Creso closer than ever to tapping billion-dollar Canadian cannabis industry

By Zoe Gross. Published at Jun 21, 2018, in ASX Biotechs

In the wake of the Canada’s recent legalisation of recreational cannabis nationwide, Creso Pharma (ASX:CPH) has said that it welcomes this decision with open arms.

The landmark bill and the historic vote passed on Tuesday June 18, and will allow Canadians to legally buy and consume cannabis. The Cannabis Act was approved by the Senate 52-29 after already passing the House of Commons in May this year.

Critically, this marks an end of 90 years of prohibition. It also makes Canada the second country in the world — and the first G7 nation — to fully legalise cannabis for recreational consumption and open up sale and distribution to both domestic and international markets.

An official date for the law to officially come into place has now been confirmed by Prime Minister Justin Trudeau to be October 17.

CPH, which has its corporate eye on the budding global cannabis market, has already established a considerable presence in North America — the passing of this law will enable further substantial opportunity for product growth and uptake.

In 2017, CPH became the only Australian cannabis company with direct exposure to the world’s largest legal marijuana market via its acquisition of Nova Scotia-based medicinal cannabis applicant, Mernova Medicinal Inc.

This deal delivered on CPH’s strategy to establish a Canadian presence, as well as its pursuit of opportunities in the global medicinal cannabis space, with added exposure to the ample recreational cannabis market.

Timing of this new legislation could scarcely be more apt for CPH, given that construction of its 20,000 square foot medicinal cannabis growing facility is currently underway and making sound progress, with completion expected in Q3 2018. This will enable CPH to vertically integrate its production chain, capitalising on the sizeable market opportunity of both medical and recreational marijuana.

Although how much of the market CPH is able to attract remains speculative and investors should take all publicly available information into account and seek professional financial advice before making an investment decision.

The new law allows the Canadian federal government to license producers and regulate how they grow, sell and distribute cannabis. Adults aged 18 and over will be permitted to possess up to one ounce of cannabis for recreational use, and grow up to four cannabis plants.

Cannabis-infused edibles will also be legal within one year of the law’s implementation — a market Creso is targeting with its cannaQIX and cannapeal ranges. CPH has also developed a range of terpene-infused premium Swiss chocolates — a major offering into the cannabis-infused edibles market.

Further cementing its position in Canada, CPH last week announced its appointment of John Griese as COO for the Americas. Griese brings expansive expertise in the North American cannabis space, and will help crystallise CPH’s presence in the region.

Canada is expected to be a US$6.5 billion ($8.7 billion) industry by 2020, according to research by Canadian Imperial Bank of Commerce (CIBC). That’s more than the US$5.1 billion Canadians spent on alcoholic spirits in 2017, and it’s approaching wine sales.

In 2017, US$2.25 billion was raised across 206 cannabis companies in Canada. In the first quarter of 2018 alone, over US$1.35 billion was raised across 96 Canadian cannabis companies, reflecting significant forecasted growth and demand.

More equity capital has been raised for cannabis companies in Canada than anywhere else in the world, with over 50 companies listed on the Canadian stock exchange.

CPH CEO, Dr Miri Halperin Wernli, said: “The full legalisation of cannabis use in Canada is really positive news. Creso has been growing its presence in Canada as we believe it offers huge potential for the uptake of our products. This law signals a great future for the industry in this market and we hope other countries will follow suit."

“Not only is it positive news for the industry, but it will also make the purchasing of cannabis safer for Canadians by providing legal licensed businesses where consumers know what they’re buying,” she said. “It will allow for better quality control and more public health awareness campaigns, whilst depriving organised crime of money and making it harder for children to access."

“Canada is demonstrating great leadership on cannabis policy. It is setting an example not only for the U.S., where reform is already progressing at the federal level, but for many other countries around the world, where there has been far too little debate on the subject."

“Cannabis prohibition is a failed U.S. policy experiment that was replicated by countries around the world. It has caused far more problems than it has solved, and governments should now follow Canada’s example by revisiting their cannabis policies and exploring alternatives,” Halperin Wernli noted.

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