PAO Group, Inc. (USOTC: PAOG) stock closed 21% higher Monday preceding its planned investor update released this morning. In a pre-market release on Tuesday, PAOG updated investors about its expanding CBD-based therapeutics and nutraceuticals program that now includes two promising treatment candidates. The first is RespRx, targeting COPD, and the second, CBD RELAX-RX, a nutraceutical designed to treat anxiety and depression. The market opportunity is substantial, with estimates calling for at least a $25 billion combined market opportunity within five years.
Investors stayed bullish after the release, sending shares roughly 9% higher in early morning trade. Highlights from its update discussed the potentially transformative acquisition of RespRx from Kali-Extracts, Inc. (OTC Pink: KALY) in 2020. That treatment is under development for Chronic Obstructive Pulmonary Disorder (COPD) with CBD compounds derived from a patented cannabis extraction method - U.S. Patent No. 9,199,960 entitled "METHOD AND APPARATUS FOR PROCESSING HERBACEOUS PLANT MATERIALS INCLUDING THE CANNABIS PLANT." According to a prior release, that extraction process provides quality extracts comparable to GW Pharma (NASDAQ: GWPH). GW Pharma was purchased by Jazz Pharmaceuticals (NASDAQ: JAZZ) for $7.2 billion earlier this year. Thus, investors have reasons to be bullish.
Also catching a good amount of attention is the announcement that PAOG is working with Veristat, a contract research organization (CRO). That agreement is expected to leverage Veristat's expertise, which is dedicated to advancing clinical therapies and treatments through regulatory approval. PAOG is also expected to soon announce new breakthroughs in its CBD RespRx pharmaceutical research.
Other deals are earning attention as well.
Partnerships To Accelerate Commercialization
Last month, PAOG released a comprehensive update on its CBD Nutraceutical Development Program, saying that the first CBD nutraceutical product is expected to come to market before the end of the year. That effort is supported by Alkame Holdings, Inc. (USOTC: ALKM) and North American Cannabis Holdings, Inc. (USOTC: USMJ), who will contribute to the logistics and marketing side of the product launch.
Now, with the run toward commercialization in play, investors are paying close attention to how PAOG can capitalize during the remainder of the year. Notably, investors appear to be investing ahead of the news, purchasing what they believe are significantly undervalued shares. In February, shares traded approximately 100% higher than current levels, and the information this morning could ignite a rally back toward those levels. Volume on Monday was substantial, with more than 47 million shares trading hands. Follow through today could indicate momentum is on PAOG's side.
Revenue Is A Defining Advantage For PAOG
Of interest as well is that PAOG is a generating company. That, in and of itself, could help drive share prices higher. PAOG said it expects to generate $300,000 in sales from its cannabis cultivation subsidiary. Although not a lot by large-cap standards, for PAOG, it could be enough to bring its products to market and increase R&D efforts to target other CBD-based therapeutics and nutraceutical market opportunities. In fact, it could have helped secure its second acquisition and retain Veristat to represent its interests.
In addition to revenues, many think that PAOG can benefit from consolidation in the sector. With JAZZ purchasing GW Pharma for $7.2 billion earlier this year, investors quickly turned back to CBD stocks, especially toward emerging players that can be partnered with or purchased at discounted prices. However, those prices have been rising, causing some to speculate that the consolidation pace will speed up in 2021. And that could be excellent news for PAOG.
Keep in mind that PAOG shares are higher by more than 385% YTD. Thus, the 21% gain on Monday only adds to an already staggering share price increase. Moreover, the rally started last week is news-based, and the update on Tuesday added fuel to the bullish premise that PAOG could deliver at least two catalysts later this year.
Better still, with two therapeutics in play, PAOG is ideally positioned to create shareholder value from partnerships and/or licensing agreements. In fact, with its drugs targeting billion-dollar markets, it's likely that as the company nears its planned commercialization that offers could be entertained. The patented extraction process could be the lynchpin in getting a deal done if they elect to go that route.
Clearly, investors are responding well to the company's developments. For a nano-cap stock, PAO Group has an impressive product pipeline in mid and late-stage development. As each program moves closer to getting its product approved for sale, PAOG could see a run.
With multiple shots on goal, having an agreement with a CRO, and partnerships that can accelerate product commercialization, PAOG is a small stock that could deliver massive rewards. This one is definitely ripe for consideration.
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