Creso Pharma will acquire ImpACTIVE’s assets to bolster its North American presence to progress market entry strategy.

Global medicinal cannabis company, Creso Pharma (ASX:CPH), is making further inroads into the North American market after signing an agreement to acquire the assets of Canadian-based life sciences company, ImpACTIVE Holdings.

Under the deal, Creso will acquire ImpACTIVE’s assets through a newly formed subsidiary, Creso ImpACTIVE, for C$200,000 payable in Creso shares valued at last Friday’s closing price of 11c a share.

The agreement also includes the issue of 6 million performance shares – of which 3 million will convert into Creso shares if Creso ImpACTIVE could generate C$20 million in gross sales revenue within 36 months.

The remaining 3 million performance shares will convert into Creso Shares if it could generate C$40 million in gross sales revenue within 60 months.

ImpACTIVE’s assets include CBD-based products that provide anti-inflammatory relief to professional and amateur athletes suffering from chronic muscle and joint pain, as well as joint and limb recovery.

Those products are expected to give Creso direct access to the sport and recreation market for CBD products, with a projected market value of US$22 billion by 2022, C$220 million of which are in Canada alone.

Creso says this transaction will be the first of many future M&A initiatives that will potentially allow it to expedite US market penetration.

“This acquisition follows a significant legal and regulatory review which can now be relied upon to advance other CBD related acquisitions in the US,” commented Will Lay, Creso’s newly appointed executive VP of North America.

Lay was recently appointed to spearhead Creso’s aggressive push into the US market.

“We are currently assessing multiple value accretive US M&A opportunities that will be based on a similar structure,” he said.

“Our model of acquisitions with high growth potential will be a key factor in the company’s US growth trajectory.”

 

ImpACTIVE’s reach in North America

ImpACTIVE is a Canadian life sciences company founded in 2019 by current and former high-profile athletes seeking to provide alternative treatment routes to the athletic community.

The company has developed a range of CBD-based products, designed to reduce muscle and joint inflammation without the use of heavy narcotics or prescription pharmaceuticals.

The products contain less than 0.3% THC, which is expected to significantly reduce regulatory hurdles worldwide.

Several well-known brand ambassadors, including pro hockey players Mark Fraser and Pheonix Copley,  promote its products which are rapidly gaining traction in North America.

There is a growing demand for topical methods of pain relief, due to the prevalence of medical conditions such as arthritis, bone and muscle-related conditions, and diabetic neuropathy.

The global topical pain relief market is projected to reach US$12.22 billion by 2027, and grow at a CAGR of 5.2% from 2021 to 2027.

ImpACTIVE has received product approval in the RangeMe system, a product procurement platform used by some of the world’s largest retailers.

Tender applications have been submitted to stock its range of  products in CVS pharmacies and Walgreens – the first and second largest pharmacy store chains respectively in North America and the UK operating thousands of outlets.

Other buyers on the RangeMe system include large US retailers such as Whole Foods, PetCo, Target, Amazon, GNC and Safeway.

 

Strategic rationale behind the acquisition

As part of the agreement, Creso Pharma will add ImpACTIVE’s products to its own growing range.

These include both topical creams and roll-on products such as the ImpACTIVE Pro-ReLEAF CBD Roll-On, the Hybrid Roll-On, and CBD Cream amongst others.

Creso is also working with ImpACTIVE to develop new products including topical rollers and creams containing only CBD, which are scheduled for launch in the coming months.

The acquisition is a major milestone for Creso Pharma, as it allows the company to potentially increase its North American footprint and broadens its range of CBD products.

Through the agreement, Creso will also be able to leverage ImpACTIVE’s wide distribution and sales channels – in order to accelerate  growth not only in North America, but also across Creso’s Swiss operations.

It’s also exploring a number of additional opportunities including cross promotion of Creso’s existing CBD products through ImpACTIVE’s brand ambassadors.

Online sales will launch soon, with additional retail partnerships expected to materialise in the coming months.

“This agreement is a major development for Creso. It was done at a low cost to us, with significant potential upside based on the performance of ImpACTIVE management,” said Creso’s non-executive chairman, Adam Blumenthal.

“Further, this agreement highlights Creso’s ongoing commitment to entering the US market ahead of our proposed dual listing.”

This article was developed in collaboration with Creso Pharma, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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