The Creso Pharma Ltd (ASX: CPH) share price has slipped in afternoon trading today after the company announced an agreement to acquire Halucenex Life Sciences Inc.
The Creso Pharma share price lifted as high as 23 cents just after the market opened this morning as the agreement provides entry into the emerging global market for psychedelic medicines, estimated to be worth up to US$100 billion. Halucenex researches, develops and licences novel psychedelic molecules for the global pharmaceutical and nutraceutical markets.
However, Creso shares are currently down 1.43%, trading at 20.7 cents at the time of writing. Let's take a look at what's happening with the Creso Pharma share price.
Consolidating after 1,000% surge last year
The Creso Pharma share price surged as much as ~1,300% last year from 3.5 cents to as high as 47 cents.
This could be attributed to the US House of Representatives passing the Marijuana Opportunity Reinvestment and Expungement Act to remove cannabis from the US Controlled Substances Act. The bill decriminalises cannabis for the first time on a national level.
While the Creso Pharma share price has taken a breather around the 20 cent level in 2021, the company continues to push forward with several significant announcements and developments in the cannabis space.
Halucenex acquisition
Creso said the acquisition was a "first-mover advantage" into the psychedelic medicines sector, positioning itself as the first 100%-owned psychedelic medicines company listed on the ASX.
Halucenex is currently awaiting the approval of its Controlled Drugs and Substances Dealer's License. If approved, it will apply to commence a phase 2 clinical trial. The company will conduct research and development on psychedelic substances, including LSD, psilocybin and MDMA. Its phase 2 clinical trial is expected to commence in the third quarter of 2021.
Halucenex will also seek an amendment to the dealer's license to produce, package/assemble, sell, transport, import and export psychedelic substances. The company notes that it will not partake in any activities in relation to certain compounds until the company has satisfied the ASX that it is legally compliant.
Transformational acquisition for the Creso Pharma share price
Creso Pharma views the acquisition as "transformational", enabling the company to emerge as a "best-in-class provider of cannabis, cannabinoids and psychedelics alternative medicines to meet the large unmet need for treatments to improve mental health and well being".
The Halucenex acquisition will include a $500,000 cash consideration plus ~29.25 million Creso shares and ~17.5 million Creso performance shares. Creso has also agreed to advance Halucenex $250,000 as a loan to fund its operations before settlement. And provide another $1,000,000 in funding during the 12 months following settlement.
Management commentary
Creso Pharma non-executive chairman Adam Blumenthal believes the acquisition benefits the company on all fronts.
This is a major milestone for Creso Pharma and marks our evolution into a broader based pharmaceutical business. Creso will now sell its trusted cannabis products and progress the commercialisation of a range of psychedelic-assisted psychotherapy treatments. Our entry into this market provides the company with another lucrative vertical and an additional near term revenue stream.
Mental health and PTSD are becoming detrimental to our society and this has been highlighted in the last 12 months. These conditions have been exacerbated by COVID-19 and the available treatments are shown to have limited effectiveness and many side effects. Psychedelic-assisted therapy is a new alternative treatment route, which has considerable promise.
Mr Blumenthal said the acquisition of Halucenex would strengthen the company's presence in Canada, as well as "provide a number of opportunities in drug development which will inevitably lead to further new market entries and commercialisation opportunities".
