Medical Cannabis Company Creso Pharma to List on ASX
Studies on medical cannabis have proven that it can be helpful for treating the symptoms of a variety of medical conditions.
The potential industry for harvesting and producing medical cannabis has caught the attention of some top-flight investors in the US. Now the local market has another IPO — Creso Pharma — which allows any investor to enter the industry through a float that may capture wider attention largely due to the nature of the business.
Cannabis has been used as a medical therapy for thousands of years across many cultures. In the early Twentieth Century cannabis became illegal and was criminalised, however an increasing number of countries are now starting to legalise the substance again for various purposes. Studies on medical cannabis have proven that it can be helpful for treating the symptoms of a variety of medical conditions and thus is a suitable medical product: the NSW government recently allowed cannabis cultivation research.
The coming listing of Creso Pharma Limited presents investors with the opportunity to invest in a marijuana focused pharmaceutical company. Creso Pharma’s primary focus is to develop and commercialise pharmaceutical-grade cannabis based products and treatments.
While Creso Pharma is not generating revenue yet, it has entered into agreements with a number of companies to develop and test technologies to create cannabis based products. Successful delivery of these technologies and procurements of patents are the main value drivers for the IPO. The company aims to break into the undersupplied vet market, which could result in a first mover advantage if successfully executed.
With this new area of investing, the ASX has yet to find an appropriate sector category for Creso. Furthermore, IPO investors should note that the company has a limited operating history (incorporated on 20 November 2015) and is reliant on external capital to fund development and research. Creso Pharma operates in an industry which is subject to laws and government regulation and any changes may adversely impact Creso Pharma’s business model.
Still, the global medical cannabis market has experienced rapid growth over the past few years and while there is no guarantee that Creso Pharma can successfully commercialise its products, the undemanding valuation mitigates some of the risks.
ASX Code: CPH
Shares on Offer: 25m
Listing Price: $0.20
Market Capitalisation: 11.5m
Listing Date: October 12
Author: Simon Herrmann
Sep 26, 2016
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.