Creso Pharma Secures Canadian License to Cultivate in Nova Scotia
February 27th, 2019
Exclusive, News, Top Story
Creso Pharma Inc.(ASX: CPH) is a commercial-stage company that operates in multiple parts of the burgeoning cannabis industry. With an existing line of health and wellness products, the company is actively generating revenue across European markets. The company’s recently granted license to cultivate in Nova Scotia provides additional exposure to Canada’s recreational and medical markets and vertically integrates its supply chain.
The company’s wholly-owned Mernova Medical Inc. subsidiary has completed a 24,000 sq. ft. cannabis cultivation facility that’s purpose-built to GMP standards. As a recently approved licensed producer, the company will be generating revenue that will appear in its 3rd quarter financial results. The facility is scalable to 200,000 sq. ft. over the long-term and management plans to focus on edibles in 2019.
After receiving a license to cultivate, the company became the only ASX-listed company that has 100% ownership of a Canadian licensed producer. The license enables the company to sell and distribute dried and fresh cannabis plants and seeds to other companies that hold licenses under the Cannabis Act. European GMP certification is expected within 180 days, enabling the products to be exported across Europe.
The company signed a three-year supply agreement earlier this year with TerrAscend Corp. (CSE: TER) (OTCQX: TRSSF), where it committed to selling a minimum of 100,000 grams of cannabis flower per month. The deal provides an immediate revenue stream following its cultivation license and eliminates any uncertainty of distribution over time.
Capitalizing on Canada’s Shortage
Canada’s cannabis industry is projected to reach C$22.6 billion over the coming years, according to Deloitte, driven by the legalization of adult-use cannabis last year. In the aftermath of legalization, there has been a chronic shortage of supply across the country. Many industry experts believe that the supply shortage will persist through 2022 as Health Canada works through a backlog of licensed producer applicants.
In addition to its Canadian facility, the company’s wholly-owned Kunna SAS subsidiary holds five licenses to cultivate cannabis in Colombia. The company plans to begin cultivation and extraction this year with initial revenue in the third quarter from Latin America end markets. Kunna was one of Colombia’s first medical cannabis companies in 2012, capitalizing on the country’s ideal climate for growing high-quality cannabis.
Colombia has upwards of six million medical cannabis patients, while regulators have green-lighted 40.5 tons of medical cannabis to be harvested for export purposes. These production levels could meet nearly half of global cannabis demand.
Rapidly Growing Revenue
Many cannabis companies are development-stage opportunities, but Creso Pharma has existing products on the market with growing revenue During the second half of 2018, the company started generating revenues which will increase as commercial partners reup orders, consumer demand is increasing, and new distribution channels are being set up across Europe.
The company’s innovative products apply cutting-edge buccal delivery methods to hemp CBD-infused products across both human and animal markets. For example, the company’s cannaQIX® products provide a cannabidiol (CBD) based full-spectrum hemp extract medicinal cannabis product available as a buccal lozenge to help manage pain.
Creso Pharma Inc.(ASX: CPH) represents a compelling investment opportunity. Investors can expect to see more meaningful revenue over the coming quarters as the company launches innovative new products, establishing new distribution channels, and ramps up its cannabis plant and seed cultivation. In addition, the company continues to create or acquire operations where there are commercially significant opportunities for its products, with a focus on nutraceuticals, therapeutics, topicals, lifestyle, and animal health segments.
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