The Creso Pharma (ASX:CPH) share price jumped 6% today. Here’s why

Investors responded well to the healthcare company’s step forward today…

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Key points

  • The Creso Pharma share price shot out the blocks this morning before ending the day 6% higher
  • It has acquired a US-based company manufacturing both CBD and non-CBD products
  • The Creso Pharma share price has fallen 57% in 12 months

The Creso Pharma Ltd (ASX: CPH) share price soared today after the company announced it was to enter the US market.

The cannabis-focused healthcare company revealed it is to acquire Colorado-based consumer packaged goods company Sierra Sage Herbs, LLC.

The Creso Pharma share price jumped 16% to 9.9 cents in early trade before settling back to 9 cents, a 5.88% gain on yesterday’s close.

So what does this acquisition mean for investors?

Let’s read on…

What fuelled the Creso Pharma share price?

The Creso Pharma share price spiked on today’s announcement. The company is now positioned to enter the US market through the acquisition of the already-established US-based business, Sierra Sage Herbs — and more so, the Green Goo brand.

Its product portfolio includes beauty and personal care, first aid, sexual wellness products (non-CBD) and CBD products. The range already has 90,000 points of sale, and a large direct-to-consumer base both in and out of the US.

Creso Pharma believes the US CBD market to be “large and quickly growing”, and estimates it will hit US$12 billion by 2026.

The company will acquire SSH for an up-front purchase price of US$21 million (with additional future payments based on estimated revenue targets of US$10 million in CY 2022 and up to US$20 million in CY 2023).

Creso Pharma aims to leverage and grow the existing Green Goo customer base and to introduce them to its own range of products — including therapeutics, nutraceuticals, topicals, and animal feed.

Comment from management

Speaking on the news driving the Creso Pharma share price today, group CEO and managing director William Lay said:

The acquisition of Sierra Sage Herbs and the company’s product range is a major milestone for Creso Pharma. It marks entry into the US CBD market and provides a strong foundation to rapidly scale up operations, product development and sales, as well as further M&A transactions.

Creso Pharma is expected to benefit from SSH’s existing revenue streams. We expect SSH’s product sales to continue growing significantly in coming years, and the transaction implies material accretion on several metrics for Creso Pharma. Coupled with our existing sales channels, we have the potential to significantly grow our earnings profile in the near term.

Sierra Sage Herbs CEO and co-founder Jodi Scott said:

We started this company because we knew that plant-based alternatives could do more. We combined our passions for science, wellness, herbology and wound care into a line of safe, effective all natural products and so began our journey to change first aid as we know it.

That seed has become one of the most disruptive CPG brands in personal care — and this is just the beginning.

Creso Pharma share price snapshot

Over the last 12 months, the Creso Pharma share price has dropped by 57%. However, it is up nearly 10% this year to date.

The company has a market capitalisation of $104.40 million and 1.23 billion shares issued.

Motley Fool contributor Alice de Bruin has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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