This is a rather lengthy post , but I thought it is useful to understand the business.
BXN has 3 sources for its revenues.
Its original probiotics business & the more recent MLM business/ wholesale channels.
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# Probiotics.....Good patent protected IP.....Good Gross profit margins......Reliable steady income but little or no growth so far.
This part generates revenues around $2m PA from 2 souces:
1) Royalties from Chr Hansen.
Chr Hansen acquired the global rights to manufacture & sell PCC in 2009....A 10 year agreement.
The terms of royalties is unclear....2-5% of sales may be a reasonable assumption.
Nov. 2009 Announcement "Probiomics Ltd (PCC) is pleased to advise that it has signed a major agreement with Chr Hansen A/S of Horsholm,Denmark to manufacture & market its proprietary probiotic strain Lactobacillus fermentum PCC globally in dietary supplements ,over the counter drugs ,sports nutrition ,slimming products ,clinical nutrition ,beverages and dairy products"
2) Wholesale to Nuskin.....BXN buys the stuff from Chr Hansen & sells it to Nuskin at a markup up of around 40%, I presume.
Royalties have been stagnant.......The agreement with Chr Hansen expired this month & 2 separate agreements have been struck to replace it......One for MLM (Nuskin & possibly BXN in the future) & another for traditional sales channels......Obviously on better terms as described in the quarterly.
Prior to the MLM effort ,BXN was valued at $4m...... the Probiotics business was barely covering corporate overheads & at breakeven state , but no growth with no expectations of any shareholder return.......The valuation was perhaps correct.
I expect the probiotic arm will eventually produce $3m in revenues & around $2m in gross profit over the next couple of years.
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# MLM:
Not a smooth sailing....Hit a few road blocks with product registration & New Image litigation issue......But seems to to have some traction recently.
This business has a gross profit margin well above 50%.
This link has useful info.
https://www.mymlm.com/pricing-your-products-services/----------------
# Wholesale channels:
Early success in Vietnam & Cambodia.
Working to break into China.
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One expects that The MLM & Wholesale effort to break even in the near term & be enough to cover the corporate overheads which is not much (around $1.5m.....very frugal board).....A modest $2-3m sales should do the trick leaving the more reliable probiotics income of around $2m as free cash flow for growth either organically or via acquisitions.
Once the MLM effort kicks in ,expect exponential growth for a number of years.
The question is .....Will BXN become one of them successful & growing MLM businesses?.....The odds are in favour......Veteran experts with good track record at the helm & plenty of skin the game bodes well......Still rather speculative, but a good punt at $12m MC......The pot size "could" be quite big.
