PAO Group, Inc.’s (USOTC: PAOG) stock is in play following the announcement that the company and Puration, Inc. (USOTC: PURA) continue to work together on developing a variety of cannabis-centric applications through a partnership that started when PAOG acquired PURA’s cannabis cultivation business in 2020. A dividend distribution of PAOG stock is included in the transaction, and the company said they are awaiting FINRA approval to complete the transaction.
Specifically, PURA shareholders are intended to receive one share of PAOG for every PURA share held on the record date. Puration said in a release last week that once the FINRA review is completed, PURA and PAOG plan to promptly proceed with the intended distribution. The transaction is a win-win deal.
Already, PAOG and PURA are together advancing a project to develop PURA’s Farmersville Brands project. With PAOG’s help, Puration is building a 70-acre facility designed to provide interactive, demonstrable education on hemp’s potential to provide environmentally sustainable alternatives to over $1 trillion in existing industrial products. Hemp is considered the ideal and optimum replacement candidate for products and services currently damaging the environment due to their design. The 70-acre facility is an instrumental part of a cooperative strategy designed to accelerate the market growth and penetration of hemp-derived products and target an expected $15 billion market size by 2027.
PAO Group’s interest is to assist in the construction and operation of indoor, pharmaceutical grade, hemp growing facilities, and the construction and operation of a cannabis extraction lab. The two will be joined by North American Cannabis Holdings, Inc. (USOTC: USMJ) and Alkame Holdings, Inc. (USOTC: ALKM) to further enhance the PURA’s Farmersville Hemp Brand strategy.
The news could fuel a return to highs set in February, especially with interest in nano-cap stocks increasing after a somewhat brutal February decline.
PAO Group Records Revenues
Pao Group does have an advantage over most nano-cap competitors; they are generating revenues. And that could help fuel a rally. In fact, from a revenue perspective, PAOG is performing better than many of its sector peers and may be doing better than some CBD-focused mid-caps that are yet to get a product to market.
Moreover, with an expected $300,000 in revenues from its cannabis cultivation subsidiary, PAOG has a unique opportunity to leverage its income to increase its exposure in other areas of the sector. In fact, PAOG is already working to capitalize on emerging opportunities in the CBD and nutraceuticals markets through partnerships and acquisitions.
One of its most promising deals was its 2020 acquisition of RespRx.
Video Link: https://www.youtube.com/embed/mlG8HDv06uk
RespRx Could Drive Growth Targeting COPD
Investors responded well to the company’s 2020 acquisition of RespRx. That asset places PAOG in an enviable position to quickly develop CBD alternatives to treat patients with symptoms associated with Chronic Obstructive Pulmonary Disorder (COPD). The debilitating disease affects millions of people per year and has an addressable treatment market that surpassed $10 billion in 2016 and is expected to reach $14.1 billion by 2025. CBD-based treatment is showing tremendous promise in its ability to treat symptoms associated with the disease.
For PAOG, the acquisition of RespRx from Kali-Extracts was viewed as a potentially transformative deal. And despite the time taken to develop the asset has been slower than expected, RespRx could still provide substantial returns in the next few quarters. Better yet, RespRx is an asset that has the potential to treat multiple indications where a better and safer standard of care is needed. Thus, patience may soon be rewarded.
Even GW Pharma (GWPH) took years to develop and market its breakthrough CBD-based epilepsy drug, Epidiolex. But after the long wait and roller coaster share price rides, that drug posted more than $500 million in sales during 2020. Moreover, as shareholders rotated in and out of the stock, the primary winners were the long-term shareholders. They were recently rewarded with a $7.2 billion buyout offer from Jazz Pharmaceuticals in a deal that provided GWPH shareholders with a 50% premium over the previous day’s closing price. Should that same patience be afforded to PAOG? Many investors say yes.
What can’t be lost from the equation is that RespRx, along with its patented cannabis extraction process, could be money-makers without the need to bring a single product to market. In fact, during a recent interview, the extraction process’s inventor said that his extraction method was professionally recognized as producing better quality CBD extracts compared to GW Pharma. Moreover, by owning the rights, PAOG is also set up to benefit from licensing, partnership, and collaborative agreements. Several deals, in fact, are already in development stages.
Also notable is that PAOG can leverage its assets to take advantage of multiple shots on goal. More specifically, beyond its COPD pharmaceutical initiatives, PAOG is advancing a nutraceutical product line that they believe will compete effectively against already marketed, higher-priced brands. The end-game is to monetize assets, which, by the way, is already happening.
Nutraceuticals Program Helped By PRCCI
It’s also impressive that PAOG is engaging with the Puerto Rico Consortium for Clinical Investigation (PRCCI) to develop its proprietary Cannabidiol (CBD) extract into a nutraceutical product. The agreement quickly adds value and, more importantly, allows PAOG to benefit from additional sources of expertise that can help accelerate potential nutraceutical marketing approvals. If they are successful in doing so, the end result could be a marketable CBD-based treatment to replace addictive and often harmful prescription drugs.
Moreover, the chances for approvals are growing as CBD-based treatments show few, if any, harmful patient reactions or side-effects. And as CBD-based therapeutics become more mainstream, PAOG believes that through its association with PRCCI that it can potentially earn fast-track review and approval from regulatory agencies. This is more warranted as CBD and cannabinoid compounds prove viable, safe, and effective treatment options.
And the programs and partnerships cited could be the impetus for investors bidding the stock higher by roughly 370% since the start of the year. Investors also responded well to a multimedia presentation where PAOG detailed its CBD nutraceutical development expansion plans and explained how strategic engagements with Puration, Inc. (USOTC: PURA), North American Cannabis Holdings, Inc. (USOTC: USMJ), and Alkame Holdings, Inc. (USOTC: ALKM) can accelerate growth in multiple directions.
Still, at the end of the day, investors come back to the differentiating feature of PAO Group compared to most every nano-cap company- they are generating revenues. And although $300,000 is not a tremendous amount of money to justify sustainable long-term appreciation, it’s a starting point from which most penny stocks will never see. Further, it’s also a necessary tool that will allow PAOG to capitalize on new opportunities and develop its pipeline’s most advanced programs and products.
Thus, despite recent weakness, which is sector-wide, PAOG remains attractive to investors willing to invest with a longer-term investment horizon. Remember, CBD-based medicine is a new science. However, interest by “big pharma” and the approval by the FDA for Epidiolex does send a direct message- CBD-based therapeutics work, they are safe, and they have a heralded ability to potentially replace harmful and addictive drugs. In the opinion of many, the FDA will soon embrace the totality of benefits offered by this natural compound.
Thus, PAOG is right to fight for its space. And like GWPH, they have the similar potential to succeed.
A Breakout In 2021
Therefore, PAOG could be only a press release away from substantial gains. Whether they ink other revenue-generating deals or sign an agreement to monetize RespRx, shareholder value may be sitting at its doorstep. Moreover, a breakout to the upside could come from any one of PAOG’s strategic deals designed to expedite program development. Time and patience could be rewarded.
Thus, given time, PAOG can capitalize on a number of its assets and at the same time transform itself from a development-stage to a commercialization-stage company. In the long run, PAOG has the potential to make investors extremely happy…if they own the stock. Invest intelligently.
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