Broadly, the cannabis industry can be broken down into four sectors; 1) cannabis sellers (Canadian licensed producers, American multi and single state operators, etc.), 2) business-to-business (sellers of lighting, soil, etc.), 3) Real Estate investment trusts (REITs) that focus on leasing to cannabis producers and 4) cannabis pharmaceutical and wellness companies. Since cannabis is still listed as a Schedule 1 drug by the U.S. Drug Enforcement Agency and “defined as drugs with no currently accepted medical use and a high potential for abuse,” companies that focus on pharmaceutical cannabis research are primarily located in Canada, Europe, and Australia.
Australia-based Creso Pharma (ASX: CPH) (OTC: COPHF) (FRA: 1X8) brings cannabis health and wellness to humans and animals around the world. On March 15, 2021, Creso announced the company struck a deal to acquire established Canadian psychedelics leader Halucenex Life Sciences. Already a leading force in the global cannabis industry, the transformational acquisition has Creso Pharma poised to catapult itself into the burgeoning psychedelics sector, with the possibility of quickly becoming a major player in the emerging market.
Cannabis Pharma: An Enormous Opportunity
While global cannabis sales are expected to surpass $42 billion in 2024, global prescription drug sales are expected to grow to $1.5 trillion in 2021. The legal cannabis market is large, but the pharmaceutical cannabis market could be enormous.
For example, British-based GW Pharmaceuticals (NASDAQ: GWPH) (OTC: GWPRF) (FRA: GW2A) is an example of a company using cannabis to treat diseases. The company grew from $12 million in revenue in 2018 to $311 million in 2019, a staggering 2,491% growth. The company is expected to grow revenue to nearly $1 billion in 2022. Developing the right cannabis drug can provide explosive revenue growth, and Creso Pharma aims to be a major player in the cannabis pharmaceutical and wellness market.
Even after factoring in CPH stock’s incredible 52-week max gain of +1,858.33%, Creso’s market capitalization still stands at about 1/20th the market cap of GW Pharma and roughly 1/6th the size of Canopy Growth (TSX: WEED) (NYSE: CGC) (FRA: 11L1). In other words, Creso Pharma likely has tremendous upside from current market levels.
“Creso was created to bring pharmaceutical expertise and methodological rigour to the world of cannabis and deliver quality products to people and animals everywhere. Founded by a team of highly-experienced pharmaceutical executives, Creso set out to leverage cutting edge science and research to develop, register and commercialize innovative cannabis and hemp-derived products.”
Founded in 2015, Creso Pharma products are already being sold in Canada, Australia, Israel, New Zealand, Portugal, Spain, Brazil and Africa. The company has reported several milestones to include being the first company to import medicinal cannabis into Australia and the first to launch innovative products containing broad-spectrum hemp oil extract into Switzerland for humans and animals. Most recently, they’ve announced several major product orders from Israel.
Cannabis Pharma: Mega Catalysts on the Horizon?
With the Democrats now controlling the House of Representatives, Senate and the White House, federal legalization in the United States could be on the near term horizon. In addition to full-on legalization, any serious cannabis reform, such as decriminalization and descheduling (MORE Act) or banking reform in the SAFE Act, would likely open the medical research flood gates in America. This would certainly be a major game-changer for the pharmaceutical cannabis industry as substantial resources would flow rapidly into the sector.
On a recent episode of The Cannabis Investing Podcast, Ayr Strategies (CSE: AYR.A) (OTCQX: AYRSF) CEO Jonathan Sandelman stated, “If we get rescheduling, I think one of the most exciting things is, and one of my passions, we’ll get medical research. I do believe cannabis is nature’s medicine, and I would love to see it be researched more broadly. It has always been a passion of mine to bring the plant to as many people who need it and derive benefits from it.”
For the most part, the majority of cannabis producers appear eager to partner with a company like Creso Pharma that focuses on cannabis as medicine.
Source: Creso Pharma Halucenex Acquisition Investor Deck
Psychedelics, the Only Sector Hotter Than Cannabis
The only investment sector hotter than the cannabis stocks is psychedelic medicine stocks. The market for psychedelic medicine is projected to reach $6.85 billion by 2027. In the past three months, MindMed (NEO: MMED) (OTCQB: MMEDF) (DE: MMQ) has seen its stock soar 250% and Creso bringing in MindMed’s director Bruce Linton on board in October of 2020 is a clear indicator that the company is exploring psychedelic medicine. 264 million people around the world suffer from depression, and psychedelic medicines are showing promise.
Halucenex Deal, Likely a Game-Changer
In March, Creso inked a blockbuster deal to acquired Halucenex Life Sciences, a company on the cusp of being one of the only fully vertically integrated Canadian psychedelic-assisted psychotherapy providers. According to a 2017 Oxford Martin School study, 3.4% of the global population was diagnosed with Post-Traumatic Stress Disorder (PTSD). The psychedelic therapeutics market to treat PTSD is expected to reach $10.5 billion by 2025.
Halucenex operates a 6,000 square foot medical clinic facility in Nova Scotia, Canada where the company researches psilocybin, LSD, and MDMA and the cultivation of natural magic mushrooms. The company is conducting clinical trials for the treatment of veterans who suffer from PTSD. In partnership with True North and Everest Clinical Research, Halucenex will conduct a Phase 2 clinical trial to demonstrate the efficacy of psilocybin in the treatment of Treatment-Resistant Depression in Canadian veterans. Phase 3 trials are projected to start in March of 2022.
Once highly regulated by the governments of the world, psychedelics are demonstrating results in treating mental illness and being deregulated in the US and Canada. In 2019, the US Food & Drug Administration designated psilocybin-assisted psychotherapy as a ’Breakthrough Therapy’ and granted expanded access to MDMA for PTSD patient treatment trials. In 2020, Oregon legalized psilocybin for adults’ mental health treatment in supervised settings, and the Canadian Health Minister granted patients with terminal cancer access to psilocybin mushrooms through a one-time exemption to the Controlled Drugs and Substances Act.
Halucenex is one of the few Canadian companies fully licensed to conduct clinical trials, and Creso brings a strong clinical team to expedite product development and provides a global distribution needed to bring products to the world. Halucenex also has a significant moat – Health Canada approves clinical trials only if companies have access to synthetic psilocybin to ensure consistency of dosage and purity in formulations. Halucenex is only one of two companies in Canada to have a license.
“This is a major milestone for Creso Pharma and marks our evolution into a broader-based pharmaceutical business. Creso will now sell its trusted cannabis products and progress the commercialisation of a range of psychedelic-assisted psychotherapy treatments. Our entry into this market provides the Company with another lucrative vertical and an additional near-term revenue stream. “Mental health and PTSD are becoming detrimental to our society and this has been highlighted in the last 12 months. COVID-19 has exacerbated these conditions, and the available treatments are shown to have limited effectiveness and many side effects. Psychedelic-assisted therapy is a new alternative treatment route, which has considerable promise. “The acquisition of Halucenex will strengthen our presence in Canada, as well as provide a number of opportunities in drug development which will inevitably lead to further new market entries and commercialisation opportunities,“ stated Adam Blumenthal, Creso Pharma’s Non-Executive Chairman.
Creso Pharma – Opportunity Awaits
With the UN late last year voting to reschedule cannabis as a drug with no medical or therapeutic value to a drug with medical value, other countries, including the United States, should follow suit, setting the stage for a major influx of cash and resources into the cannabis pharmaceutical industry. Companies like Creso Pharma should benefit enormously as new multi-billion dollar markets open to their products. With Creso now fully invested in the psychedelic medicine market, the sky’s the limit.
CPH Stock Price Action & Chart – Bull Pennant Breakout Imminent?
Shares of Creso Pharma’s stock appears set for a major breakout as CPH approaches the apex of its extremely bullish pennant chart formation. Bull Pennants are continuation patterns that form during the period of consolidation that takes place following a large breakout. Bull Pennants are formed by converging support and resistance trend lines, that create the appearance of a physical baseball pennant.
As is often the case with this type of Technical Analysis continuation pattern, following the consolidation period that forms the pennant, the stock will break out above the upper resistance trendline as it approaches the pattern’s apex. After the confirmation of a successful breakout, the stock will normally continue moving higher following the direction of its current trend, which in the case of Bull Pennants, is upward. As a rule of thumb, the longer the period of consolidation, the larger the potential breakout’s move to the upside.
Taking a look now at the CPH chart below, you’ll see a gorgeous textbook Bull Pennant pattern that has been forming for nearly 4 months. If history is any indication, a very large move to the upside for CPH is likely imminent. Breakouts from these types of chart patterns are usually fueled by a large catalyst, and in the case of Creso Pharma, the blockbuster psychedelics deal with Halucenex is as big as it gets. Move Creso Pharma (ASX: CPH) (OTC: COPHF) (FRA: 1X8) to the top of your trading watchlist immediately.
This U.S. Cannabis Stock Appears to Be Way Undervalued and May Actually Benefit From a Second Wave of the Pandemic
Creso Pharma is a paid client of The Cannabis Investor. The Cannabis Investor does not hold a position in CPH.
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