A Strong Start to FY2021 Leaves Bod Well-Positioned for Continued Growth

A 339% increase in revenue on the period corresponding periods tells us Bod Australia is unfazed by a global pandemic.

Bod Australia Limited (ASX: BDA) is pleased to provide this update to shareholders for the quarter ended 30 September 2020 (Q1 FY2021).

Bod made considerable progress during the period, which culminated in the commencement of nationwide R&D initiatives, record medicinal cannabis prescription growth, ongoing revenue generation across all operating businesses and achieving regulatory approvals which will allow it to pursue large market opportunities in the USA.

Corporate overview Bod achieved a total of $2.2m in attributable sales for the period, which was made up of $1.4m in revenue and $0.75m in binding purchase orders. This is in line with the previous quarter and is a ~339% increase on the prior corresponding period ("PCP") (Q1 FY2020: $507,000). A further $0.1m in other revenue brings Bod's total attributable revenue for the period to $2.3m.

Revenue for the period was generated by further uptake of Bod's CBD products in the United Kingdom as well as growing sales of MediCabilis™ in both regions.

Pleasingly, the Company continued to reduce operating expenses driven by a 60% reduction in corporate costs on the PCP due to consolidation of consultants and the impact of remote work arrangements in Australia and the UK. Advertising and marketing expenditure remained low due to the company's agreement with Health and Happiness Group Ltd (H&H Group, HKSE: 1112), whereby H&H Group incurs the costs to market specific products.

Product and manufacturing costs were $2.03m which relates to payments for raw materials for existing purchase orders from H&H Group and further medicinal cannabis prescriptions. These cash outflows have allowed Bod to drive sales for the quarter and prepare for anticipated purchase orders during the current period, thus ensuring ongoing revenue growth.

Bod expects that these favourable trends in revenue and operating expenditure will continue into FY2021 and beyond. The Company anticipates the receipt of a number of additional purchase orders for it's pending US market entry and European expansion which will underpin further revenue growth.

The first quarter of the new financial year was one of significant progress CEO Jo Patterson

Mrs Patterson went on to say "Pleasingly, both business divisions continue to generate growing, diversified and sustainable revenue streams. Operating expenditure is decreasing and product demand is strengthening, leaving Bod well positioned for the remainder of the financial year and beyond.

"Importantly, a number of regulatory shifts including the TGA's interim decision and the Company achieving GRAS status in the USA have unlocked large market opportunities for Bod which we will actively pursue in the coming months. The US market entry in collaboration with H&H Group will further grow Bod's revenue profile and push the Company towards a cashflow positive position. The US market is a major opportunity for us and we have the best possible partner and brand to achieve meaningful scale there.

"We look forward to providing updates on a number of growth opportunities, including new product launches, R&D initiatives, partnerships and the receipt of purchase orders for international expansion over the coming months."

Bod has retained a healthy cash balance of $4.96m at the end of the quarter, and together with mounting customer receipts, gives the Company the necessary financial capacity to fund future growth. There are a number of value accretive initiatives planned in the coming months that will continue to grow the Company's revenue base.

During the quarter the Company made payments totalling $0.23m to related parties representing remuneration paid to Directors.

Australia-wide medicinal cannabis study commenced: Bod commenced a nationwide, multi-clinic, open-label, observational study into the effectiveness of its medicinal cannabis product, MediCabilis™, for indications including anxiety disorders, insomnia and Post Traumatic Stress Disorder (PTSD).

The trial will collect data from 500 patients over 12 months, who will be prescribed MediCabilis™ over that period, with the aim to generate insights into the efficacy of the product on patients suffering from specific conditions. The initiative is being run through approved study sites across Australia with reputable partners including Cannabis Doctors Australia, Compass Clinics, Tetra Health and Cannabis Access Clinics.

Bod anticipates that each patient will be prescribed MediCabilis™ three to four times over the course of the study, adding to the Company's growing medicinal cannabis prescription pipeline. The study will also broaden visibility for MediCabilis™ amongst healthcare professionals and patients.

Strategic agreement with LYPHE Group to bolster UK medicinal cannabis prescription volumes: Bod entered into an agreement with leading medicinal cannabis services provider and distributor LYPHE GROUP ("LYPHE") (www.lyphegroup.com). Under the agreement, LYPHE will act as Bod's preferred dispenser for Project Twenty21, Europe's largest medicinal cannabis registry targeting 20,000 patients (refer ASX announcement: 8 November 2019).

LYPHE is the UK's leading and busiest medicinal cannabis prescriber, providing telehealth services as well as physical clinics across the country. The group has 20 prescribing physicians that write over 50% of all new cannabis prescriptions in the UK market. Bod will leverage LYPHE's established footprint in the UK, its distribution channels and network of physicians to fill the large number of prescriptions which will be generated from Project Twenty21. Bod will also utilise the partnership to build opportunities outside of Project Twenty21, allowing it to further penetrate the UK market.

Meaningful medicinal cannabis prescription sales are anticipated to commence during the current quarter and Bod looks forward to providing additional updates on volumes.

Regulatory shift unlocks large market opportunity: Following the interim decision by the Therapeutic Goods Administration ("TGA") regarding the rescheduling of cannabinoid ("CBD") products, Bod advised that it would actively pursue a number of near term opportunities in the Australian market.

The decision was made on 9 September 2020 and stipulated that CBD products containing 98% or more of total cannabinoid content will be made available to consumers over-the-counter as an ARTG registered product, without the need of a prescription.

This unlocks a large market opportunity for Bod, as it will grow the overall size of the CBD market in Australia and allows the company to progress the introduction of new products. To capitalise, Bod is exploring opportunities through both its medicinal cannabis business division, as well as its CBD & hemp operations.

Any products launched through Bod's CBD & hemp consumer products vertical would be undertaken in collaboration with exclusive global partner and Swisse Wellness parent company, H&H Group.

The potential introduction of a new low dose format product will align with the revised guidelines, without compromising the sale of existing, high dose, full plant, MediCabilis™ products, which continues to gain significant traction in Australia.

The Company is continuing to explore a number of opportunities and clinical requirements to launch new potential low dose MediCabilis™ products to Australian consumers and looks forward to providing shareholders with updates on progress.

'Generally Recognised as Safe' (GRAS) status achieved to support US market entry: In a major development, the Company advised that an independent expert panel has unanimously concluded that Bod's CBD and hemp oil preparation is Generally Recognised as Safe in specified food products in accordance with stringent US Food and Drug Administration ("FDA") safety guidelines.

Achieving Self-Affirmed GRAS status is a major achievement for Bod and means the Company's proprietary extract is now considered safe for use in a wide range of food supplements and beverage applications, directly supporting Bod's introduction of its CBD and hemp products into to the USA.

Following the approval, Bod has immediately progressed the launch of approximately 10 new products in oil and soft gel capsule formats for the US market under existing brands in collaboration with exclusive global partner and Swisse Wellness parent company, Health and Happiness Group Ltd (H&H Group, HKSE: 1112).

Bod and H&H Group will launch products directly to consumers through eCommerce platforms, as well as with recognised retailers in the US. Bod will leverage H&H's established presence in the country and anticipates significant revenue to materialise from this new market entry.

Manufacturing of first products is set to commence in the coming months, which will coincide with numerous purchase orders from H&H Group, underpinning revenue growth.

Record medicinal purchase orders achieved: Bod achieved record medicinal cannabis prescription growth during the quarter, receiving purchase orders for a total of 2,630 MediCabilis™ units, highlighting 165% quarter-on-quarter uplift (Q4 FY2020: 989). Growth can be attributed to ongoing uptake and strong brand recognition in the Australian market, as well as clinical trial initiatives and Bod's active educational efforts with approved prescribers.

The Company delivered 1,630 of these units during the period, which is directly reflected in sales, with the balance to be shipped to partner clinics during the current period. The delivery of the initial 1,630 units equates to over 41% of the total prescriptions filled during FY2020 (FY2020: ~4,000). The Company anticipates that strong sales will continue during the current period, particularly as UK operations continue to scale.

Effects of COVID-19: COVID-19 has had a minimal impact on Bod's operations during Q1 FY2021. The Company received $25,000 in cash flow boost payments from the Australian government during the period. Bod did not receive any other COVID-19 related financial support. Outlook: Bod is focused on several important revenue-generating opportunities and growth objectives this quarter and throughout FY2021 including:

▪ International market and product expansion initiatives with new and existing H&H Group brands, including Swisse Wellness, Swisse Me and CBII;

▪ Product manufacturing for the Company's proposed US market entry in collaboration with H&H Group;

▪ Additional growth of MediCabilis™ prescription volumes in Australia and the commencement of meaningful sales in the UK through Project Twenty21 and Bod's agreement with LYPHE Group;

▪ Ongoing collaborations with research groups to progress the insight of CBD and MediCabilis™ on chronic conditions; and

▪ Product development initiatives to target the Australian market following regulatory decisions by the TGA.

For the latest news and updates on Bod Australia, click here

Disclaimer: Past performance is not an indicator of future performance.

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Mark Page
Mark Page

Mark is a UK born investing enthusiast based in Sydney. He has a keen eye for technical analysis and is paying close attention to the ongoing legalisation of cannabis for the health benefits, opportunities, and emergent industries that will follow.

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