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Creso Pharma poised to enter US market with established partner after signing non-binding letter of intent with CERES

Last updated: 10:52 01 Mar 2021 AEDT, First published: 10:48 01 Mar 2021 AEDT

Creso Pharma Ltd - Creso Pharma signs non-binding letter of intent, poised to enter US market with established partner
The US is a major market opportunity for the company with considerable growth expected once CBD is legalised.

Creso Pharma Ltd (ASX:CPH) (OTCMKTS:COPHF) (FRA:1X8) has executed a non-binding letter of intent (LOI) with CBD and plant-based remedies provider CERES Natural Remedies to distribute and sell Creso’s anibidiol® range of CBD and hemp animal health products in the USA.

CERES has three traditional retail stores in Vermont and access to more than 50,000 distribution outlets across the country, servicing high growth customer segments, including conventional and convenience-based grocery stores, colleges and universities, fast food outlets, natural grocers and medicinal and recreational cannabis dispensaries.

Expanding US footprint

Creso expects to leverage CERES’ established relationships to expand the company’s footprint into the US.

The company is targeting US$5 million in anibidiol® sales over the first two years of the agreement - subject to federal legalisation of CBD in the US.

Creso non-executive chairman Adam Blumenthal said: “Entering the US market with a high-calibre partner such as CERES is a major achievement for Creso Pharma and we look forward to working with the group to outline a progress of the launch of anibidiol® across the country.

“Importantly, CERES has an established distribution footprint and relationships with over 50,000 stores across the country, as well as a track record of scaling up its own branded products and international offerings.

“To this end, we are very confident that our animal health products will be well received.

“We will continue to monitor regulatory and policy shifts in the US to ensure the company and CERES are primed for launch and expect first sales to add to the company’s revenue streams.”

Demand for hemp-based pet products

The US represents a large, emerging addressable market for Creso, with the global CBD pet supplements market valued at US$27.7 million in 2019 and anticipated to grow at a 40% compound average growth rate from 2020 to 2027.

CERES executive director Shayne Lynn said: “We are excited to partner with Creso Pharma to introduce the company’s industry-leading animal healthcare products to the US market.

“We continue to witness rapid demand for CBD and hemp-based pet health products through our network and anticipate anibidiol® to be very well received.

“We look forward to working with Creso’s management team to explore additional growth opportunities which will benefit both parties and create a long-term, value-accretive partnership.”

Legislation expected in near-term

The company has recently witnessed considerable shift in the regulation of cannabis globally and looking forwards Creso and Ceres will work together collectively to prepare to sell and distribute within the US market upon legislation occurring which both groups believe will happen in 2021.

The commercial agreement will be formalised quickly in order to be able to move swiftly upon legislation occurring.

Agreement terms

The initial term of the agreement is one year and will automatically renew after one year, unless either party notifies the other of their decision to not renew the agreement within 90 days prior to the expiry of the initial or renewal term.

Initially, it is intended that CERES will focus on Vermont, Maine, New Hampshire, New York, Connecticut, Massachusetts and Rhode Island and explore opportunities to target additional states across the US.

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