Last week, Creso Pharma Limited’s (ASX: CPH; FRA: 1X8) wholly-owned Canadian cannabis cultivation subsidiary, Mernova Medicinal Inc. received three purchase orders with a combined value of C$275,023 (A$288,159).
These new purchase orders are part of a trend this year, which has seen CPH generate more consistent revenue through product demand, whilst substantially trimming operating costs.
The first of the new purchase orders was valued at C$232,826 (A$243,841) and came from Truro Cannabis Company, a licensed producer of medical and recreational cannabis products.
The Truro order is a bulk order for three of Mernova’s high quality, indoor grown, hand trimmed, hang dried, cured, artisanal cannabis strains, in dried flower form, specifically HPG13, Lemon Haze and Mimosa.
Truro is well established throughout Canada, and will sell Mernova’s products via its well-established distribution channels.
Creso Pharma also received a maiden purchase order from the Yukon Liquor Corporation (‘Yukon’), opening a new Canadian market with the company anticipating further orders in the future.
The purchase order for the HPG13, Lemon Haze and Mimosa strains, in dried flower form is valued at C$24,333 (A$25,436).
These products will be sold under the Ritual Green brand in 3.5 gram and 7 gram units, through leading retailer Triple J’s Canna Space.
A Notice to Purchase from the Province of Ontario, also marks Creso’s entry into Canada’s largest recreational cannabis market.
These developments serve as confirmation of the significant demand for Mernova’s high-quality cannabis products in the rapidly growing Canadian retail recreational market.
This has been evident since October, when Creso announced that repeat purchase orders totalled more than $2 million on a year-to-date basis following a repeat purchase order from South African-based Pharma Dynamics.
In Europe, CPH continues to sell its CBD products in the animal health market via its Swiss operations, with a total of A$975,000 in Purchase Orders confirmed in 2020.
Total purchase orders continue to grow across CPH’s operations.
Commenting on these recent developments and expressing his confidence regarding the likelihood of further strong order flow, Mernova managing director Jack Yu said, “Mernova continues to make very strong progress in the Canadian recreational market.
“The three most recently secured purchase orders will contribute to Creso Pharma’s growing revenue profile and we expect additional orders to materialise in the very near term.
“Mernova has now become part of a very select group of licensed producers with cannabis products for sale in the Yukon.
“This is a major achievement for us, and we expect growth to continue across Canada and, with our pending entry into Ontario, Canada’s largest recreational market, we expect rapid growth to continue.”
Recreational markets across the globe could open up
Legal recreational marijuana has been available in Canada for two years now, however it looks as though other nations are following suit.
Last Friday, the US House of Representatives passed the Marijuana Opportunity Reinvestment and Expungement (MORE) Act – an Act that intends to decriminalise cannabis on a national level.
The decision is expected to have far reaching effects on the cannabis industry in North America, encouraging investors and corporate America to fully unlock the value of a multi-billion dollar industry, expected to surge to $130BN by 2024.
Mernova, Creso’s 24,000 sq.ft cannabis growing facility in Canada is only 1,700 miles from the US border.
Creso is now exploring near term opportunities for entry into the US recreational cannabis space right now, in readiness for legalisation. It is being assisted by Canadian cannabis icon Bruce Linton, who has come to Creso as a Strategic Advisor.
Mr Linton was the founder and CEO of Canopy Growth (TSX: WEED | NYSE: CGC), which he built from a tiny start up into a US$15BN market cap powerhouse at its peak.
Given these developments, CPH is currently trading at levels not seen since February 2020, prior to COVID sending global markets tumbling.
Looking globally, the United Nation’s Commission for Narcotic Drugs voted to reschedule cannabis, effectively removing it from a list including ‘hard’ drugs, such as heroin.
Furthermore, the Court of Justice of the European Union (CJEU) ruled that member states must not prohibit the marketing of lawfully produced CBD and ruled that CBD is not considered a narcotic.
As a result, CBD can be freely sold in the European Union (EU).
Even Australia is getting on board.
The Therapeutic Goods Administration (TGA) will shortly bring down its final decision regarding a major regulatory change in the distribution of cannabidiol (CBD) products in Australia.
The changes recommend that CBD products be down scheduled from schedule 4 and classified as schedule 3 medicines in Australia, which would allow Australian consumers to purchase CBD products over-the-counter (OTC) through pharmacies without the requirement of a prescription.
That announcement may already be paying off for Creso, which late last week announced it has secured an exclusive Heads of Agreement with leading natural, sustainable health and lifestyle brand supplier Martin & Pleasance Pty Ltd.
Under the agreement, Creso will manufacture a range of cannabidiol products in Switzerland, which would be sold under new and existing Martin & Pleasance brands in Australia.
Martin & Pleasance was established over 150 years ago and provides an extensive range of natural remedies and medicines to consumers.
Four products are earmarked from Creso’s proprietary nutraceutical range in lozenge and tea form, which are all manufactured at the GMP Certified Mernova facility.
With regulations around cannabis opening up across the globe, and well-established global operations, it’s my contention that Creso Pharma looks well placed for growth.
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