BOD Australia.png

Bod Australia Ltd

ASX:BOD

Last Price:

$0.160

Our Investment Summary

Date of Initial Coverage

17-Mar-21

Initial Entry Price

$0.500

Returns from Initial Entry

-68%


Our Big Bet for BOD

BOD will deliver a minimum 10x return on successfully commercialising at least one application of their new technology that optimises the human body’s absorption of cannabinoids.

Investment Memo: Bod Australia Ltd (ASX:BOD) - LIVE

Opened: 01-Jul-2022

Shares Held at Open: 500,000


What does BOD do?

BOD Australia is a cannabidiol (CBD) wellness and medical cannabis company.

BOD’s CBD wellness arm makes up the bulk of its revenues and is backed by the innovation arm of Health & Happiness International (owners of the Swisse brand), New H2 Ltd.

BOD’s medical cannabis arm is building a suite of IP for future medical cannabis product commercialisation and licensing deals via clinical trials.

Over the next 12 months the company is progressing two clinical trials for new CBD-based treatments for insomnia and long-Covid.

What is the macro theme?

Globally, regulatory shifts towards cannabis reclassification are providing opportunities for new, legal products and treatments. According to market research from BDSA, legal global cannabis sales hit $21 billion last year and are expected to grow at 16% CAGR to surpass $61 billion in 2026.

In Australia, the Therapeutic Goods Administration (TGA) decision to down-schedule low dosage CBD products to Schedule 3 medicines means that these products will be available over the counter without requiring a prescription, paving the way to broader consumer reach.

Why did we invest in BOD?

Clinical trial results could lead to a re-rate

Biotech and healthcare stocks can deliver large re-rates following successful clinical trials for new products/treatments. This is due to the value of the IP being generated. 

BOD is progressing two clinical trials over the next 12 months and we are holding to see what value can be created here.

Ongoing R&D work has potential to bolster commercial opportunities

BOD is conducting additional R&D and collaboration work with multiple leading medical institutions in Australia. This work is supported by leading medical researchers and an advisory board with expertise in genetics, extraction, and product development. 

We are looking out for BOD to deliver new product commercialisation and licensing deals over the long term. 

Major shareholder support

BOD is the exclusive CBD partner for global healthcare giant H&H, enjoying its strong distribution footprint across the globe and capacity to fast-track products to several international markets. This level of support is lacking from many of BOD’s peers, removing a key distribution hurdle for BOD. H&H is the major shareholder of BOD through its innovation arm, NewH2, holding a 14% stake in the company.

Medical cannabis sector could swing back into favour

The medical cannabis sector has been out of vogue for a prolonged period of time (over 12 months). Our experience tells us that this is a cyclical shift which could reverse in the coming 12 months. The catalyst for this could be regulatory reform, further legalisation or changes in consumer preferences. We think BOD stands to benefit in this market environment. 

What do we expect BOD to deliver?

Objective #1: Complete UK open-label “Proof of Concept” clinical trial for MediCabilis treatment for Long-Covid to expand prescription numbers

Milestones

Patient recruitment for 26 weeks programme

Completion of trial (Q4 – Q1, 2023)

Results of trial (Q4 – Q1, 2023)

Registration of MediCabilis as treatment for Long-Covid (Q4 – Q1, 2023)

Objective #2: Complete Australian Phase IIb clinical trial and make low-dosage CBD treatment for insomnia available without a prescription

Milestones

Patient recruitment for 12 weeks programme (Q2-Q3)

Completion of trials (Q4)

Results of trial (Q4 – Q1, 2023)

TGA submission (Q4- Q1, 2023)

Objective #3: Schedule 3 CBD product registration in Australia to allow sale in pharmacies in Australia

Milestones

Sales agreement with potential distributors (Q4 – Q1, 2023)

TGA approval (late Q2 2023?)

Product launch (late Q2 2023?)

What could go wrong?

Technical failure

BOD’s two clinical trials are designed to determine the safety and effectiveness of CBD products/ treatments on patients, as well as provide data on side effects and preferred dosages. Despite CBD generally being accepted as safe, there is no guarantee that BOD’s new products will prove effective following the trials.

Market risk

Alternative products are available within the markets that BOD targets with their own pricing and marketing channels, which can impact demand for BOD’s products. In Australia, BOD’s product is priced at the premium range of the spectrum of cannabis based CBD products, due to the fact that they are GMP validated. There is the potential for lower cost hemp based CBD products, such as those cultivated in the United States and potentially supplied by competitors, to compete and significantly reduce the market price. 

Regulatory risk

Any new CBD-based products and treatments must receive approval from the appropriate regulatory bodies within the desired markets. There is no guarantee that BOD’s products will receive such regulatory approvals, or may be delayed from entering new markets.  For instance, the Food Standards Agency (FSA) in the UK regulates that only products which have a valid Novel Food application are allowed on the market – it is only at the start of 2022 that BOD was granted such approval. 

Financial risk

BOD is yet to generate profits or become cashflow positive, and so relies on favourable external capital markets for funding. With $4.47M cash at bank at 31 March 2022, BOD appears to be well positioned to not require another capital raising for the remainder of the year, but there is no guarantee that this is the case.

What is our investment plan?

We originally Invested in BOD in early 2021 at 50c because we believed the stock was on the cusp of a further growth underpinned by growing revenues. 

Since then the stock has underperformed and is now trading at ~15c, well below our Initial Entry Price of 50c.

We have not sold any shares and will continue to hold our full position in the expectation of a share price re-rate on the company achieving at least one of the objectives outlined above.

General updates from BOD

Awarded US Hemp Authority certificate for CBD products [19-Aug-2022]

Disclosure: The owners of Wise-Owl, S3 Consortium Pty Ltd, and Associated Entities, own 500,000 BOD shares at the time of publication. S3 Consortium Pty Ltd has been engaged by BOD to share our commentary on the progress of our Investment in BOD over time.


Investment Milestones for BOD

Initial Investment: @50c
🔲 Top Slice
🔲 Free Carry
Increase Investment: @8c
🔲 Free Carry
🔲 Take Profit
🔲 Price increases 300% from initial entry
🔲 Price increases 500% from initial entry
🔲 Price increases 1000% from initial entry
12 Month Capital Gain Discount
🔲 Hold remaining Position for next 2+ years

Exclusive supply agreement for CBD-based insomnia drug

ASX:BOD  

Dec 02, 2022

Announcement

Investment Memo: BOD IM-2022


Earlier this morning, our innovative cannabis Investment Bod Australia (ASX:BOD) announced it had entered an exclusive 5-year licensing and supply agreement for a Schedule 3 (pharmacist-only) CBD (cannabidiol) product to treat insomnia, which is currently in development.

The agreement is with Arrotex Pharmaceuticals, Australia’s largest supplier of generic drugs to pharmacists that services over 5,700 pharmacies nationwide.

Under the terms of the agreement, BOD is to receive an upfront $500,000 cash payment for exclusive supply of the final product to Arrotex.

It is only very recently that CBD treatments have been made available for purchase at pharmacists. In February, the Therapeutics Goods Administration (TGA - think of them as the regulators for Australian pharmaceuticals and medical treatments) down-scheduled low dose CBD for over-the-counter purchase (sales without a prescription).

Whilst it is now legal to sell CBD treatments at pharmacies, no CBD drugs have yet been approved for sale in Australia. BOD hopes to be one of the first - if not the first - to offer CBD products nationwide. So the agreement with Arrotex is a major step forward.

How is BOD’s progress with developing the product?

A Phase IIb clinical trial is underway, with first participants already enrolled. Once completed (we expect this sometime in 1H2023), BOD will submit a Schedule 3 dossier to the TGA. If approved, that would pave the for Arrotex to distribute to its extensive network of pharmacies.

Experts recruit bad sleepers for cannabis trial

We also note BOD’s positive results from a Phase 1 Clinical Trial of its novel CBD soft-gel delivery format announced last week.

This supported the potential for BOD’s unique ECS BioAbsorb Soft Gel to be the benchmark delivery format for this OTC CBD market, with the trial reporting superior bioavailability (i.e. the extent a drug becomes completely available to its intended biological destination) than alternative formats.

Those results bodes well for this soft-gel tablet to become an OTC purchase option for BOD’s insomnia treatment, provided a successful outcome with the current clinical trials.

What’s next?

With ethics approval already granted for the clinical trial for the CBD-based insomnia treatment, we’re keen to see progress on patient recruitment (which has already begun). A dossier submission to the TGA is expected in 1H23.

Subject to the outcomes of the trial, it’s feasible that BOD could have its CBD treatment for insomnia available in pharmacies by late 2023/ 1H2024, positioning it as one of the first to offer such products in Australia.

We're also keen to see BOD's progress with the acquisition of the Aqua Phase technology, which we recently covered - BOD’s big bet – will it pay off?

New CBD delivery format showing up available alternatives

ASX:BOD  

Nov 23, 2022

Announcement

Investment Memo: BOD IM-2022
Objective 2 : Complete Australian Phase IIb clinical trial and make low-dosage CBD treatment for insomnia available without a prescription
Objective 3 : Schedule 3 CBD product registration in Australia to allow sale in pharmacies in Australia


Yesterday, our innovative cannabis Investment Bod Australia (ASX:BOD) announced positive results from a Phase 1 Clinical Trial of its novel cannabidiol (CBD i.e. a non-hallucinogenic component of marijuana) delivery format.

The trial evaluated Bod’s ECS BioAbsorb Softgel Capsule against other delivery formats currently available, namely Epidyolex (the only FDA-approved CBD drug currently) and CBD Oil across safety, tolerability and pharmacokinetic (PK) profile.

The results matter as this new delivery format is being utilised in Bod’s clinical trial for a Schedule 3 (i.e. available at your local pharmacy, no prescription required) CBD product to treat insomnia. The study supports the potential for Bod’s unique ECS BioAbsorb Soft Gel to be the benchmark delivery format for this over the counter CBD market, with the trial reporting:

  • Bod ECS BioAbsorb Softgel offering over 20% greater bioavailability (ie the extent a drug becomes completely available to its intended biological destination) than Epidyolex and over 400% greater than the CBD Oil solution
  • The maximum concentration of CBD after single oral administration of Bod ECS BioAbsorb Softgel was over 60% greater than Epidyolex and over 600% greater than CBD Oil solution.
  • In addition, Bod ECS BioAbsorb Softgel was twice as fast to reach maximum concentration of CBD after single oral administration of Epidyolex, and five times faster than CBD Oil solution

What’s next?

With ethics approval already granted for the clinical trial for the CBD-based insomnia treatment, we’re keen to see progress with recruitment of patients (which has already begun). Subject to the outcomes of the trial, it’s feasible that Bod could have its CBD treatment for insomnia available in pharmacies by late 2023/ 1H24.

Aside from the insomnia trial, we’re also looking forward to updates on Bod’s long Covid treatment trial as well as progress with its recent Aqua Phase technology acquisition - covered in our latest commentary BOD’s big bet – will it pay off?.

Patent lodged for anti-ageing skin process

ASX:BOD  

Oct 20, 2022

Announcement

Investment Memo: BOD IM-2022


Earlier today, our long term Wise-Owl cannabis Investment, Bod Australia (ASX:BOD) announced that it had lodged an international patent application for a novel delivery device to combat the skin ageing process.

This represents another innovative product BOD is developing that addresses a substantial market. According to Precedence Research, the global anti-aging market size is expected to grow at a compound annual growth rate of 7.9% from 2022 through to 2030, hitting ~US$119.6 billion in 2030.

The delivery device comprises a novel family of proteins discovered through a research collaboration with the University of Technology Sydney (UTS).

Recent testing results showed that treatment of human skin cells with Bod’s delivery device reduces cell death to UV light exposure by up to 30% when compared to untreated cells, as well as protection against harsh skin oxidants such as hydrogen peroxide.

BOD is now actively advancing licensing opportunities for this opportunity.

We’re thinking skin care products (many of which have dubious or no clinical evidence behind their claims) could benefit from BOD’s patented, clinically proven tech. Sunscreen comes to mind as well - basically any topical skin product.

Today’s news follows BOD’s announcement last month of the transformative acquisition of the Aqua Phase technology - a cannabis product and process technology that allows more rapid onset, better efficacy and lower dosage rates of cannabidiol (CBD) products, resulting in raw material cost savings and fewer patient side effects.

BOD is certainly doubling down on its R&D with a very active clinical trial pipeline - the novel delivery device to combat the skin ageing process being one of 11 projects progressing.

We like that BOD is progressing multiple innovations and products addressing sizable markets. We are keen to see how Aqua Phase can be incorporated into the current clinical trials into an over-the-counter insomnia treatment, as well as the trials addressing long Covid. Our latest commentary on the recent acquisition including our Big Bet for BOD can be found here - BOD's Big Bet, will it pay off?

Entitlement offer at 8c closes today

ASX:BOD  

Sep 29, 2022

Announcement

Investment Memo: BOD IM-2022


A reminder to fellow shareholders of our Wise Owl cannabis Investment, Bod Australia (ASX:BOD), that today is the final day to take up its 4-for-17 pro rata, non-renounceable entitlement offer at 8c per share, in which we are participating.

BOD is acquiring a cannabis product and process technology that allows more rapid onset, better efficacy and lower dosage rates of cannabidiol (CBD) products – resulting in raw material cost savings and fewer patient side effects.

Following the capital raise, BOD is expected to have over $5M in cash, and a market cap of $12M.

Whilst its been a rough ride for BOD holders lately, we think this could be the bottom for the share price. We are hoping this acquisition gives the company fresh momentum, which is timed with a resurgence in the sentiment of cannabis stocks that we predict will occur in 2023.

For a full update on BOD, its new cannabis acquisition, and how BOD can build value from here, check out our latest commentary: BOD’s big bet – will it pay off?

Extends entitlement offer by a week

ASX:BOD  

Sep 21, 2022

Announcement

Investment Memo: BOD IM-2022


At the start of September, our cannabis innovator Investment, Bod Australia (ASX:BOD) announced its “transformational acquisition” of the Aqua Phase technology, alongside a capital raise to fund the deal.

Under the capital raise, BOD can raise up to $3.5M at an offer price $0.08 per share via:

  1. A placement (with firm commitments for entirety) raising $1.5m
  2. A four for 17 pro rata non-renounceable entitlement offer to raise up to $2m

Earlier today, BOD announced that the entitlement offer has been extended one week to now close on Thursday 29 September, given the national holiday tomorrow and the Melbourne public holiday the next day.

Aqua Phase is a process technology that increases the bioavailability (i.e. the ability of a substance to be absorbed and used by the body) of cannabis compounds, meaning faster onset, better efficacy, lower dosing and fewer side effects - hence the term “transformational”.

We will provide an in-depth analysis and commentary of the acquisition shortly. We are keen to see how the acquisition can be incorporated within new products such as the insomnia treatment that BOD are working on currently.

Transformational acquisition and capital raise

ASX:BOD  

Sep 01, 2022

Announcement

Investment Memo: BOD IM-2022


Earlier today, our cannabis innovator investment, Bod Australia (ASX:BOD) came out of its trading halt announcing a “transformational acquisition” alongside a capital raise.

Looking first at the acquisition, Bod intends to acquire Aqua Phase, a process technology which increases the bioavailability (i.e. the ability of a substance to be absorbed and used by the body) of cannabis compounds.

The total size of the deal is £3m (~A$5.2m) is quite substantial when compared to Bod’s market cap of ~A$10M prior to announcing the proposed acquisition, which points to its significance (hence “transformational” in the title of today’s ASX announcement) and Bod’s strategy to focus heavily in innovation and R&D. This is further evident with Bod also currently progressing multiple clinical trials for new products and treatments.

Looking at the technology, we note its impact on bioavailability - which is the ability of a substance to be absorbed and used by the body. This matters as CBD/ cannabinoids typically have very poor biological absorption - for instance, oral CBD compounds in oil are estimated to only have 6-8% bioavailability. Improving bioavailability can deliver faster onset, better efficacy, lower dosing and fewer side effects, positive attributes for both consumer and medical cannabis products.

Furthermore, the Aqua Phase technology can potentially deliver a cannabis complex which is soluble, tasteless, colourless and odourless. This has the potential to open up opportunities and markets for new delivery formats for cannabis products superior to existing oral formats currently being utilised.

Turning to the capital raise, Bod can raise up to $3.5M at an offer price $0.08 per share via:

  1. A placement (with firm commitments for entirety) raising $1.5m
  2. A 4 for 17 pro rata, non-renounceable entitlement offer to raise up to $2m

We like that the Placement includes the conditional placement to the chairman ($100k) and managing director ($50k), with the chairman also underwriting a further $100k should there be a shortfall in the take-up of the entitlement offer - a sign of their confidence in the business.

Funds raised will be directed as follows:

Key dates for the raise are:

We are planning to provide an in-depth analysis of the acquisition and what the new Bod looks going forward. In the interim, here is our Bod Investment Memo and what we’re looking for the company to deliver for the rest of the year.

BOD to acquire Aqua Phase following placement

ASX:BOD  

Aug 30, 2022

Announcement

Investment Memo: BOD IM-2022


Earlier today, our cannabis investment, BOD Australia (ASX:BOD) entered a trading halt on the back of an acquisition and placement.

BOD has agreed to acquire ‘Aqua Phase’, a process technology to increase the bioavailability of cannabis compounds, along with all intellectual property, confidential information, records, goodwill and branding.

We will provide our commentary on the acquisition once further details are made available.

We’re also keen to see what progress has been made on two clinical trials that BOD is advancing, in which first patients were recruited last quarter:

  1. Insomnia (Phase IIb)
  2. Long-COVID (Open label, “Proof of Concept”)

For our reasons for investing in BOD as well as what we’d like to see the company deliver next can be found within our Investment Memo.

Awarded US Hemp Authority certificate for CBD products

ASX:BOD  

Aug 19, 2022

Announcement

Investment Memo: BOD IM-2022
Risk 3 : Regulatory risk


Our long-term Wise-Owl cannabis investment, BOD Australia (ASX:BOD) today announced it has been awarded US Hemp Authority Certification for its exclusive CBD extract and its CBD products sold in the US.

This certification provides a competitive advantage in the US as it essentially an endorsement that BOD’s products adhere to the highest US standards, enhancing consumer confidence in the brand.

BOD already sells a range of CBD wellness products in the USA through its exclusive global partner and Swisse Vitamins parent company Health and Happiness Group Limited (H&H, HKSE: 1112).

We’re keen to see how today’s news translates into revenue from the US markets going forward.

What’s Next?

We await progress updates on BOD’s clinical trials. During the last quarter, BOD dosed the first patients for the following two trials:

  1. Insomnia (Phase IIb) - for an over-the-counter (OTC) treatment available at pharmacists
  2. Long-COVID (Open label, “Proof of Concept”)

Since these potential products both address substantial markets, we’re keen to see the outcomes of both trials.

With a market cap of ~$10.5M, and $3.67M cash at bank as of 30 June 2022, this translates to an enterprise value (EV) for BOD of ~$7M. Given BOD's low EV, we suspect that success in either trial would lead to a significant market re-rate.

Quarterly report - advancing multiple clinical trials

ASX:BOD  

Jul 28, 2022

Announcement

Investment Memo: BOD IM-2022


Our long-term Wise-Owl cannabis investment, BOD Australia (ASX:BOD) released its quarterly results earlier today.

While the company improved in several financial metrics that we track on a quarter-vs-quarter basis (total quarterly sales up 46% to $943,608), it declined on a previous-corresponding-period last year basis ($1,173,498).

This is partially explained by the company now focussing more on its R&D pipeline with the hopes of unlocking several growth opportunities (and future revenue sources) in the year ahead.

Bod holds $3.67M cash at bank as of 30 June 2022, which we think likely means the company doesn’t need to raise capital for the rest of the year, unless a significant new investment/ growth opportunity arises.

Capped at ~$10.5M, Bod’s enterprise value (EV) is now under $7M.

That said, as per our Investment Memo, we are more interested in how Bod’s numerous clinical trials are advancing.

On this front, we like the progress being made. During the quarter, BOD dosed the first patients for the following two trials:

  1. Insomnia (Phase IIb) - for an over-the-counter (OTC) treatment available at pharmacists
  2. Long-COVID (Open label, “Proof of Concept”)

These both address substantial markets, and hence successful outcomes on either trials could ultimately lead to new products and potentially prosperous revenue sources. Typically this is when significant market re-rates can occur.

Of interest, Bod is planning to launch a new low dose cannabidiol product through Australian SAS-B channels (i.e. via a prescription from a medical practitioner), providing the company with another sales channel and additional delivery format for consumers ahead of any OTC launch.

We will provide a more detailed analysis on the progress of the clinical trials in August.

BOD to launch low dose CBD schedule 3 product

ASX:BOD  

Jun 23, 2022

Announcement


Investment Memo: BOD 2022

Objective #2, Objective #3: Insomnia trial, Schedule 3 CBD product registration


Our cannabis Investment, BOD Australia (ASX:BOD) has just confirmed it intends to launch a new product in July for the Australian SAS-B channel (medicinal cannabis prescription).

Bio-Absorb 100 is a soft gel formula that delivers a low dose of CBD and is currently the product being used in BOD’s phase II insomnia trial.

Successful completion of that phase II trial is Objective #2 in our BOD Investment Memo, and subsequent registration of registration of Bio-Absorb 100 is Objective #3 in our BOD Investment Memo.

Here’s how we see today’s news helping BOD achieve these two Objectives:

  • It provides important product awareness ahead of a potential Schedule 3 registration (no prescription needed)
  • It will act as a good trial run for larger scale manufacturing by getting it in the market early

What’s next for BOD: We’re looking forward to recruitment updates from BOD about their insomnia trial which BOD says is progressing well. This is in addition to the Long-Covid trial. The Long-Covid trial is Objective #1 in our BOD Investment Memo and could unlock additional prescription sales while also giving

Proof of Concept CBG Trial Success

ASX:BOD  

May 26, 2022

Announcement



Investment Memo: BOD 2022

General: Additional clinical trial


Our medical cannabis Investment, BOD Australia (ASX:BOD), has announced that its “Proof of Concept” CBG trial was successful.

CBG, or cannabigerol, is a non-intoxicating cannabinoid which BOD has been exploring for a range of therapeutic uses, including fibromyalgia, inflammatory bowel disease and irritable bowel syndrome (IBS).

This is what the product looks like:

BOD found that, “74% of trial participants reported a noticeable improvement in

their conditions within two to four weeks of using MediCabilis™ CBG 50 twice a day.

That’s a solid result for a novel therapy and should make doctor’s feel more comfortable prescribing BOD’s CBG product in the UK and Australia.

As BOD Investors, we’re glad that BOD’s R&D/clinical trial pipeline is starting to deliver results and we’re hoping these trials lead to more sales.

What’s next for BOD: We’re looking for an update on patient recruitment for their two main clinical trials - one for Long-Covid and another for insomnia. These trials form Objective #1 and Objective #2 in our BOD investment memo.

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