

On December 4, Creso Pharma advised that the US House of Representatives passed the MORE Act to remove cannabis for the US Controlled Substances Act.

Creso Pharma’s range of cannabidiol (CBD) hemp oil-based nutraceuticals, contain a broad spectrum of organic hemp oil extracts with CBD that aims to improve management of stress and to support mental and nervous functions.

Creso Pharma is now well-positioned to capitalise on opportunities in the US market, with an established global distribution network that will benefit from the ruling, as well as a leading Canadian subsidiary, Mernova Medicinal Inc., that already has a 24,000 sq ft cannabis growing facility 220 miles from the US border.

From its current position, Mernova could scale up operations to meet potential demand from the US market.

Creso is currently exploring several US market opportunities and is confident in its ability to enter this market swiftly. As a listed vehicle with access to capital, Creso is also an attractive partner for merger and acquisition opportunities.

Further sales boost revenues

As a company that prides itself on bringing the best of cannabis to better the lives of people and animals, Creso Pharma would be extremely encouraged with this repeat business.

Delivery to Lupin follows the receipt of a second purchase order from Pharma Dynamics in October 2020 valued at CHF220,000 (approximately A$320,000), which has now been banked and adds to Creso Pharma’s growing revenue profile.

Pharma Dynamics is a subsidiary of leading pharmaceutical company, Lupin International which is ranked as the fifth largest generic pharmaceutical company in South Africa.

Pharma Dynamics provides high-quality generic medicines at affordable prices and is well known for its investment in innovative wellness programs that “go beyond the pill” in helping patients manage their conditions and improve treatment outcomes.

Pharma Dynamics has a growing range of over-the-counter products include medications for cold and flu, allergy, and digestion, as well as immune booster wellness products.

Importantly, its products are consistently prescribed and recommended by leading doctors and pharmacists countrywide.

Commenting on the significance of receiving a second-order from Pharma Dynamics and the scope for further sales, Jorge Wernli, commercial director said, “We are excited about the completion of this second order from Pharma Dynamics, which has underpinned a very successful launch of cannaQIX® under the Cannamics brand in South Africa.

“cannaQIX® has been developed using Good Manufacturing Practice standards and is standardised and user-friendly.

“Strength and formulation allow for precise dosage control, and the lozenge form is more palatable than many other oils on the current market.

“We have no doubt that it will continue to be well received by consumers in South Africa.

“We are very proud of having accomplished this delivery in spite of the current restrictions in place, mainly due to the COVID situation.

“We are looking forward to further growth throughout South Africa and other territories together with Pharma Dynamics.”

The purchase order further contributes to CPH’s cash balance.

As at 31 December 2020, Creso Pharma retained a robust cash balance of over $6 million.

Since then, the company has received an additional $1.7 million following the exercise of options, giving Creso a healthy bank balance to accommodate its current operations, as well as funding expansion into new markets.

Creso Pharma’s healthy bank balance further demonstrates the group’s strong financial foundation to continue to win market share, as well as being positioned to quickly capitalise on any potential further international growth opportunities.

The company has also hinted at new opportunities and hopes to ratify these in the relative near-term, potentially providing further revenue growth share price momentum.

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