IPO Watch: UK-leading cannabis health and wellness house Dragonfly Biosciences set to list on ASX
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As regulations and people’s attitudes towards cannabis change rapidly, many companies are trying to get a foothold in the Australian market.
In 2021-2022, data shows that cannabis was the third most common drug Aussies had received treatment with, while 41% of Aussies said they supported the legislation of cannabis for personal use.
And while medicinal cannabis has been the one making headlines, one product format that’s gaining increasing interest is cannabidiol (CBD) used in everyday products such as toothpaste, suncare, balms, and moisturisers.
Now, a company popular for selling those products in major UK shops Boots, Tesco and Sainsbury, is poised for an $5m IPO cap raise and listing on the ASX.
Dragonfly Biosciences’ CEO Regan Saveall says the company has strong ambitions to expand its well-established UK products into the Australian and Asian markets.
“It’s a great opportunity for Dragonfly because the Australian market is well-renowned as a health and wellness market for testing new products,” Saveall told Stockhead.
Saveall says the Asian market, which is next door to Australia, could be a potential huge market for its products.
“We tend to see that the Asian market looks to Australia for credible, compliant products. So having Dragonfly products in Australia mean that there’s a bit of a beachhead into the Asian market as well.”
According to Saveall, China is currently getting to grips with how to regulate the CBD market.
“Thailand has also recently allowed CBD to be purchased in the country, while Malaysia is expected to follow suit. These are currently the biggest opportunities we see in Asia.”
In the consumable category, Dragonfly has already received special access scheme approval for two of its products from the TGA.
Shortly after the IPO, which is expected some time in August, the company intends to submit a dossier to gain full TGA approval for the rest of the range, which include the 1000 milligramme and 3000 milligramme CBD oil drops.
“Once we get the TGA approval, we’re expecting the Asian market to see Dragonfly as a fully accredited brand, which would enable us access to those markets,” said Saveall.
He explained that the TGA has fairly similar protocols to that of the FDA in the US, which means that an accreditation in Australia will help with the company’s US ambitions as well. Dragonfly says it will be preparing for multi-channel distribution once approvals have been secured in the US.
Meanwhile, all of Dragonfly’s products are free from THC, the psychoactive constituent of a cannabis flower that makes people high.
“We’re not dealing with that kind of an idea, we’re only really dealing with CBD and the health and wellness benefits that CBD can bring,” said Saveall.
Dragonfly has also been selling its products on eBay over the past nine months as the e-commerce platform embarked on testing out and dipping its toes into the CBD market.
“Dragonfly was invited as one of the few brands to be the first on on the platform,” said Saveall.
A big chunk of the company’s asset is tied to the more than 100ha of organically accredited farmland it owns in Bulgaria, which was acquired in 2021 and is used to cultivate the flowers.
“All of our infrastructure has been created. We cultivate under global GAAP in Bulgaria, and we own our dedicated large scale extraction facility across the border in Romania.”
Crop harvested from Bulgaria is taken to Romania to extract the CBD, which is then taken back to Bulgaria to an EU GMP pharmaceutical-grade formulation facility where it’s formulated, boxed, and labelled.
(This is due to Bulgarian law which prohibits producers from directly extracting CBD from cannabis flowers in the country.)
“We control the entire process from seed to shelf, which allows us not only to control quality, but it’s also a very cost effective way of manufacturing our product,” said Saveall.
Saveall explains that there is a distinction between a cannabis business that’s looking to make medicinal cannabis, and a company like Dragonfly which is effectively a health and wellness business.
“Medicinal cannabis business has to be done indoors, it has to be in a facility under UV light under strict conditions to ensure consistency of the flower from product to product – and that’s obviously quite a capital intensive endeavour.
“What we do at Dragonfly is we grow outdoors, and we’re only interested in extracting the CBD out of the plant so we don’t necessarily need to have a uniform flower from every single plant,” says Saveall.
This means that the company has a completely different model, which Saveall says would give it more options to grow revenue in the future.
“I think investors are starting to realise that the health and wellness CBD market has a better outlook than perhaps the medicinal cannabis space, especially with the kind of challenges they face.”
The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.
Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.