PAO Group, Inc. (USOTC: PAOG) is getting nearer to its first of several planned revenue-generating catalysts. Last week, in addition to announcing new partnerships, PAOG offered a sneak peek at its upcoming CBD Nutraceuticals line of products. The excellent news is that at its current pace of development, PAOG expects revenue from the CBD Nutraceutical line later this year and, at the same time, accelerate its long-term projects involving CBD pharmaceuticals.
PAOG's flagship product is expected to be RespRx, a development-stage CBD pharmaceutical product derived from a patented cannabis extraction method. Once launched, it targets a massive billion-dollar Chronic Obstructive Pulmonary Disorder (COPD). The better news is that PAOG has plenty more in its pipeline.
In fact, PAOG intends to launch three CBD nutraceuticals as soon as the fourth quarter of FY-2021. Their first CBD Nutraceutical in production will be named CBD RELAX-RX and is designed to target the anxiety and depression treatment market. That product is targeting an expected $18 billion market by 2025. The second CBD Nutraceutical in production will come from PAOG's ongoing COPD studies, which will focus on the COPD treatment market separately from the overall pharmaceutical sector. The third CBD Nutraceutical is being produced in collaboration with the EVERx CBD Sports Water brand owned by Puration, Inc. (USOTC: PURA) and will be marketed to the sports nutrition industry.
To develop and sell the CBD nutraceuticals, PAOG intends to work with Alkame Holdings, Inc. (OTC Pink: ALKM) as a co-developer and North American Cannabis Holdings, Inc. (OTC Pink: USMJ) as a distributor. Both offer logistical and industry expertise to the program.
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PAO Group, With A CRO On Its Side, Could Deliver Its First CBD-Based Therapeutic By Year's End
Notably, PAO Group may be able to expedite its ongoing CBD Pharmaceutical Development Program thanks to recently introduced laws pertaining to cannabis legalization. The loosening of restrictions and regulatory oversight could work in PAOG's favor in bringing its products to market more quickly. What's even better, the easing regulations could open the door to new research partners and potential investors who have previously been reluctant to work in the sector under current laws. Changes could help PAOG from more than just a regulatory standpoint; they could also clear a pathway to significant growth in the second half of 2021.
Another factor driving PAOG's growth will be its ability to maximize its partnership with Puration, Inc. in building a pharmaceutical-grade indoor hemp grow facility and CBD extraction facility in conjunction with PURA's Farmersville Hemp Brand project in Texas.
And, with the timeline to legalization getting shorter, its agreements to expedite growth are happening at the right time. Thus, interest in PAOG's CBD-based pipeline is likely to grow in the back half of this year.
The sector is experiencing a dynamic shift in sentiment. And at least 99% of it brings positive implications for PAOG.
PAOG Can Capitalize on Changing Laws
The Texas House of Representatives passed a bill to relax marijuana restrictions in April, particularly for CBD-based therapeutics, PAOG's primary focus. Alongside this bill, a popular financial publication generated considerable buzz through an article titled, "President Joe Biden is in favor of decriminalizing marijuana, while Senate Majority Leader Chuck Schumer is ready to push ahead with full legalization efforts even if Biden isn't completely on board just yet." The article cites data from a recent Pew Research study that demonstrates overwhelming public support for legalization, "91% of people in the U.S. believe marijuana should be legal for either medical or recreational use, with 60% in favor of both." While both may help PAOG in various ways, the therapeutics side of the equation should be most exciting for the company and its investors.
In 2020, PAOG struck a deal with Kali-Extracts, Inc. (OTC Pink: KALY) to acquire RespRx, a CBD treatment for chronic obstructive pulmonary disease (COPD) being developed using a proprietary cannabis extraction process. In a synergistic move to further develop this treatment, PAOG bolstered its portfolio by hiring Veristat, a contract research organization (CRO) committed to the scientific advancement of therapies and treatments through regulatory approval.
With the expected relaxation of regulations and CRO Veristat on its team, PAOG has created an excellent foundation for a breakout year in 2021. Already, things are looking good.
2021 Could be a Year of Growth
From a valuation perspective, 2021 has been good for PAOG. Since January of this year, shares are up by approximately 219%. A report outlining its efforts to extend its CBD-based therapeutics and nutraceuticals program received positive feedback from investors. As noted, at least two treatment candidates are currently being developed by the company, aimed at large and potentially lucrative markets. Together, the two treatment candidates target a combined market opportunity estimated to be valued as high as $25 billion within the next five years. The estimates continue to surge after that period.
The great news is that Veristat, a contract research organization (CRO) committed to the scientific advancement of therapies and treatments through regulatory approval, may deliver a significant boost to the opportunity.
Veristat has already made significant strides in validating and supplementing the underlying research for RespRx, according to an update from PAOG. This is undoubtedly positive news for the short term, while future updates on commercialization progress could pique market interest for the long-term play.
Interest is building already. In April of this year, the stock attempted to break resistance but unfortunately came up short, hitting a wall at $0.01. Despite this, any milestone updates released concerning its new RespRx program could soon give PAOG a more robust second attempt. If that wall is broken, the next stop could be near $0.02, representing a near 200% gain from current levels.
Upcoming Research Funding Will Open New Opportunities
PAOG also announced in April that it expects to finalize an agreement that will include research funding and a 25% interest in a cannabis extraction patent. More good news came next, with the company announcing that it is in final talks to form a partnership to perform a CBD In Vivo Histological Research Study, which would help RespRx get regulatory approval faster. The 25% stake in the underlying proprietary cannabis extraction technology, from which the RespRx formula is extracted, could provide PAOG with a company-changing asset. PAOG also noted that it could secure the right to buy the patent outright in the long term, which would open up a variety of new revenue streams.
The patent, at face value, could become a substantial revenue-generating asset for PAOG. The company has stated that industry experts agree its extraction method produces an extract very similar to that of GW Pharma (NASDAQ: GWPH), a leading figure in the development of CBD-based treatments. All things considered, this means that PAOG could monetize the commodity by licenses and agreements without ever bringing a product to the lab, allowing the company to harvest any windfalls without ever getting a product to market. This is a long-term strategy that could eventually bring substantial revenues - and don't believe PAOG is oblivious of its strong hand, especially after GW Pharma's acquisition by Jazz Pharmaceuticals (NASDAQ: JAZZ) for $7.2 billion earlier this year.
It all combines toward a potentially massive year for the company.
A Bullish Outlook In 2H 2021
Although the pandemic has slowed program growth in industries worldwide, PAOG is far from stalled. In fact, some of the most significant developments for the company happened throughout the last year, as the company secured the work of Veristat, acquired a new asset, and built upon its business relationships in Puerto Rico to expedite its research and development processes.
In fact, PAOG could be in its strongest position ever to build shareholder value in the coming weeks and months, with two therapeutics in the works and a proposed extension of its development programs. Moreover, the intrinsic value alone from its asset base is already more valuable than its current share price. Not only does this help to mitigate some of the risks associated with a long-term investment, but any one of the many planned near-term updates could drive valuations considerably higher.
On PAO Group, the investment thesis is simple. The company has positioned itself to have multiple shots on goal, has engaged with a CRO to expedite planned approvals, and has partnerships and acquisition strategies all working on adding value to the stock.
The best news is that development at any level could spark a potentially huge second half of 2021. And if all goes according to plan, PAOG investors could benefit from both near and long-term catalysts that drive investment returns now and potentially bigger ones later.
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