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Why the Zelda Therapeutics Ltd share price has surged higher today

Although the market has dropped lower for a third day in a row, that hasn’t stopped the Zelda Therapeutics Ltd (ASX: ZLD) share price from jumping higher today.

The pot stock has climbed over 4% to 12.5 cents after announcing plans to expand its clinical trial programme in Chile. As well as insomnia and eczema, the company’s clinical trial will now include autism.

According to the release the company will work with Chilean non-profit patient advocate group Fundación Daya, leveraging its clinical experiences with autism patients.

Pleasingly these clinical experiences have previously demonstrated solid anecdotal evidence of positive quality of life outcomes using cannabinoid-based therapy.

Which I think bodes well for Zelda, especially considering it expects the global market for autism diagnosis and treatments to grow to be worth US$412.7 million by 2019.

Subject to regulatory approvals, trials are expected to commence in the second half of 2017. These trials are expected to last three to six months, meaning Zelda could start generating revenue from Chile and other South American markets as early as 2018.

But is it a buy?

Like fellow pot stock Auscann Group Holdings Ltd (ASX: AC8), I think Zelda has a great deal of potential.

But with a $100 million valuation, the market certainly has factored in a significant amount of growth already.

I feel reasonably confident that AusCann and Zelda are destined to be very successful businesses, but I think the prudent thing to do at this point is to sit on the sidelines and wait to see how its sales develop in 2018.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.