Next Investors logo grey
ASX:BOD

Bod Science Limited

Company Tooltip

ASX:BOD
- Bod Science Limited
Company Tooltip

$0.024

Last Price

Investment Memo:

Bod Science Limited (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.

Our Big Bet for BOD Big Bet Tooltip

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.

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

complete Patient recruitment for 26 weeks programme

cancelled Completion of trial (Q4 – Q1, 2023)

cancelled Results of trial (Q4 – Q1, 2023)

cancelled 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

complete Patient recruitment for 12 weeks programme (Q2-Q3)

complete Completion of trials (Q4)

complete Results of trial (Q4 – Q1, 2023)

in-progress TGA submission (Q4- Q1, 2023)

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

Milestones

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

in-progress TGA approval (late Q2 2023?)

not done Product launch (late Q2 2023?)

Objective #4: Develop and launch epilepsy treatment

Added 28-Sep-2022

Milestones

not done Commence epilepsy moonshot study [H2 2022]

not done Launch Investigational New Drug (IND) application [2023]

not done FDA meetings [2023]

not done Complete epilepsy moonshot study

not done Submission for FDA approval via new drug application pathway [H2 2023]

not done Potential FDA approval [H1 2024]

not done Launch competitor product and sell in the US market

Objective #5: Acqua Phase Incorporation

Added 28-Sep-2022

Milestones

complete AcquaPhase PK Study

complete AcquaPhase Acquisition

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.


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.

Our Investment Summary

Date of Initial Coverage

17-Mar-21

Inital Entry Price

$0.500

Returns from Initial Entry

-95%

High Point

-60%

First on the ASX - BOD announces successful outcome for insomnia clinical trial

Sep 6, 2023

First on the ASX - BOD announces successful outcome for insomnia clinical trial

BOD acquires CBD technology, insomnia trial results next two weeks

Aug 15, 2023

BOD acquires CBD technology, insomnia trial results next two weeks

Microcap Cannabis Stock BOD has two major near term catalysts…

Jun 26, 2023

Microcap Cannabis Stock BOD has two major near term catalysts…

BOD: Clinical trials set to begin on chemist-available, cannabis insomnia treatment

Mar 24, 2023

BOD: Clinical trials set to begin on chemist-available, cannabis insomnia treatment

BOD’s big bet - will it pay off?

Sep 28, 2022

BOD’s big bet - will it pay off?