Creso Pharma (ASX: CPH) has shouldered its way into China’s medicinal cannabis and nutraceutical markets after entering a partnership and distribution agreement with hemp producer Zhejiang Kingdom Creative Co Ltd.
A wholly owned subsidiary of Hong Kong-listed Kingdom Group, Zhejiang Kingdom Creative cultivates and processes hemp-based linen and is seeking to expand into China’s healthcare sector with hemp and cannabis-based nutraceutical and medicinal cannabis products.
Under the agreement, Creso and Zhejiang Kingdom Creative will collaborate on research, development and distribution of hemp and cannabis-based nutraceutical, cosmetics and body care products throughout China.
Creso will also bring to the collaboration its current and future ingredients and products for either manufacturing or sale in China.
Creso expects a definitive agreement will be secured with Zhejiang Kingdom Creative within three months to define collaboration and commercial terms.
“This is a very exciting partnership for Creso as it gives us a strategic foothold in China and Asia,” Creso chief executive officer and co-founder Dr Miri Halperin Wernli said.
“Our collaboration with Zhejiang Kingdom Creative offers a great opportunity to work with a well-established and substantial organisation in this market,” he said.
China’s health food market is currently estimated at A$39.62 billion and Creso anticipates this will grow 10% annually until 2025. Additionally, the world pharma market is was valued at around A$208.73 billion in 2016, with China being the second largest market.
Similar to Australia and Canada, China’s government is progressively legislating to allow Chinese patients access to hemp and medicinal cannabis products.
In readiness for the agreement’s execution, Creso has opened up four China-based offices in Beijing, Shanghai, Shenzhen and Guangzhou.
Dr Halperin Wernli added the company would use its China offices as bases to leap into other Asian markets.
In addition to this agreement with Zhejiang Kingdom Creative, Creso is in discussions with other Asia-based pharmaceutical and cosmetics companies to expand into Asia and reach its “massive population of consumers and patients” as effectively and efficiently as possible.
Creso is also targeting Canada’s emerging medicinal cannabis industry, reporting in late October a new 20,000 square foot facility is due for completion by mid-2018. The company is in the process of gaining a medical cannabis cultivation licence for its Canadian facilities and aims to sell its edible cannabis nutraceutical products in 2019, under Canada’s amended legislation.
Cannabis stocks on the ASX
Back in Australia, there are more than 20 small cap cannabis stocks currently trading on the ASX.
Australia has advantages over other regions, such as Canada, because its weather is favourable for growing cannabis crops outdoors, with companies having the potential to grow up to two crops a year. This reduces costs associated with constructing and operating multiple greenhouses.
World legal cannabis consumption has an estimated value of $500 billion by 2029 as numerous other countries ease restrictions on research and supply of medicinal cannabis.
Shares in Creso soared more than 19% today to sit at A$0.98 in early afternoon trade.