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Creso Pharma (ASX:CPH) sees an action-packed Q1 marked by Halucenex developments

Summary

  • Creso Pharma marked its Q1 2021 with significant milestones and impressive financials, including a massive 237% revenue growth over the previous quarter.
  • The Company signed an agreement to enter the psychedelics space with the proposed acquisition of Halucenex Life Sciences.
  • Creso’s wholly owned Canadian subsidiary, Mernova, secured multiple purchase orders (POs) and distribution agreements during the period.
  • The Company remains confident that its planned OTC listing will unlock significant value for existing shareholders.
  • Creso Pharma remains well funded, with AU$18.6 million in cash reserves at the end of the quarter.

Creso Pharma Limited (ASX:CPH, FRA:1X8) released its quarterly activities report for the March quarter, highlighting significant developments coupled with impressive financials. The quarter was full of notable achievements, one of them being the agreement to acquire the Canada-based psychedelics company, Halucenex.

The Company believes that the positive developments during the quarter unlock a substantial value for its shareholders.

Below are the key highlights from Creso Pharma’s March 2021 quarter-

Major feat: CPH entered into an agreement to acquire Halucenex

In a significant accomplishment, Creso Pharma entered into an agreement to acquire Canada-based Halucenex, a prominent psychedelics player, focused on R&D of treatments for Treatment-Resistant Depression in individuals with PTSD (Post Traumatic Stress Disorder) as well as other mental health conditions. The proposed acquisition is subject to shareholders and other necessary regulatory approval.

READ MORE: Creso Pharma (ASX:CPH) seals a transformative deal to foray into psychedelics space

Source: CPH Presentation (15 March 2021)

The psychedelics company has initiated significant preparatory work for its upcoming Phase 2 clinical trial, anticipating the Dealer’s License approval.

DO READ: Creso Pharma’s acquisition target Halucenex readies for PTSD trial

So far, Halucenex has:

  • Identified True North Clinical Research as the principal investigator.
  • Commenced patient identification process.
  • Secured additional pharmaceutical-grade psilocybin.
  • Purchased a CO2 Supercritical Extraction System Agreement with Advanced Extraction Solutions Inc (AESI).

Creso targets dual US OTC listing

Creso advanced its application to dual list on the US OTC market. The Company disclosed that the listing was earmarked for the second quarter of 2021.

The dual OTC listing will allow Creso to access a broader capital market, providing investors in North America the liquidity and accessibility to invest in a developed psychedelics medicines and cannabis market.

Furthermore, CPH anticipates that the OTC listing will unlock significant value for existing shareholders by permitting simpler comparisons to the US and Canada-listed peers engaged in the cannabis and psychedelic medicine space.

DO READ: Double bonanza: Creso eyes OTC listing; Halucenex gets new psilocybin supplies

Creso raises AU$18M via strongly supported placement

During the quarter, Creso Pharma raised AU$18 million from institutional, sophisticated, and professional investors via the issue of ~94.7 million new fully paid ordinary shares at a per-share issue price of AU$0.19.

The Company disclosed that the funds raised would be used:

  • To progress several opportunities related to Halucenex acquisition.
  • To expand Creso’s current nutraceutical range.
  • To scale up Mernova’s operations and move ahead with the dual listing on the US OTC market.

READ MORE: Creso Pharma (ASX:CPH) raises A$18M to scale up operations, fund trials

Mernova secured multiple POs, launched a new product

In March 2021 quarter, Creso’s wholly owned Canadian subsidiary, Mernova, continued to experience increasing demand for its Ritual Green product. The Company received a consistent stream of POs during the period.

Copyright © 2021 Kalkine Media Pty Ltd

The purchase orders include-

  • Two orders from the Ontario Cannabis Retail Corporation (OCRC), which operates as the Ontario Cannabis Store (OCS), valued at CA$228,323 and CA$115,008, respectively, for a total value of CA$343,331.
  • Three purchase orders from Cannabis NB, New Brunswick’s only legal cannabis retailer, valued at CA$94,800, CA$81,800 and CA$45,540, respectively.
  • Two purchase orders from the Nova Scotia Liquor Corporation (NSLC) valued at CA$69,000 and CA$61,022, respectively.

TO KNOW MORE, DO READ: Creso Pharma’s (ASX:CPH) subsidiary Mernova bags three new purchase orders

Launch of Ritual Sticks

Mernova also launched its pre-roll joint range under its Ritual Sticks brand.

The initial PO for Ritual Sticks, valued at CA$70,560, was obtained from the Nova Scotia Liquor Corporation, marking the official launch of the product line in Canada.

It is noteworthy to mention that the pre-roll joint product range unlocks another significant addressable market for Mernova.

Source: CPH Announcement (19 March 2021)

Creso Pharma Switzerland - Nutraceutical division

The Company continued to experience growing demand for its products, as demonstrated by the several POs and distribution agreements signed during the quarter, including:

Copyright © 2021 Kalkine Media Pty Ltd (Source: CPH quarterly update, 30 April 2021)

Financial highlights

 The key financial highlights include-

  • In Q1 2021, Creso generated total revenue of ~AU$1.38 million, up 237%, compared to Q4 2020.
  • Creso’s Canadian subsidiary, Mernova Medicinal Inc., reported AU$759K in sales revenue, indicating a 143% rise on the previous quarter and a 340% rise against Q1 2020.
  • CPH’s Swiss business unit performed strongly with CHF466K in revenue recorded for the quarter, representing a ~1,600% uplift on the previous quarter. The revenue comprises -
    • cannaQIX® product sales (~CHF205K)
    • anibidiol® product sales (~CHF261K)
  • Creso had cash reserves of AU$18.6 million as of 31 March 2021, which provides considerable financial flexibility to the Company.

Management Commentary

Non-Executive Chairman Mr Adam Blumenthal said:

Mr Blumenthal further added Halucenex had made significant progress during the quarter and provided CPH with access to another lucrative vertical. Furthermore, the management has a well-defined growth approach to execute during the current period and beyond, including multiple near-term growth initiatives like the dual listing on the US OTC market.

Outlook: the way forward

  • The US Cannabis legalisation would provide a significant market opportunity for Creso Pharma. Furthermore, the Company is very well positioned to capitalise and move forward. Once the legalisation takes place, CPH can accelerate Mernova operations scale-up to service the US market.
  • The introduction of OTC sales of low-dose CBD products in Australian Pharmacies after the Therapeutic Goods Administration (TGA) decision opens up new opportunities for the Australian medicinal cannabis market.

Creso Pharma is now progressing several value-accretive opportunities, including initiatives through its existing agreement with Martin & Pleasance to unlock substantial value for its shareholders.

On 05 May 2021, CPH shares were trading at AU$0.200 (at AEST 10:22 AM).


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