Creso delivers second consecutive quarter of record revenue growth

4 minute read

By Trevor Hoey. Published at Jul 1, 2021, in Small Caps

Creso Pharma Limited (ASX:CPH, FRA: 1X8) through its Swiss operations and wholly-owned Canadian subsidiary, Mernova Medicinal Inc. has achieved record sales growth for the June quarter.

This has added to the company’s growing revenue profile that has benefited from multiple purchase orders from various provinces, highlighting increased demand for Mernova’s products in Canada.

To date, Creso Pharma has generated a total of A$1,715,933 in revenue during the June quarter, which marks a 24% increase on the previous quarter (Q1 CY2021: A$1,385,000) and and a 451% increase on the previous corresponding period (Q2 CY2020: A$311,353).

The consistent quarter on quarter growth is underpinned by the strong demand for Mernova’s craft cannabis products and Creso Pharma’s animal and human health CBD products.

Mernova continues to aggressively pursue further near term sales opportunities prior to quarter end.

This provides confidence in the company's scalable recurring revenue model that will increasingly provide income visibility and predictability for the broader group.

Mernova has generated a total of A$1,040,454 in sales to date from purchases from various provinces including the Nova Scotia Liquor Corporation (NSLC), New Brunswick’s only legal cannabis retailer and the Yukon Liquor Corporation for its Ritual Green and Ritual Sticks pre-roll range.

Robust demand for animal and human health products

The strong sales performance was assisted by increasing demand for Creso Pharma’s animal and human health CBD products.

Creso Pharma’s Swiss operations have contributed approximately CHF469,083 (A$675,479) to total quarterly revenue growth so far through the sale of the company’s high-quality CBD products for animals and humans.

Recent revenue growth is in line with the company’s strategy of increasing sales in existing key markets, ongoing international expansion and through the introduction of new products.

Creso Pharma has a positive outlook on sales growth, with the expectation that the Red Light Holland (RLH) merger could potentially provide multiple new near term market entries and scale-up opportunities

Enhanced regulatory conditions provide new opportunities

There has also been positive news on the regulatory front with Connecticut becoming the nineteenth state across the US to allow recreational cannabis use.

The state passed legislation on Tuesday, 22 June 2021, which allows people aged 21 and over to possess and consume marijuana beginning 1 July 2021.

The legislative shift is expected to lay the groundwork for a new cannabis industry in the state.

Government representatives anticipate that retail sales of recreational cannabis in the state will commence during 2022.

There has been movement in California as well as Senate Bill 519 (SB519) has now passed through the Californian State Assembly Committee on Public Safety, which is another pivotal step towards the legislation being enacted into law.

SB519 proposes that a wide range of psychedelic substances, including psilocybin, should be legal to use and possess for adults over the age of 21, as well as expunge prior criminal offences for use and possession.

The bill was introduced to progress a more health-focused approach to the use of psychedelic compounds and to address the current mental health crisis in the US. It also marks the ongoing push towards acceptance of psychedelic compounds as an alternative treatment route.

This provides another major market opportunity for Creso Pharma and Red Light Holland ahead of the potential merger to create The HighBrid Lab.

Both parties are currently exploring go to market strategies and opportunities to scale up Mernova’s offering to progress an entry into US markets.

It also favours acquisition target Halucenex.

The HighBrid Lab prepares to tackle US$41 billion US market

The US is anticipated to become the world’s largest cannabis market and reach a value of US$41 billion by 2025.

Creso Pharma is very well positioned through its operations and pending corporate developments to capitalise on this emerging market and unlock considerable value for shareholders.

Commenting on the outstanding sales growth and factors that are likely to provide sustained momentum, particularly in light of the proposed merger, non-executive chairman Adam Blumenthal said, “Recent sales growth across the group is very pleasing and provides a very strong foundation for the remainder of 2021 and beyond.

"We look forward to providing further updates on revenue growth from our existing operations through new product launches and ongoing international expansion efforts."

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