Creso Pharma’s shares surge following news of Democratic majority in Senate

By Hannah Goldman. Published at Jan 8, 2021, in ASX Biotechs

Creso Pharma Limited (ASX:CPH; FRA: 1X8) was among the myriad of cannabis stocks to surge on Thursday (07/01/2021) following early news from the United States that the Democrats had taken control of the Senate.

Following significant share price movement in response to developments in the US, CPH closed at a high of 26.5c, representing a gain of 44% in a mere 24 hours.

The Democratic win is likely to catalyse constructive changes for federal cannabis reform - 2021 will see the first unified Democratic control of the White House and Congress since 2008, whereby such leadership has revolutionised their cannabis policy and support for reform.

Throughout the election the Joe Biden campaign touted support for cannabis decriminalisation, with Kamala Harris pledging for it to be an administrative priority if she and Joe Biden were elected.

Importantly, the development enhances the potential for Marijuana Opportunity Reinvestment and Expungement (MORE) Act to be passed in the Senate, a bill which has the potential to considerably benefit Creso Pharma.

On December 4, Creso Pharma advised that the US House of Representatives passed the MORE Act to remove cannabis for the US Controlled Substances Act.

The historic bill aims to erase certain federal convictions and essentially decriminalise cannabis for the first time on a national level.

The Cannabis industry views these developments as a major milestone, as legislation like the MORE Act is expected to encourage private investors and larger corporate entities that have been hesitant to become involved in the US cannabis industry due to federal prohibition.

Investors are now sitting tight to see if the coming months will open the door to a series of meaningful cannabis policy reforms.

Creso attractively poised to tackle US market

Creso Pharma is now well positioned to capitalise on opportunities in the US market.

The company has an established global distribution network that will benefit from the ruling, as well as a leading Canadian subsidiary, Mernova Medicinal Inc. (Mernova), that already has a 24,000 sq ft cannabis growing facility 220 miles from the US border. From its current position, Mernova could scale up operations to meet potential demand from the US market.

Creso is currently exploring several US market opportunities and is confident in its ability to enter this market swiftly. As a listed vehicle with access to capital, Creso is also an attractive partner for merger and acquisition opportunities.

CPH share price increase tenfold with global regulatory developments

Such triumph for Creso Pharma comes off the back of the strong rerating that occurred in December 2020, which saw company share price increase tenfold in the midst of promising global regulatory developments and purchase orders.

On December 2, the United Nations Commission of Narcotic Drugs voted to remove cannabis from Schedule IV of the 1961 drug convention treaty.

Under the United Nations system, Schedule IV substances are considered the most dangerous and addictive drugs. Cannabis has now changed to be classified Schedule I, the least restrictive drug classification, a landmark decision and in essence, acknowledgement of the potential medical properties of cannabis.

Commenting on the Democrat win, Non-Executive Chairman, Adam Blumenthal said: “The recent election result is a historic moment for the cannabis industry in the USA and these developments leave Creso very well placed to capitalise, should cannabis ultimately be decriminalised in the US through the passing of the MORE Act.

“Importantly, the decision reflects the changing sentiment towards cannabis and its CBD derived products in the USA. Creso has established distribution footprints in place, as well as an established product suite that it is able to quickly rolled out to satisfy large unmet demand from US customers.

Our proximity to the US, through our wholly-owned subsidiary Mernova, provides a significant advantage for the Company and we look forward to any potential legislative changes that will unlock the US market.”

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