I’ve increased my holding in BIOXYNE.

They have recently upgraded the FY earnings guidance which did not come as a surprise. In addition they have succeeded in getting licences to supply THC/CBD products into the UK, Singapore, Canada and the EU. It wasn’t that long ago that bringing weed into Singapore got you a death sentence, so I’m not too sure this is going to provide much of a kicker to revenue. Canada is no doubt well supplied by local and US cannabis suppliers. However, they do have an established brand and business (on Amazon) in the UK and have also just announced a $5.6m deal to supply a German distributor with “flower”. That’s buds to those of us more used to buying it the old fashioned way.

All of their revenue bar $1million comes from Australia currently. They have invested for growth with recent increases in capacity for the production of both flower and pastilles.

I have included 2 slides from today’s presentation that show the progress and the opportunity.

*What could go wrong?

The US experience is a bit different but is not pretty. There, manufacturers sell flower to retailers, who sell it to the general public. In Australia, the UK and the EU (I’m unclear if that is the whole of the EU, but certainly major economies) these THC products are prescription only. So, in the US it has been a race to the bottom, with multiple business failures and no one having a decent margin. The barriers to entry and compliance constraints are so far limiting the number of players in this space in Australia. BXN is the market leader and economies of scale being what they are, should be able to maintain a small moat. It will informative to see what the bottom line looks like come results season.

Currently, BXN have a gross margin of 50% which is healthy and should allow for a reasonable ROIC. I’d love some more detail around these numbers. I would anticipate this margin can be sustained in Australia and replicated, if not improved upon in the UK - they also have their Dr Watson brand which should increase margins there.

There are also the psilocybin and MDMA arms of the business that are currently only involved in clinical trials in Australia.

*Deep dive into the product suite:

Strawman members will be reassured to know that I take my research very seriously. Purely in the interests of due diligence, I registered as a patient (insomnia, back pain, I once got rejected by a girl I fancied when I was 15 and have PTSD etc) and have subsequently tested the majority of the BXN products.

After a few weeks of somnolence and moderate disorientation, I realised that I am not the target market and have discontinued frequent use. Additionally, I recently received a bulk package of “TV snacks” from Amazon that I have no clear recollection of ordering and do not usually enjoy eating. Mysteriously, I have also gained 6kg.