PAO Group, Inc. (OTC: PAOG) stock was in rally mode after commercializing its first CBD nutraceuticals. After its second launch last week, momentum is at its back. In fact, since the start of September, when hints that its nutraceuticals would launch first surfaced, shares have ripped higher by 109%. And while profit-takers took the stock lower from its 241% peak, technicals showing oversold conditions keep the run very much intact.
Creating the excitement is the launch of its second CBD nutraceutical in as many weeks. Coming off the successful commercialization of its RelaxRX product the week prior, PAOG surprised the markets by announcing its second product, also brought to market by distribution partner North American Cannabis Holdings (OTC Pink: USMJ). This one, RehabRX, is the second of several more planned to come to market under the RX brand name. And like its first, RelaxRX, which targets the sleep aid market, RehabRX is expected to meet substantial demand from a consumer audience turning away from over-prescribed prescription medications.
In fact, migration away from narcotics, especially opioids, is happening faster than ever as patients learn more about the benefits of CBD over addictive drugs known to cause severe unintended side effects. Death is one of them. In fact, because of that, the CBD nutraceuticals space has gone from relatively obscure only a few years ago to a more than $5.2 billion market today. It's expected to potentially double over the next five years. Thus, PAOG, which brings products to market during the industry growth spurt, can benefit more than others. Better still, those owning intellectual property can do even better. PAOG does.
PAOG is leveraging valuable IP acquired last year derived through research into CBD extraction processes. Better still, they hold rights to a patented extraction process and method that alone could be worth multiples of its current market cap. Notably, it enables PAOG to develop both pharmaceutical and nutraceutical treatments based on this intellectual property. Hence, more than just product sales are in play for this emerging company. They are well-positioned to license their IP, which could provide substantial upfront and milestone payments from companies trying to break into the booming sector.
For now, though, its CBD product lineup is the value driver. And each can be a significant driver of new revenues in Q4 and 2022.
Two Nutraceuticals With More Expected
Its most recent product to market is RehabRX, a rich formulation with beneficial botanicals proven to support healthy skin. RehabRX is free from preservatives, colors, or flavorings and uses CBD extracted from hemp grown in Colorado. Further, it's Gluten-free and Non-GMO. By the way, the skincare market in 2019 was a more than $130 billion opportunity. And with it growing at a CAGR of 4.6%, it's appreciably larger now. The better news is that CBD-based nutraceuticals are finding a welcoming audience in the sector, with CBD skincare markets expected to reach $1.7 billion by 2025.
PAOG's other product is equally impressive. Earlier this month, they announced the launch of its first CBD nutraceutical sleep aid product, RelaxRX CBD. RelaxRX is available in 30mg Softgels and in an 1800mg tincture and utilizes CBD oil that is 100% derived from full spectrum whole-plant hemp. It contains no added chemicals. It, too, is targeting a lucrative market opportunity by capitalizing on a more than $64 billion market in 2019. Better still, they bring it to market at the right time, with analysts expecting a more than $101 billion market opportunity by 2026. Again, PAOG is in the right place at the right time.
The better news is that PAOG has guided for more to come as it develops its RX brand portfolio in the coming weeks and months. And make no mistake, clues to what PAOG has been up to have been there to see for months. Early investors certainly were rewarded, with some potentially taking some profits after a meteoric 241% surge. Still, while taking some money off the table is always a prudent gesture, staying long-term on PAOG may be a better strategy.
That's because not only is the CBD sector hot, it's about to become scorching. And since they have products for sale, they will likely benefit. Here's another thing to consider. At roughly ½ cents per share, PAOG is insanely undervalued, especially once it delivers its first set of revenues. Virtually no stock at this level is revenue-producing.
Multiple Shots On Goal
Keep in mind, too- PAOG is more than just a products play. As noted, its IP can fetch a handsome bounty too. Proof of that happened when Jazz Pharmaceuticals (NASDAQ: JAZZ) purchased GW Pharma for $7.2 billion last year. Jazz was after more than a single drug.
They wanted the IP to develop even more pharmaceuticals, combining vision with data supporting that the CBD pharmaceutical and nutraceutical market is becoming a worthy competitor against traditionally prescribed treatments. Jazz also set the market high, which lifts all IP-laden CBD stocks in the process. Indeed, despite suggestions to never do so, it's a reason to love PAOG at these levels.
Maybe best of all, it does more than add to PAOG's revenue-generating potential; it diversifies it. Put in a better way, it brings multiple shots on revenue-generating goals. In fact, at least one of those shots can come through its partnership with Puration, Inc. (OTC: PURA) to collectively market for multiple hemp growers and processors under a single brand name – Farmersville Hemp. That deal has a mission to recruit processing and cultivation partners to establish an industrial hemp brand cooperative under the Farmersville Hemp Brand name.
PAOG and PURA describe its plan as similar to Sun-Maid Raisins, which collectively markets for growers all selling under one brand name. Thus, the strategy could combine the interests of many smaller players to compete against the industry giants. The result could be a more significant market share for each.
Still, paying attention to what PAOG says is important too. And the line where they said to expect more RX branded products is one to watch in particular.
Another Nutraceutical In The Queue
In Q3 of this year, PAOG provided a roadmap detailing its latest developments to commercialize its CBD-based nutraceutical product line. They have delivered on the commercialization front, and investors responded in kind. But, looking at past updates, more products could follow closely behind the two just launched.
Its RespRX has been in development since the start of the year. It utilizes CBD-based formulations to treat the symptoms of chronic obstructive pulmonary disease (COPD). And it is being developed with data from studies conducted as early as 2015 that show CBD has an inherent ability to open the bronchial passages. That discovery could prove transformational to patients and to PAOG.
Besides being a potentially best-in-class non -prescription treatment for COPD, RespRx can benefit from multiple global studies showing CBD as safe and lacking the often severe side effects associated with current standards of care. To date, volumes of data suggest that CBD-based alternatives have enormous potential to become a preferred treatment method for COPD. And, with RespRX, PAOG thinks it has the right product at the right time.
Moreover, its RELAX-RX may have more firepower than discussed. Part of the interest in that product extends to its promise targeting treatment in the $15 billion anxiety and depression market. Patients in that segment, too, are quickly opting for CBD-based treatments over pharmaceuticals to treat the often debilitating symptoms of depression and anxiety. So, although PAOG may initially position it as a sleep aid, its formulation could be ideally suited to alleviate these conditions. Therefore, updates could have an appreciable effect on share prices.
PAOG does have other business interests, but focusing on its current marketing opportunities may be best for now. After all, they intend to bring in revenues as early as this month.
Put On The Rally Hats
Consequently, for PAOG investors and those considering, putting on the rally hats may be in order. PAOG has officially transformed from a development stage company to a commercialization one. And not only is the commercialization news of its first two nutraceuticals a big deal, but it's setting the expectation for more to follow is exciting as well. But from an investor's perspective, replacing excitement with revenues is the better proposition. That's happening today.
Even better, PAOG has positioned itself for multiple wins. They can leverage value from a diversified portfolio that can create several revenue streams, benefit from a strong IP portfolio, and capitalize on developing partnerships in the hemp space. Thus, while two October surprises have sent share prices higher, getting a third is possible. If so, not only is the revenue-generating tailwind strengthened, but its RX brand is as well.
And in a sector where speed to market is the difference between success and failure, having that brand combined with valuable IP could punch PAOG's ticket to success, shareholder value included.
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