Friday, October 18, 2019
Stockhead Poses The Question? Are Aussie Cannabis Companies A Good Purchase ?
For a while there, it seemed like the Australian cannabis sector had stalled.
But there are signs the tide is beginning to change. In June, Canadian-listed medicinal cannabis business PharmaCielo lobbed a $122 million bid for Aussie pot stock Creso Pharma (ASX:CPH), and just last week Zelda Therapeutics (ASX:ZLD) announced it wanted to merge with private US medicinal cannabis company Ilera Therapeutics.
Zelda shareholders will vote on whether to see their company become ‘Zelira Therapeutics’ by the company’s annual general meeting by the end of November, while at Creso, PharmaCielo’s proposal has been approved in its first court hearing, with a shareholder vote set for November 11.
So then, is this the beginning of the land grab for small Aussie cannabis companies? Is it the time in the sun for Aussie green? Well, yes and no, says Adam Miller, founder of cannabis advisory firm BuddingTech.
“The Zelda and Creso deals clearly demonstrate the interest,” he tells Stockhead. “M&A is very important in this industry and it is incredibly important to have an international footprint.
“In a space that moves like dog years, having connections with international companies is essential.”
However, he says not all Aussie pot stocks are bound to be takeover darlings, saying those with established distribution and a product portfolio are best placed, and companies without, or with limited distribution networks, risk getting left behind.
Dr Richard Hopkins, Zelda’s managing director, says that reasoning is part of what makes the Ilera merger so attractive.
“By bringing together these two companies we’re creating something the world doesn’t have,” Dr Hopkins tells Stockhead. “They have the footprint and we can access their infrastructure.”
“It makes sense that PharmaCielo is leveraging Creso’s product development and established relationships,” Miller continues. “It’s a clever move for a larger organisation.”
As for whether this could be a tipping-point for long-awaiting Australian cannabis shareholders, Miller says the horizon looks good.
“The Australian market is growing and will only continue to grow,” he says. “Our prescription population is exceeding initial estimates, and we are an export hub, with a footprint extending into New Zealand and Southeast Asia.
“For an international company, all of this is quite attractive. We’re getting the ticks on the board and they will want to have a presence in this region.”