Despite its micro-cap size, PAO Group, Inc. (USOTC: PAOG) continues to make significant strides to advance its patent-backed CBD nutraceutical portfolio. Last week, PAOG announced that at least three of its CBD Nutraceutical Products will be released internationally in Q4 of this year. That brings several near term milestones and catalysts into view. Better still, it puts PAOG in a competitive position to capitalize on an emerging CBD nutraceutical industry opportunity valued at $5.2 billion in 2020, and projected to grow to $16.4 billion by 2027.
The better news for PAOG is that its planned international expansion is expected to cost less than originally planned, which makes the move more impactful with the international markets expected to deliver a significant portion of the company's total CBD Nutraceutical revenues. Three products are in play.
The first is CBD RELAX-RX, targeting the multi-billion dollar anxiety and depression market. The second nutraceutical is RespRX, a late-stage development project expected to tap into the massive COPD market. And its third CBD-based therapeutic, being developed in conjunction with Puration, Inc. (USOTC: PURA) is EVERx CBD Sports Water, seeking to take advantage of a substantial sports nutrition sector where CBD infused products are earning greater shelf space.
To facilitate what is expected to be a busy back half of 2021, PAOG is working with Alkame Holdings, Inc. (OTC Pink: ALKM) as a co-developer and North American Cannabis Holdings, Inc. (OTC Pink: USMJ) as its logistics partner to distribute its CBD nutraceuticals into US and international markets.
The US market opportunity, by the way, is getting a boost from legislation intended to lessen restrictions on the use of CBD. In fact, at least 12 states have decriminalized its possession entirely.
2021 Milestones In View
PAO Group, Inc. is coming to market at the right time, with its mission benefiting from less restrictions in the sector. Newly enacted cannabis reforms ease regulations and regulatory scrutiny, which have an immediate effect on PAOG's ability to get its products to market faster and with fewer logistical hurdles. Also, the loosening of regulations is likely to attract new research partners and prospective investors who were previously hesitant to work in the sector due to existing laws. These changes should benefit PAOG in more ways than just regulatory terms; they could also pave the way for enormous growth throughout the rest of 2021.
In fact, PAOG's expansion is already well in progress. A partnership with Puration, Inc. will facilitate near-immediate growth by maximizing its use of a Texas-based pharmaceutical-grade indoor hemp grow and CBD extraction facility. Other partnerships with Alkame Holdings, Inc. and North American Cannabis Holdings, Inc. also add marketing and distribution expertise to its development and commercialization ambitions. Thus, PAOG has the team in place to get its products to market. And for a company its size, that's a remarkable accomplishment.
Better still, with the cannabis-sector enjoying more mainstream marketability, PAOG is better positioned than ever to capitalize on substantial opportunities.
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Benefiting from Loosening Cannabis-Related Restrictions
In April, the Texas House of Representatives passed a bill that legalized the medical and recreational use of cannabis. That legislation benefits PAOG tremendously, especially with CBD-based treatments gaining in popularity over traditional and addictive pharmaceutical alternatives. And, while President Joe Biden may only be in favor of decriminalizing marijuana at this time, Senate Majority Leader Chuck Schumer has called for the government to move forward with full legalization efforts. Biden is expected to sign bi-partisan legislation enacting the latter. For good reasons.
According to a new Pew Research survey, 91% of people in the United States think marijuana should be legal for either medicinal or recreational use, with 60 percent in favor of both. Though both can benefit PAOG in different ways, the therapeutics side of the equation is the prize for PAOG. And lucrative markets are in play.
PAOG's RespRx, for instance, a CBD treatment being developed to treat Chronic Obstructive Pulmonary Disorder (COPD) targets a multi-billion dollar treatment opportunity utilizing proprietary extraction methods. That asset came through an agreement with Kali-Extracts, Inc. (OTC Pink: KALY) last year. PAOG also bolstered its commercialization efforts by recruiting Veristat, a contract research organization (CRO) dedicated to the advancement of therapies and treatments through regulatory approval. That deal should accelerate commercialization of RespRx.
2021 Could Be The Breakout Period
Indeed, PAOG generated considerable product development momentum during the first half of 2021. The back half should be even better. In fact, investors could expect to see at least one, perhaps three, CBD-based products on the market. Accordingly, the stock is responding well to its prospects, increasing by approximately 228% since January.
Investors responded especially well to PAOG detailing its plans to expand its CBD-based nutraceuticals line toward other indications. As noted, PAOG is working on at least two treatment candidates, both targeting vast and potentially lucrative markets. Combined, its two treatment candidates are seeking to earn a respectable share of a market valued at more than $25 billion. Moreover, that market is expected to double in the next ten years.
Keep in mind, too, that it's CRO, Veristat, is retained to accelerate approvals for its development-stage products. That benefit needs to be factored into the share price, especially since it validates PAOG's pipeline. In fact, an update from PAOG reiterated that Veristat has already made considerable progress in validating and supplementing the underlying research for RespRx. This is unquestionably good news in the near term, and additional updates alluding to commercialization could ignite investor interest.
A rally in April fell short of breaking resistance at the $0.01 level. However, expected milestones on the development and commercialization progress could translate into 2021 catalysts. And catalysts drive value.
Research Funding Powers New Opportunities
Notably, PAOG is not slowing its ambitions. In April, they announced plans to complete a deal that would provide additional research funds and a 25% stake in a cannabis extraction patent. They also announced being in final talks to conduct a joint research study involving CBD In Vivo Histological Research, which will help to speed up the approval process for RespRx. Additionally, PAOG will benefit from its 25% stake in the underlying patented cannabis extraction technology, from which the RespRx formula is derived. Better still, PAOG noted that it could secure the right to buy the patent outright in the long term, which opens up a variety of new revenue streams. Patented assets clearly add firepower.
The excellent news is that PAOG's stake in the underlying cannabis extraction method could generate massive long term revenue streams. Noting that product analysts have said that the patented extraction process yields an extract that is very close in form to that of GW Pharma (NASDAQ: GWPH), licensing and partnership opportunities could come in the masses. That would translate to PAOG potentially monetizing the asset through licensing agreements without ever taking their own product to market. Those would be cash-cow agreements.
And don't underestimate PAOG's understanding of that asset. They have noted that ownership of the technology would add long-term, highly lucrative revenue streams. In fact, if Jazz Pharmaceuticals (NASDAQ: JAZZ) purchase of bought GW Pharma for $7.2 billion earlier in 2021 is any indication, holding ownership to an effective extraction process could deliver exponential rewards. .
A Lucrative Opportunity In A Substantial Market
Indeed, PAOG is well-positioned for near and long-term growth. And they maintained that position despite the pandemic disrupting almost every industry around the world. In fact, while other companies slowed, PAOG actually added value by engaging Veristat, purchasing new assets, and strengthening its development team by working with PRCCI in Puerto Rico to speed up its research and development processes.
Better yet, having two therapeutics in the works, complimented by an expansion of its research projects, PAOG may be in its best shape ever to increase shareholder value in the coming weeks and months. The intrinsic value from its therapeutics alone is already more valuable than the company's current share price, especially from its inherent value to target a rapidly growing, billion-dollar market.
In total, PAO Group has delivered a compelling investment proposition. Taking into account multiple partnerships, engagement with a CRO, ownership interest in a compelling CBD extraction process, and near term commercialization for three products, PAOG offers tremendous inherent value at a discount.
The best part is that investors could take advantage of low share prices and maximize returns from what is expected to be a busy back half of 2021. And if its aggressive development and commercialization strategies remain on schedule, the returns could be exponential.
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