Next Investors logo grey

Revenues up 237%: Creso Pharma delivers strong quarter ahead of OTC listing


Published 30-APR-2021 09:35 A.M.


8 minute read

Hey! Looks like you have stumbled on the section of our website where we have archived articles from our old business model.

In 2019 the original founding team returned to run Next Investors, we changed our business model to only write about stocks we carefully research and are invested in for the long term.

The below articles were written under our previous business model. We have kept these articles online here for your reference.

Our new mission is to build a high performing ASX micro cap investment portfolio and share our research, analysis and investment strategy with our readers.

Click Here to View Latest Articles

There were several highlights to come out of the quarterly report released by Creso Pharma (ASX: CPH) today.

CPH is enjoying a sustained run this year in the lead up to its US listing, which is expected to occur in the coming weeks.

Highlights of the quarterly, which we will break down shortly include:

  • Total Q1 2021 revenue of A$1,385,000 - up 237 % from Q4 2020
  • Pending Halucenex acquisition that will put CPH into the growing psychedelics market
  • Firm commitments secured from leading investors including John Langley Hancock, Stocks Digital and L1 Global Master Opportunities fund to raise $18m
  • OTC listing to unlock US investor market.
  • Cash at bank of $18.6M provides considerable financial flexibility

The Halucenex acquisition is an interesting development and one that could open up enormous opportunities for the company in North America as it gets set to list there.

CPH has signed an agreement to acquire psychedelics company Halucenex, which is focused on developing treatments for Treatment Resistant Depression in individuals suffering from PTSD and other mental health conditions.

The Canadian, Nova Scotia-based company is progressing the research, development and licencing of novel psychedelic molecules for the global pharmaceutical and nutraceutical markets and is currently focused on progressing clinical trials to research the efficacy of psilocybin to treat and alleviate Treatment Resistant Depression in individuals suffering from PTSD and other mental illnesses.

Not only will this acquisition give CPH a first mover advantage into the psychedelic medicines sector, it could be transformational for the company especially as it looks to extend its revenue footprint into the US sector.

There is a growing appetite for psychedelics and associated companies in the US. Just this week, MindMed listed on the NASDAQ, having already had a great run this year.

MindMed closed at $5.84 last night on its OTC/NEO listing. In September, it was trading at less than 50c.

Next Investors Image

CPH and MindMed have a strong connection. MindMed Board member Bruce Linton, who founded Canopy Growth Corp - which went from a penny stock to a $15BN market cap at its peak - recently became an advisor to CPH. Linton holds shares in CPH.

Former CEO and founder of CPH Dr Miri Wernli remains a significant shareholder of CPH and is the Executive President and Director of MindMed.

This connection should augur well for CPH when it makes its US market entrance.

Creso Pharma will emerge from the Halucenex 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.

Halucenex currently operates at 6,000 sq. ft. medical treatment facility in Nova Scotia, located next to the Hants Emergency Hospital, with a Controlled Substances laboratory, and 18 treatment rooms dedicated to providing psychedelic-assisted psychotherapy.

Halucenex’s 6,000 sq ft medical treatment centre in Nova Scotia, Canada.
Halucenex’s 6,000 sq ft medical treatment centre in Nova Scotia, Canada.

Halucenex is currently waiting to receive its Controlled Drugs and Substances Dealer’s License so that it can apply to commence a phase II clinical trial expected to commence in Q3 2021.

For more about Halucenex read:

Revenues continue to grow

CPH has increased its total revenues by 237% this quarter, reporting revenue of $A1.38M, highlighting the growing demand for its products.

Here’s a look at its revenue highlights:

Mernova Medicinal Inc. (CPH: 100%):

  • A$759k (~C$743k) in sales revenue recorded for the quarter – marks a 143% on the preceding quarter and 340% increase on Q1 2020
  • Repeat purchase orders highlight ongoing shift to a recurring revenue model
  • Launch of Ritual Sticks pre roll joint range provides access to new lucrative market
  • Growth anticipated during current quarter and beyond following new product launches and scale up of operations

NB: During February, Mernova secured four purchase orders (POs) for its leading Ritual Green product range, with a total value of C494,131 (A$502,199).

Two of the four orders were from the Ontario Cannabis Retail Corporation (OCRC), which operates as the Ontario Cannabis Store, valued at C$228,323 ($A231,911) and C$115,008 (A$116,815), for a total value of C$343,331 (A$348,726).

In April, Mernova secured new purchase orders valued at C$145,192 (A$150,770) from the Ontario Cannabis Store (OCS) and Yukon Liquor Corporation (Yukon).

Read: Pre-roll joint market provides multiple growth opportunities for Creso

Nutraceutical product line - cannaQIX®:

  • A$275k (~CHF205k) in revenue recorded for the quarter – highlights a 12000% uplift on previous quarter
  • Second shipment of cannaQIX® delivered to Pharma Dynamics South Africa
  • cannaQIX® sales brought in-house to increase margins
  • Distribution Agreement with Route2 unlocks multiple new markets and minimum order commitments of A$2.48m
  • Agreement with ImpACTIVE broadens product line and North American footprint

NB: Creso completed all required import and export procedures and successfully completed the second delivery of its cannaQIX® products to Pharma Dynamics South Africa, a subsidiary of leading pharmaceutical company, Lupin International (NYSE: LUPIN) – the fifth largest generic pharmaceutical company in South Africa.

Next Investors Image

Read: Creso agreement with Cannabis Queen expands POS network to 3100

CPH also secured an LOI with ImpACTIVE Holdings Limited, which allowed the group to distribute cannaQIX® and cannaDOL products in North America.

CPH will become an authorised distributor of ImpACTIVE’s CBD based roll on product range, with an initial focus on Switzerland with launch expected to commence April 2021.

CPH will target the growing sports and recreational market through its 2,100 points of sale in Switzerland, which provide access to over 400 sport and fitness centres and specialist large retailer groups. Sales are expected to underpin the Company’s growing revenue profile.

Animal Health Product line - anibidiol®:

  • A$351k (~CHF261k) in revenue recorded for the quarter
  • 952% revenue increase from previous quarter
  • Second purchase order secured from Vibac Switzerland valued at A$247,826
  • Letter of Intent entered into with CERES Natural Remedies (“CERES”) to distribute anibidiol® in the US

NB: CPH’s PO from existing commercial partner, Virbac Switzerland is a repeat order and is binding. Delivery is expected this month and follows an ongoing demand trend for CPH’s Creso’s range of CBD and hemp animal health products anibidiol® products, which have underpinned revenue streams during the course of the financial year.

Also of note, is CPH’s agreement with leading CBD and plant-based remedies provider CERES Natural, a leading Vermont headquartered distribution company, specialising in plant based remedies and CBD and hemp products for the US market. It is the sister company to Champlain Valley Dispensary, Vermont’s first licensed and only independent medicinal cannabis company.

Champlain Valley Dispensary and CERES are both subsidiaries of High Fidelity, Vermont’s largest independent cannabis company. High Fidelity currently operates two of the five vertically integrated cannabis licences available in the state and services 70% of registered patients.

Since 2013, High Fidelity has generated in excess of US$35 million in revenue.

Read: Creso teams up with CERES to distribute animal health products

Regulatory winds of change work in CPH’s favour

CPH has been one of the busiest companies on the ASX and as it expands its footprint across Europe and the US, it should be able to capitalise on coming regulatory changes.

The decriminalisation of cannabis and the passing of the Marijuana Opportunity Reinvestment and Expungement (MORE) Act, should work in the company’s favour.

The MORE act aims to remove cannabis from the US Controlled Substances Act and aims to erase certain federal convictions to essentially decriminalise cannabis on a national level.

Should legalisation occur, CPH can expedite its scale up of Mernova’s operations to service the US market.

Further to this, New York has struck a deal to legalise cannabis.

Read: CPH looks to expand its footprint as NY State reaches deal legalise recreational cannabis

In Australia, CPH is looking forward to over the counter (OTC) sales of low-dose CBD products in Australian Pharmacies. The sale of these products was made possible following a decision from the Therapeutic Goods Administration (TGA) to down schedule low-dose CBD preparations form 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.

CPH is working with Martin & Pleasance, a leading natural, sustainable health and lifestyle brand supplier to supply cannabidiol (CBD) products to the Australian market.

Read: Creso Pharma is a step closer to unlocking Australian market

Final word

Having raised $18M in an oversubscribed placement, CPH is well placed to progress several opportunities related to the acquisition of Halucenex, expansion of its current nutraceutical range and scale up Mernova’s operations.

With a dual listing on the OTC market also imminent, CPH will look to continue its upward trajectory.

General Information Only

S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

Conflicts of Interest Notice

S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.

Publication Notice and Disclaimer

The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.

Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.

This article may include references to our past investing performance. Past performance is not a reliable indicator of our future investing performance.