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Bod’s first sales in US a precursor for further revenue generation
3 minute read
Medicinal cannabis, CBD and hemp healthcare products company, Bod Australia Limited (ASX: BDA) has received a maiden $312,000 binding purchase order from exclusive global partner, Health & Happiness Group Limited (HKSE: 1112) for CBD products for the US market.
This is the first of multiple binding purchase orders expected in the coming months and marks the commencement of Bod’s US expansion.
It may also mark the start of a significant share price rerating if the performance of other players in the sector is a guide.
It is one thing to have a product portfolio and a hard-working R&D lab, but bringing the money in the door is when the rubber hits the road.
This is the point where investors start to demonstrate confidence in investing in the company as they can see cash flow predictability and a clearer line of sight to profitability.
Indeed, Bod has an impressive range of products and it has been extremely successful on the development front, as well as establishing strong ties with healthcare professionals.
These positive characteristics have been instrumental in the company’s shares trading strongly over the last 12 months, increasing three-fold from 22 cents to a high of 66 cents in late 2020.
While there appears to have been some profit-taking on the back of that run, the company has continued to trade in a relatively stable and tight range between 45 cents and 55 cents, and today’s news may just be the catalyst that sees it push up towards last year’s highs.
Such a rerating is even more likely given that management has flagged strong order flow from US, UK and European markets in the near term.
In discussing this latest development chief executive Jo Patterson pointed to the significance of global expansion, and more specifically growing its presence in the US in saying, “The first US purchase order is an exciting step for Bod on two fronts, firstly as it’s growing our global footprint, and secondly the US offers a significant opportunity for consumer healthcare CBD products.
“Bod will continue to work with H&H to progress additional opportunities in North America.
‘’We look forward to updating shareholders on more purchase orders soon.”
Cashed up and ready to launch three new products in the US
Bod will now manufacture three full-spectrum CBD oil products, derived from European Good Manufacturing Practice (GMP) CBD extracts for the US market.
These products are the first of a large range, which will be launched during June half under premium CBD brand CBII (www.cbii-cbd.com).
Bod is well funded to progress product manufacturing following its placement to institutional and sophisticated investors in December 2020.
The company has sufficient capital to meet manufacturing demands for other orders anticipated in the coming months for the US, Europe and the UK markets.
Bod and H&H will launch the CBII range directly to consumers through e-commerce platforms, while H&H will initiate marketing and brand campaigns to drive product uptake and awareness in the US, as well as manage distribution, considerably reducing Bod’s cost base.
Bod will receive a royalty on net product sales, as well as a cost-plus margin for the supply of the finished goods, unlocking more revenue streams.
The binding purchase order will be booked as revenue upon delivery, which is expected in the coming months.
The US market for CBD consumer products was expected to reach US$1.8 billion in 2020, and grow to US$6.9 billion by 2025, making it four times larger than the UK.
Growth in the US is being assisted by an affirmative regulatory environment and a better understanding by medical professionals of the benefits of medicinal cannabis.
Bod does not foresee any regulatory issues during the launch phase, as an independent panel has unanimously concluded that its CBD extract is Generally Recognised as Safe (GRAS) in specified food products in accordance with stringent US Food and Drug Administration (FDA) guidelines.