Positive regulatory ramifications for CPH from US Marijuana Act

By Trevor Hoey. Published at Dec 7, 2020, in ASX Biotechs

Creso Pharma Limited (ASX:CPH; FRA: 1X8) has advised that the US House of Representatives has passed the Marijuana Opportunity Reinvestment and Expungement (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 bill was passed in the lower chamber with 228 votes to 164 votes on Friday 4 December 2020 and will now move to the Senate.

This is a major milestone for the cannabis industry 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.

The development leaves Creso Pharma very 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 can scale up operations to meet potential demand from the US market.

Mernova, which is Creso’s fully licenced 24,000 square foot cultivation growing facility is only 1700 miles from the US border, an ideal location to be able to cater to the Canadian and US market.

Having such close proximity to the US, Mernova will immediately benefit directly upon legalisation.

There is also substantial appetite for the group’s Swiss CBD products in the US, and management is exploring many initiatives to roll this out as soon as legalisation occurs.

There has been some extremely positive industry data released throughout the year, and the following chart indicates that the American marijuana business could increase to US$130 billion by 2024.

Creso’s shares surge following positive global regulatory developments

Creso co-founder and Director Boaz Wachtel highlighted the significance of this development, particularly on the back of last week’s news regarding regulatory shifts in the European Union in saying, “This is a historic ruling that will create significant growth opportunities in our burgeoning industry. It follows similar regulatory shifts in the European Union and from the United Nations that highlight public acceptance for cannabis and CBD-derived products is at an all-time high.

“Creso is very well positioned to capitalise on opportunities arising from the market in the USA.

“The company has a robust balance sheet, allowing it to progress near and medium term growth initiatives, as well as an established Canadian subsidiary in Mernova, which can be scaled up to address the US market.

“The appointment of Canopy Growth founder, Bruce Linton to Creso earlier this year will position Creso very strongly to take advantage of this new opportunity when it materialises.”

Such has been the quality of the newsflow that shares in Creso Pharma have increased more than threefold in less than a fortnight, and they are now trading at levels not seen since COVID sent our market tumbling at the start of the year.

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