Producing high quality CBD health & wellness products from 'seed to shelf'

Live Dragonfly Biosciences Ltd ASX: DRF

Dragonfly Biosciences Ltd IPO |ASX: DRF

Fixed Priced IPOType of Offer
02 Dec 21Offer Open
31 Jan 22Pay By
$0.20Price
Up to $11 millionSize of Offer
$2,000 Minimum Investment
Finexia SecuritiesLead Manager

Investment Highlights

Introduction

Dragonfly Biosciences Limited (ASX: DRF) principal activities comprise of developing cannabidiol (CBD) health and wellness products. The Company is committed to delivering the highest quality products by owning and operating the entire production chain from ‘seed to shelf’. The Company grows European Union (EU) licensed strains on its own organically certified fields in the EU and utilises its own ‘state of the art’ large scale extraction facility specifically designed and built for CBD extraction. The final products are formulated within a pharmaceutical EU-GMP accredited facility.  The products are being distributed by blue chip retailers in the United Kingdom (UK), such as Boots, Tesco, Sainsbury’s, Amazon, Day Lewis Pharmacies, Cohens Pharmacy and Harrods.

The Company has developed world-class award-winning CBD products and believes that it is positioned as the number one brand for CBD production in the UK. In addition, Dragonfly has submitted their Novel Food application to the UK Food Standard Agency (FSA) to have their products approved under the new compliance regime, for the purposes of maintaining existing UK sales and expanding the retail footprint under the Novel Food Scheme (NFS).CBD is one of many cannabinoids in the cannabis plant that can be legally extracted and developed into wellness products. Studies show that CBD helps with chronic pain, arthritis, joint pain, anxiety, sleep disorders, depression to name just a few ailments.

Following the success of the products in the UK, the company is targeting expansion into other high growth international markets including Australia, Asia, US, Europe and New Zealand.

Dragonfly is forecasting global revenues of $6.9 million for FY2021.

Dragonfly CBD Product Range

Offer Overview

Dragonfly Biosciences Ltd is looking to undertake an IPO on ASX to raise up to $10 million via the issue of 50 million shares at an offer price of $0.20 with the ability to accept a further $1 million in oversubscriptions.  The company will have an indicative market capitalisation of approximately $97.99 million at maximum subscription on a fully diluted basis.

Industry Overview

CBD has become one of the biggest disruptors of mainstream industries over the last decade, impacting sectors from pharma to food and wellness to cosmetics. Already a multibillion-dollar opportunity globally, the market is expanding at an unprecedented rate, however many small-scale operators, multinational fast moving consumer goods and investors are benefiting from the short and long-term opportunities that are presented in this rapidly expanding burgeoning market.

There is substantial evidence around the effects of CBD to aid the human bodies’ ability to deliver on sleep, mood improvement, antianxiety benefits and pain relief, all of which have proved essential in the face of social isolation, balancing work and childcare, and adjusting to a new way of living. In addition, the extended benefits of CBD based on testimonial and trial is opening new markets daily because of the consumer interest focussing on the quality of formulations and the benefits of ingredients.

Global CBD Markets

Australia has an established reputation in the health and wellness industry with health practitioners, proprietors of brands and formulators who understand the benefits of engaging with Australian institutions and government departments who support global innovation. Australia is also world-renowned as being highly representative of the most developed markets for beauty and wellness products around the world. Data collected from this market will provide valuable feedback to enable development of launch strategies to achieve highly robust market penetration globally including across the APAC (Indo-Pacific) region, the USA, Europe and beyond.

The Company is positioning itself as market leaders in Australia and in the region based on their market ready product offerings, compliance status and track record in the United Kingdom and other international markets. As the regulatory landscape opens up, Dragonfly’s distribution footprint and growing interest will underpin their leading brand in category status.

Company Overview

Dragonfly Biosciences Ltd is a premium retailer of CBD, which is one of several cannabinoids extracted from the Cannabis Sativa plant. Using CBD as the main ingredient, Dragonfly specializes in producing and offering health and wellness/lifestyle products. Dragonfly both produces its own branded product and offers bulk and white label services.

The Company is poised for global growth by leveraging a highly successful proof of concept across Europe and the UK.

The Products

Dragonfly currently produces proprietary and bulk white label products, which include:

CBD Narrow spectrum oil/oral drops

The Narrow Spectrum range extracts Dragonfly CBD’s organically grown Cannabis Sativa L. to create a ‘super-distilled’ CBD, which is smooth in taste & consistency. Dragonfly CBD Narrow Spectrum is the most popular CBD oil in its range and was voted the Best CBD Oil by Boots UK customers.

CBD Broad spectrum oil/oral drops

Derived from hand-crafted Cannabis Sativa L. extract, Broad Spectrum Dragonfly CBD Oil is a close reflection of the plant’s natural complexity and is ideal for an experienced CBD Oil user.

CBD Skincare Range

CBD is an anti-inflammatory and antioxidant, which aids the reduction of cell stress and damage. Whilst popular as a food supplement, CBD can also be absorbed externally through the skin, lending its wide-ranging benefits to cosmetics. 

 

Each of the above products are formulated in an EU-GMP pharma grade facility to ensure that they are formulated under EU-GMP protocols, in a consistent and standard labelling and packaging manner, and with a standard composition. Dragonfly intends to apply for EU-GMP accreditation for the facility in 2021.

Vertically Integrated Process

The Company’s proposed business model will be to facilitate and accelerate the development of Dragonfly’s production, research and sales of CBD and other hemp-based extracts and CBD products.  At the core of the business is the range of wellness and beauty products including CBD oils and CBD skincare botanicals (the CBD Products), which the Company seeks to produce. Centred around the production of the CBD products, the business cycle comprises cultivation, production, research and development, manufacturing, and distribution.

Set out below is a diagrammatic overview of the Dragonfly business model.

Dragonfly aims to establish a competitive advantage by providing the market with quality and consistency based on established protocols from genetics, agriculture, cultivation, extraction, all the way through to formulation. The importance of vertical integration is a differentiator to support supply chain and to scale based on tested protocols and phytochemical footprint that underpins the integrity of all Dragonfly formulations.

Seeds

The Dragonfly business model is conducted across various countries with the journey for all Dragonfly products starts with quality high-yielding seed. The company only uses EU-certified and licensed seed supplied by the world’s largest purveyor of EU approved cannabis seed varieties, IHEMPFARMS. IHEMPFARMS works exclusively with EU-registered hemp varieties, which are subject to the strict European Union rules for THC compliance.

Cultivation

Dragonfly’s outdoor cultivation involves large-scale cultivation of cannabis plants on its own organically certified land located near Sofia in Bulgaria. Through its fully owned subsidiary Dragonfly Biosciences Bulgaria Ltd (Dragonfly Bulgaria), the Company has capacity to cultivate up to 950 ha of organically certified farming land to support expansion.

Since 2017, the Company has had a successful track record in cannabis cultivation and to date has not had a crop failure. The Company is an accredited vertical organic operation from soil to cultivation and extracts CBD utilizing its own large scale extraction facility and formulating in an EU-GMP certified manufacturing facility with their own extract that is refined and formulated with an organic hemp seed oil carrier.

Extraction and Formulation

Dragonfly carries out extraction at its wholly owned dedicated modern CBD extraction facility in Romania. The facility is one of only a few large-scale extraction laboratories in the EU. It has separate biomass storage capacity of 350 square metres.

Dragonfly employs an ethanol (food grade) extraction method using the Company’s own highly specialised High Performance Liquid Chromatography (HPLC) equipment. Adoption of this HPLC technology guarantees consistent high-quality CBD oil at the end of the extraction process. It also provides the Company with the flexibility to design and derive bespoke formulations including ‘special batch’ runs for wholesale and white-label customers.

Dragonfly has chosen to partner with one of Europe’s largest and most experienced pharmaceutical manufacturers, Vetprom AD. Vetprom is an EU-GMP accredited manufacturer specialising in proprietary and outsourced (third party) manufacturing of medicinal products for human and veterinary purposes. They also produce food supplements and cosmetics.

Storage

Dragonfly currently has over 500,000 Kg of biomass stored securely from harvests of previous years. The Company considers that this amount is sufficient to support existing demand through to the end of 2022.

Sale of products

Each of the Dragonfly products are sold directly through Dragonfly’s proprietary website shopping portal. The products are also available in several well-known high Street retailers across the United Kingdom including Tesco, Boots Pharmacies, Sainsbury’s, and Harrods.

In January 2021, Dragonfly was approached by Amazon with an offer to be part of Amazon’s CBD portfolio. All of Dragonfly’s CBD products are available to buy on Amazon in the UK.

In July 2021, having established itself as an industry leader, Dragonfly was invited to become the first CBD brand to be allowed to sell their product range on eBay.

International Expansion

US market size in 2019 was US$ 4.1bn, forecasted to be US$ 15.9Bn by 2024 (Source: 2021 Statista). Australian legal cannabis market sales to date reach AUD$150m and are expected to reach AUD$200m by 31 December 2021. CBD was downgraded from Schedule 4 to Schedule 3 by the Therapeutic Goods Administration (TGA) in Feb 2021, providing access to Australians over the counter (OTC) with a prescription. There are 45,000 patients registered. According to the Australian Institute of Health, there are 600,000 Australians using cannabis for health reasons and only 3.9 % of those patients are registered with their physicians.

Dragonfly currently has representation in New Zealand, Australia, the United States and Europe and will expand its presence in these countries/regions. Dragonfly Ltd is also engaged in discussions with distribution partners in Germany, Norway and Sweden.  As demand grows for CBD health supplements, Dragonfly Ltd seeks to be the go-to-producer and supplier of CBD for multi-channels to market that include both business to business and consumer channels.

Key Objectives

The Company’s main objectives are:

  • expand UK retail partnerships to continue to position the Company to be the number one CBD brand in the UK whilst leveraging off the Company’s existing distribution network to establish new retail partnerships in European Union, Asian, Australian and New Zealand markets;
  • achieve Novel food validation by the UK Food Standards Agency (FSA) and monetise early mover advantage;
  • build better brand awareness taking advantage of expected fewer brands post our FSA Novel food deadline; and
  • expand the white label/wholesale business line capitalising on Dragonfly’s large scale extraction facility.

Key Offer Statistics

Use of Funds

Funds raised from the Offer will be applied as follows:

Source of Funds

Key Board and Management

Dragonfly Biosciences Limited is led by a board with significant expertise and experience in the CBD and cannabis industry and will aim to ensure that the funds raised through the Offer will be utilised in a cost-effective manner to advance the Company’s business.  This include:

Regan Saveall - Chief Executive Officer

Mr Saveall has been in the role of CEO since November 2019. Prior to his appointment as CEO, Mr Saveall served as the Company’s Chief Financial Officer for the period from January 2019.  Mr Saveall is a Chartered Accountant with over 25 years of experience in the media industry.  Mr Saveall spent 4 years at NBC Universal where he served as VP Finance in the Emerging Markets and International Corporate divisions. Previously, Mr Saveall spent 8 years at Chello Zone where he served as CFO supporting the worldwide expansion and the eventual sale of Chellomedia to AMC Networks for US$ 1bn.

Radost Draganova – Executive Director and Chairman

Mrs Draganova is an entrepreneur and experienced businesswoman, based in Sofia. Equipped with a law degree, she spent her early years as head of the Legal Department at Sofia Municipality, responsible for all large-scale urban development, architecture, and infrastructure-focused projects. Radost has developed a series of solar farms, a successful TV production company and now is dedicated to building Dragonfly Biosciences.

Chris Wronski - Executive Director

Mr Wronski was formerly the Chief Executive Officer, having previously been involved in Wellbeing Network, where he also served as a Chief Executive Officer. In 1991, Chris founded Chello Zone Holdings (also known as Zone Vision Networks) an England-based TV company. Chris served as President. He also developed and expanded Zone Vision Networks worldwide. Chello Zone was sold to Liberty Global and then in 2014 sold to AMC Networks as part of the Chellomedia sale for $1.0bn.

Ventcislav Dimitrov Non-Executive Director

Mr Dimitrov is a transactional and regulatory lawyer working throughout Central & Eastern Europe. He has particular specialization and expertise in structuring and negotiating transactions and projects across the regulated sectors and his experience includes advising on internationally significant infrastructure and technology transactions. Mr Dimitrov has held senior positions in industry and private equity as an M&A partner.

Julian Karadjov – Non-Executive Director

Mr Karadjov has completed a PhD in Biology. Mr Karadjov has completed significant research in the area of “Calcium Transport and Oxidative Phosphorylation in Brain Mitochondria”, as well as related biochemical, optical and electrochemical methods. He has written two books on drugs, titled “Cannabis: Science and Politics” and “Drugs: Almost all about them”. He is also currently lecturing on different topics, including those related to CBD and other Cannabinoids. His recent research includes work on synthesis and biomedical tests of a new class of synthetic cannabinoids (not yet published).

Dale Klynhout - Non-Executive Director

Mr Klynhout has 10 years’ experience in both Australian and international capital markets, structuring transactions across equities dealing, funds management and corporate finance. He has managed investments across various asset classes and investment teams across the Asia Pacific region as well as operated financial licenses in both Australia and Hong Kong jurisdictions.

Warren Goward - Non-Executive Director

Warren Goward has 18 years’ experience in financial markets, working for boutique share brokerage and investment banking firms. Warren has extensive international equity markets experience which includes 4 years in London trading European Equities.

Advisory Board

Dr Saoirse O’Sullivan

Associate Professor at the University of Nottingham within the Faculty of Medicine & Health Sciences.

Dr Andy Yates

UK pharmacist who received his PhD in cannabinoid medicinal chemistry from the University of Nottingham. Over 15 years’ pharma experience working in the medical, commercial, business development and strategy functions. Runs independent pharmaceutical consultancy.

Paul Carter

More than 25 years leadership experience in the pharmaceutical industry. Former Executive Vice President of worldwide Commercial Operations at Gilead Sciences Inc. 14 years in various positions at GlaxoSmithKline (GSK).

Risks

You are encouraged to read the Prospectus carefully as it contains detailed information about the Company and the Offer. Like all investments, an investment in Dragonfly Biosciences Ltd carries risk. As set out in Section 7 of the prospectus, Dragonfly Biosciences Ltd is subject to a range of risks, including but not limited to product risk, access to ingredients, competition, potential acquisition, regulatory updates, liability claims and contractual risks.

 

Section 734(6) disclosure: The issuer of the securities is Dragonfly Biosciences Ltd ACN 137 176 393. The securities to be issued are ordinary shares. The disclosure document for the offer can be obtained by clicking on the link above. The offers of the securities are made in, or accompanied by, a copy of the disclosure document. Investors should consider the disclosure document in deciding whether to acquire the securities. Anyone who wants to acquire the securities will need to complete the application form that will be in or will accompany the disclosure document (which can be done via the electronic application form which will become available by clicking the bid button above).

OnMarket has a limited allocation. The offer may close early and the 'Pay By' dates may change. Duplicate bids under the same investment profile, investor name or residential address may be cancelled

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IPO Live

Dragonfly Biosciences Ltd ASX: DRF

Dragonfly Biosciences Ltd
Producing high quality CBD health and wellness products from ‘seed to shelf’, sold through blue chip retailers

 

AFR Interview with CEO, Regan Saveall available here

 

Dragonfly Biosciences Limited’s (ASX: DRF) develops cannabidiol (CBD) health and wellness products derived from the cannabis plant, owning and operating the entire production chain from ‘seed to shelf’. EU licensed strains are grown on its own organically certified fields in the EU, with CBD extraction undertaken at the Company’s ‘state of the art’ large scale extraction facility. 

 

Dragonfly has a 3-year track record of selling its CBD products through blue chip retailers in the United Kingdom (UK), such as Boots, Tesco, Sainsbury’s, Amazon and Harrods, and is now targeting international expansion to Australia, Asia Pacific and the USA. The company is forecasting revenues of $6.9 million for FY2021.

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