Health: Elixinol pivots to pet pot treats, nabs 25pc stake in US hemp manufacturer
Health & Biotech
Health & Biotech
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Australia’s most successful pot stock Elixinol (ASX: EXL) is on the acquisition path.
The hemp-growing company announced this morning that it’s bought a 25 per cent equity interest in Altmed Pets LLC, trading as Pet Releaf.
The transaction was carried out via Elixinol’s fully-owned US subsidiary.
Colorado-based Pet Releaf manufactures hemp-derived CBD oils, topical creams, and edible marijuana products for pets.
The company was an early mover in the sector, “which is a completely different universe to the human world because canines and felines have very different endocannabinoid systems and needs to humans,” Pet Releaf’s Stephen Smith said.
To complete the deal, Elixinol will shell out $US4.35 million cash and issue $US1.9 million in new shares, for a total consideration of $US6.25 million.
For Elixinol, which is also headquartered in Colorado, the deal is the by-product of a “long-standing relationship” between the two companies.
“Elixinol has been the exclusive supplier of CBD extracts from Pet Releaf’s exclusive strains of hemp since inception,” the company said.
Both parties have also shared knowledge “for many years”, including the exchange of farming ideas and cost reduction strategies.
Elixinol will issue 523,437 new shares to complete the scrip side of the deal.
The comply with ASX rules, the value of issues shares must be no less than 75 per cent of the volume-weighted-average-price of Elixinol shares over the 15 days prior to the transaction date.
On that basis, the minimum value calculated by Elixinol was $3.82, and the $5.09 issue price represents a 33 per cent premium to the minimum requirement.
Shares in Elixinol took a hit yesterday after its quarterly numbers showed a slowdown in revenue growth for the three months to March 31.
A short time ago, the company’s share price had slipped by another three per cent this morning to $4.88.
Elixinol says Pet Releaf made full-year revenue of $US8.1 million in the 12 months to December 2018, based on the numbers in its unaudited accounts.
The company says its investment will provide Pet Releaf with some ammunition to scale up and provide exposure to the fast-growing sector for hemp-based animal products.
Elixinol’s US-focused hemp operation made $37 million revenue in the 2018 calendar year, up 121 per cent from 2017. Despite losing some momentum this week, its share price has risen steadily from around $1.50 at the beginning of September.
“In addition to having Elixinol as a major distribution partner, Pet Releaf is the most widely distributed hemp and CBD pet product on the market, both online and through over 4,000 retail pet locations globally,” Elixinol president Gabriel Ettenson said.
Biotech minnow Factor Therapeutics (ASX: FTT) released its 4C filing for the March quarter. Operating outflows for the quarter were $1.12 million, largely comprised of costs associated with its failed Phase II trial results from its venous leg ulcer wound dressing treatment.
The company ended the quarter with $4.4m in the bank. It’s now focused on cost reduction strategies and maintaining its intellectual property portfolio, while the board assesses potential acquisition targets and the future direction of the company. Shares in FTT were unchanged at 0.4 cents.
And medtech player Proteomics (ASX:PIQ) — which makes a predictive test for diabetic kidney disease called PromarkerD — also released its quarterly update. Cash receipts in the three months to March totalled $606,000, with net operating cash outflows of $361k. The company currently has $2.57m in the bank.
The Perth-based Proteomics commenced a collaborative study with global pharmaceutical company Janssen, and obtained a US patent for a kidney drug using its PromarkerD technology which could provide “significant commercial value”. Shares in PIQ were unchanged at 28 cents, down from a 12-month high of 48 cents in November.