Company overview - Creso Pharma Limited is an Australia-based company engaged in developing cannabis and hemp-derived therapeutic-grade Nutraceuticals and Medical Cannabis products with a range of applications in both human and animal health. The Company's principal activity is to develop, register and commercialize pharmaceutical-grade cannabis and hemp-based nutraceutical products and treatments. The Company's segments include Hemp-Industries s.r.o. (Hemp-Industries), which includes hemp-growing operations, outsourced cannabidiol (CBD) extraction and CBD product sales activities; Creso Pharma Switzerland GmbH (Switzerland), which includes the development and commercialization of its therapeutic products, and Creso Pharma Limited (Creso), which includes the Company's corporate administration. The Company primarily offers human health and animal health products, and hemp-derived extracts, oils and proteins.

CPH Details

Leader in cannabidiol (CBD) innovation: The medicinal cannabis industry is in its infancy and dominated by small players with minimal understanding of what is required to comply with emerging regulations. It has led to questionable quality due to the lack of standardization in formulation and dosage of cannabis derived products. There is a remarkable lack of trusted cannabis brands in the global marketplace, and established pharmaceutical companies are generally reluctant to enter the market due to evolving regulations. Creso brings significant pharmaceutical industry expertise and rigor to the world of medicinal cannabis. The company is the leader in cannabidiol (CBD) innovation and develops cannabis and full plant hemp derived therapeutic grade CBD nutraceuticals and medical cannabis products with wide patient reach for human and animal health. Creso only uses full plant extracts. Cannabinoids and other compounds have a greater effect when taken together than when separated into individual single compounds - potentially resulting in a synergetic entourage effect.


Creso Pharma Group Structure; (Source: Company reports)
 
Upcoming product launches: Creso Pharma remains on track to launch its CannaQix human health nutraceutical product in the area of anxiety and stress in Q1/ Q2 2018 and line extensions in the area of bone metabolism in Q2 2019. The launch of anibiodiol 2.5 and anibiodiol 80, the proprietary formulated hemp-based complementary feed products for companion and zoo animals also remains on target for 2017.  The products use proprietary Swiss delivery technologies which would boost the bioavailability and absorption of their active ingredients. Creso Pharma’s Australian partner, Health House International, successfully imported the first medicinal cannabis products into Australia in May 2017 following changes to Government legislation, and the import was a range of three cannabis oils for human health from Canadian manufacturer CanniMed. The oils can be used for a variety of conditions as approved by prescribing physicians under Australian Federal and State laws and regulations to meet immediate need for medicinal cannabis locally. Products will now be distributed to authorized pharmacies by Health House.
  
Creso Pharma is targeting to import medical cannabis products into the Asia-Pacific and Latin American regions from Switzerland, post their deal with Cannapharm AG. The company has signed a binding Letter of Intent (LOI) with Cannapharm AG to provide patients in Asia Pacific and LATAM the access to top quality medicinal cannabis products from Switzerland, to address a variety of conditions as approved by prescribing physicians under relevant local legislations. Importantly, CPH would capitalize on the first mover advantage to be exclusive distributor of highest quality Swiss-grade medicinal cannabis products into Asia Pacific and LATAM markets. The partnership would further enhance CPH’s market leadership position in the rapidly growing industry.


Cannabidiol treatment and therapeutic benefits; (Source: Company reports)
 
Vast market opportunity: The firm is talking with potential commercial partners and targeting to launch the products in Australia and across Asia-Pacific in 2018 as they see the region lucrative given the rising demand for wellness and prevention health products among well-informed consumers. As per Euromonitor research, the Asia Pacific market for vitamins and dietary supplement sales is larger than the US and generated over $US40 billion in sales in 2016. China is the major vitamin and dietary supplement market in the region, which comprises 45% of total retail value and is forecasted to rise at a 10% CAGR over 2016-2021 to $US26 billion. The group is aiming to introduce several SwissVit nutraceutical products specifically formulated to target several health-related areas, including eye health, immunity, bones and joints, oral iron supplementation, and digestion. Accordingly, they intend to leverage their nutraceutical products innovative and propriety characteristics to penetrate in the Asia-Pacific region. Creso fills void in current market with growing need for trusted products that meet the highest global pharmaceutical standards. Global market size is estimated at $1.8 billion per-year industry, with sales now exceeding $4.5 billion. Moreover, US has a 3 million-patient market opportunity (More than 700K patients have already been prescribed), while Canada’s market size was $144 million in 2014, and expected to reach $380 million by 2018, to $1.3 billion in the next 10 years. Europe presents a huge unmet demand as small quantities usually imported from Holland's only national medical grade cannabis (MGC) program supplier, Bedrocan.
 

Market size; (Source: Company reports)
 
Growth in human health markets:   Total global nutraceuticals market reached $142.1 billion in 2011, and expected to reach $204.8 billion by 2017. Further, the nutraceutical ingredient market is forecast to reach $33.6 billion by 2018, while the overall US nutrition market was estimated at $137.4 billion in 2012, with supplements accounting for $32.4 billion. Creso’s subsidiary, Hemp-Industries, successfully delivered its second shipment of hemp protein to one of the largest bakeries in Slovakia, Pekárne Liptovský Hrádok, s.r.o. (PLH). Hemp Industries is anticipating growing demand for its product from PLH due to increasing public awareness of the health benefits of hemp seeds, which are regarded as the next important thing in the “superfood” industry for its high content of amino acids, omega acids, protein and other beneficial substances. The hemp protein is used by PLH to produce several top-quality protein bar products, which are sold in leading grocery chains like Tesco, Kaufland and others.


Product Pipeline; (Source: Company reports)
 
Animal health products update: The group is on track to launch their proprietary formulated hemp-based complementary feed products for companion and zoo animals by September 2017. They are planning to launch anibidiol 2.5 to cater small companion animals, and anibidiol 80 aiming large companion animals and zoo animals at Switzerland and Europe, followed by South Africa and selected countries in the Gulf Region and Latin America.

First-ever and unique EU registration for two proprietary formulations: Creso and its commercialization partner, Greveling Holding BV (Greveling) obtained the first-ever and unique EU registration for two proprietary formulation animal feed CBD-based nutraceutical products for commercialization in the global companion animal market. The registration paves the way for CPH to sell the two nutraceutical products globally and the first mover advantage will help Creso capture a leading share of the global companion animal market and a leading market share of the hemp-derived animal health market worldwide. The recession-resistant animal health products industry is projected to continue showing rapid growth as the veterinary health market represents an attractive opportunity for the company with the estimated market size of $US39.7 billion by 2021. Currently, the number of treatment options available to veterinarians are limited and available treatments are often human therapeutics that are poorly adapted to animals. For the animal health product, it also initiated observational field studies in Switzerland and the Netherlands to gather data which will be used to support the company’s development and commercialization efforts.


Source: Google
 
Considerable progress during FY16: The Company’s net loss for the FY16 was $4,584,239 against the net loss of the previous corresponding period of $11,572. Total revenues for the period were $8,022 up 100% from the previous corresponding period. The initiative taken during FY2016 were expected to put the company in a strong position in terms of its development and commercialization efforts as the company expects to achieve further key milestones in FY2017. In terms of its animal health products, the award of EU registration for two cannabidiol (CBD) based proprietary formulation animal feed nutraceutical products gives the company a first-mover advantage in the growing veterinary health market. The stock has rallied over 106.5% in this year to date (As of July 18, 2017) but corrected over 24% in the last three months. Given the group’s strong pipelines and growing demand for cannabis medicines, we give a “Buy” recommendation on the stock at the current market price of $0.455


CPH Daily chart; (Source: Thomson Reuters)

 

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