Avecho (ASX:AVE) has received a US$3 million (A$4.7 million) payment from pharma heavyweight Sandoz in exchange for the latter’s right to use Avecho’s licence for a CBD capsule sleeping pill.

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The term ‘CBD’ refers to the non-psychoactive element within marijuana (the bit that gets you high is called ‘THC’) which has been widely popular in recent years among both medical and recreation markets.

CBD is in just about everything from gummy bears, creams and lotions, roll-on sticks, eyedropper bottles, soft drinks, vand apes. The list goes on.

Whether or not it actually empirically works remains debated, but then again, most people will pay for peace of mind. If they perceive it works, it doesn’t matter.

Thus, the $4.7M from Sandoz.

Worth noting is Avecho’s share price is worth a sixth of a cent. So there’s that. It also has 3B shares on issue – so this payment from Sandoz is, most likely, quite welcome.

But the company stands to make a further US$16M in milestone payments, from Sandoz, should the latter continue progressing Avecho’s CBD capsule product towards commercial sales.

And then there are royalty payments – up to 19% – which makes you wonder if Sandoz truly intends to commercialise.

Or if they truly believe that these products could sell so spectacularly the cut-throat pharmaceutical giant is fine with a 19% royalty. (Sandoz is often accused of patent piracy, and it doesn’t mind a lawsuit.)

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“The upfront licensing fee from Sandoz strengthens our financial position, providing the necessary support to accelerate ongoing research and commercial activities,” Avecho CEO Dr. Paul Gavin said.

Let’s hope Sandoz stays interested.

AVE last traded at 6cps.

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