BDA Records Highest Ever Monthly Sales of Medical Cannabis Products
Bod Australia (ASX: BDA) has announced its highest ever monthly sales for its medicinal cannabis prescription products.
We invested in BDA earlier this year, you can read why here . BDA is currently trading well below our entry price, despite the company continuing to deliver a strong performance.
BDA is a cannabis focused healthcare company with an established revenue base from two verticals:
- Medicinal cannabis - sold via prescriptions, supported by clinical trials, and health professional education and awareness
- CBD and hemp consumer products - sold off the shelf, BDA’s products licensed to H&H Group globally to accelerate sales.
We invested as we liked the fact that BDA was already generating revenue, and was trading at a lower revenue multiple compared to its peers.
Today’s news relates to BDA’s medicinal cannabis products.
BDA filled a total of 1,789 MediCabilisTM prescriptions in Australia last month - an 11% increase in the month of March.
BDA attributes this growth to its Australia wide clinical study to test the efficacy of MediCabilisTM when prescribed for conditions including anxiety, insomnia, and Post Traumatic Stress Disorder (PTSD).
On the CBD consumer side, BDA has an exclusive global partnership with H&H Group, a multi-billion dollar Hong Kong listed company, that owns a number of powerful consumer brands in the health and wellness space, including the market leading Swisse brand in Australia.
H&H Group also operates one of the largest e-commerce channels for nutritional products in Europe and North America, which means BDA already has international reach and a competitive advantage against its peers.
BDA products are being sold in the UK, Netherlands, and Italy, with further expansion in the UK now imminent.
We see significant upside as BDA has also recently launched itself fully into the US market.
The company announced itself to the US on the back of a maiden $312,000 binding purchase order - the first of multiple binding purchase orders expected in the coming months - from H&H Group for CBD products for the US market.
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.
The US market entry will be an exciting development for BDA. It may also mark the start of a significant share price rerating.
Despite a lot of positive progress over recent months, prior to today’s news, BDA’s share price had not been trading as low since October last year.
Our take on today’s news
BDA filled a total of 1,789 MediCabilisTM prescriptions in Australia during the month of April.
This follows record medicinal cannabis sales growth during the March quarter, in which BDA filled 3,789 MediCabilisTM prescriptions – a 61% increase on the previous quarter.
Today’s news takes the total MediCabilisTM prescriptions filled in FY2021 to 9,519. Total FY2021 prescriptions have currently increased 138% on FY2020 (FY2020 prescriptions: ~4,000), with the upward trend expected to continue.
This news points to a sustained growth in revenues over the long term, which was highlighted by increased sales last quarter.
Invoiced sales were up 188% on the previous quarter and 64% of prescriptions dispensed during April 2021 were repeat prescriptions.
BDA has a strong cash balance of over $9.2M (at March 31st 2021) . In the March quarter BDA spent $1.3M, less than the $1.87M in revenue it brought in. So BDA looks well funded for the coming months at current rates of revenue and spending.
Also pleasing is that during April, BDA filled ~27% of the total Special Access Scheme Category B prescriptions filled across Australia (total: 6,682) - that figure shows that BDA has a large market share for prescription cannabis products in the country.
It also highlights patient and physician product satisfaction for BDA’s products, along with the strong relationships BDA has with approved prescribers, educational initiatives with physicians and healthcare professionals.
This is a continuing trend allowing BDA to generate consistent and recurring revenue, and with
BDA’s roll out of its products into the lucrative US market and the increase in prescription sales should see it continue on its current trajectory.
Why we invested in BDA
We like the medical cannabis space as we think it has significant growth potential. We were drawn to BDA for the following reasons:
✅ Modest market cap: BDA has a current market cap of $39M, which is a fraction of other ASX medicinal cannabis stocks, including the $134.7M Cann Group, the $107.5M capped Althea Group Holdings and the $303.5M capped Ecofibre Ltd.
✅ Relatively Cheap Enterprise Value: The company held $9.2M in cash at March 31st 2020, giving a current Enterprise Value of circa $29.8M (as of Friday 7th May) .
✅ Attractive entry price: BDA recently raised $8M at 55 cents. The stock is currently trading at around 37c (prior to today’s news), providing an opportunity to take a position at a steep discount to the 55c price sophisticated investors recently invested at.
✅ Founder and CEO Jo Patterson has a high % ownership: We met with Ms Patterson a number of times and were impressed by her skills and experience. She is the company founder and is the third largest shareholder of BDA - we like it when management has significant ‘skin in the game’, as there is additional motivation to succeed.
✅ Aiming to be cash flow positive by end of 2021: BDA has solid revenues, costs are being managed well, and is on track to deliver on this target.
✅ Global product distribution in place: Exclusive global distribution partnership with Swisse brand owner Health & Happiness Group Limited (H&H Group) gives BDA significant muscle, and can help accelerate BDA’s growth. This week's news is clear evidence of that.
We invested in BDA with a multi-year time horizon. We think the company is going to build from a stable base, and continue to deliver on its financial performance.
BDA is focused on a number of revenue generating objectives and growth initiatives during this quarter and beyond, including:
- Progress US market entry with H&H following receipt of initial binding purchase order
- International market and product expansion with H&H under new and existing brands
- Continued growth of MediCabilisTM prescription sales in Australia, as well as scale up of UK operations
- R&D initiatives to further build on the growing body of evidence for the use of MediCabilisTM and
- Finalise product registration strategy for new schedule 3 CBD products in the Australian market.
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