Biotechnology company StemCell United (ASX: SCU) has received an in-direct leg-up in China after its close working partner, Yunnan Hua Fang Industrial Hemp (HFIH), obtained its inaugural industrial hemp licence in China.
Stemcell signed a co-operation agreement with HFIH in April this year which included a payment of A$400,000 and several exclusive rights options.
The agreement meant that StemCell could utilise HFIH’s import-export licence and existing market network in China to explore further distribution of its dendrobium-related products and capitalise on future cannabis beauty products developed by HFIH.
Today’s news of HFIH being granted its industrial hemp licence is therefore significant because it permits the company to engage in planting, processing and selling of industrial hemp related products in China.
The licence is directed towards high cannabidiol (CBD) and low tetrahydrocannabinol (THC) cannabis strains, thereby adding emphasis to the medicinal side rather than the psychoactive side typically attributed to THC.
Chinese hemp opportunity
StemCell says it is focusing on the growth, reproduction, culture and extraction of stem cells for medicinal, health and beauty applications using its environmentally-friendly “breakthrough plant stem cell biotechnology.”
StemCell says Its ‘Dendrobium Officinale’ and ‘Daemonorops Draco Blume’ extracts are currently in high demand and widely used in many different products, including medical, healthcare and beauty products.
The licence is a significant step forward for StemCell in allowing HFIH to access high-quality cannabis seeds that SCU could use for stem cell research and manufacturing cosmetic cannabis products.
The company has previously said that it intends to use proprietary plant stem cell technology to produce cosmetic cannabis products in China, given the emphatic growth of cannabis-infused cosmetics in the country to date.
China’s skincare market is one of the world’s largest cosmetic markets and the use of cannabis stem cell extraction for beauty products is expected to provide StemCell “compelling growth opportunities,” according to StemCell.
“We are delighted that HFIH has received the industrial hemp licence in China, a significant milestone that will greatly assist StemCell in accessing cannabis seeds for stem cell research, in line with our objective to establish StemCell as a leading provider of high-quality TCM cosmetic cannabis products in China,” said Philip Gu, CEO of StemCell United.
Furthermore, the current partnership between StemCell and HFIH also allows the biotech company to use HFIH’s import-export licence to import its TCM beauty products into China and supply its products nationwide via HFIH’s distribution network. The duo also hopes to supply StemCell’s products into Hong Kong, Singapore and potentially Australia.
At the current time, StemCell has an exclusive right to invest around A$760,000 in exchange for a 51% interest in HFIH but must first notify the ASX in accordance with existing listing rules before the transaction can be finalised.
In early trading this morning, StemCell shares were up as high as $0.04 per share, representing a gain of around 95% compared to yesterday’s close.