Breaking through the regulatory dilemma, the skin bacteria company has its own tricks
Small Company Champion & Lemming Investors Research and Newsletter Updates
Friday, 11 December 2020
2021 Economic and Capital Market Outlook
Friday, 4 December 2020
The Company completed its human safety study for the cosmetic application in early 2019 and having generated data, progressed its discussions with third parties interested in licencing the technology. This culminated in the agreement with Croda (RNS 20 November 2019).
Under the terms of the agreement, SkinBioTherapeutics' proprietary SkinBiotix(R) platform will be paired with Croda's expertise in the development and commercialisation of unique, sustainable, cosmetic ingredients, focusing specifically on the growing skincare actives market. Sederma, part of Croda International plc, is a specialist manufacturer of bioactive ingredients for the cosmetic industry and will be responsible for the development, manufacturing and commercialisation of the SkinBiotix(R) technology.
Croda will be creating a separate manufacturing line for the technology. As design and manufacture of the active ingredient are carried out, there will be concurrent testing in focused ingredient application areas which will be detailed in further, additional agreements.
Any licensed products resulting from these agreements will be sold to Croda's global portfolio of Personal Care customers, which amount to >12,000, some of which are the leading companies and brands in the market. SkinBioTherapeutics will be paid tiered royalties based on global sales revenues on any licensed products subsequently derived from the successful development of the partnership. Recognising the development activity required by Croda, the Company anticipates revenue generation to commence from these additional agreements during 2021.
Sales and distribution rights are for the cosmetic sector alone, leaving SkinBioTherapeutics to focus on further applications of its technology in other sectors. A key component of the Croda agreement is access to a reliable supply of material, and Croda will supply SkinBiotix(R) for the Company to be able to use in sectors outside of those covered by this agreement.
Saturday, 28 November 2020
Thursday, 26 November 2020
A discussion centred around the cost of sales (COS) and profit margin on an ADVFN Guild forum was an interesting one, if not confusing for some readers. Given the variables and grey areas and the knowledge, some companies understate their COS to boost the company's margins; thus profitability, I thought it would be a worthwhile topic to feature.
OptiBiotix and industry context.
Gross Margin: This is the sales price minus the cost of producing, warehousing, and distributing the goods. The higher the gross margin, the more money we make on the sale of our products. Royalties and profit share have a 100% margin.
The gross margin reported in the annual and interims accounts is a composite of sales and royalties across the whole company and is affected by:-
- The sales channel: Direct to consumer sales via the online store typically have a higher gross margin than selling via an intermediary (although marketing costs will be higher and effect the new margin)
- What is sold (ingredient or final product): Product sales (e,g CholBiome X3, GoFigure) typically have a higher margin than ingredient sales. Selling final product provides a double margin - on the ingredient sale to the manufacturer and the sale of the final product.
- The end customer: Sales to Pharmacies, GPs, hospitals will have a higher gross margin than retailers, but volumes will be lower. The aim is to have a mix of high volume retail sales and higher margin sales to pharmacies etc.
Saturday, 21 November 2020
Investors of OptiBiotix Health PLC (OPTI) will have heard the company talk of the first and second-generation products and the focus increases towards the second generation, and talk withing the company how excited they are about the next stage in the development of the business with the first generation lead products (ProBiotix Ltd, probiotics, like LP-LDL range, prebiotic SlimBiome range. These are created for health, chronic lifestyle diseases that have high mortality and morbidity and where there are limited treatment options. As the microbiome storey emerges into the mainstream, particularly in the US, OptiBiotix will bring out its microbiome science more.
As most of you know, I try to communicate with the CEO. Stephen O'Hara a lot, usually with fact-checking queries I have, and or investor queries. One of the key observations we agree on is our belief many investors don’t fully understand the multiple shots at goal OptiBiotix has, consequently significantly de-risking the investor's investment. These are all designed to reduce investor risk as the company builds a business in a new and evolving area like the microbiome. With any new science in a totally new space, there is always the risk the promise won't develop or takes a long time (think of electric cars).
It is frustrating the wider market appears not to give OptiBiotix the deserved credit for delivering on all scientific based platform's; including multiple awards winning Pre, probiotic, modulation including SweetBiotix. All have passed science hurdles and all commercially viable and all managed with a headcount under double digits and £8m raised since the IPO in August 2014. That is astonishing, even if the share price does not reflect this right now, it will, but other forces are against us right now. It was cryptos in 2016/17, now its Covid stocks and dare I say, the reemergence of cryptos.
Some of us may not think so, but the company has come a very long way in 6 of on the AIM casino. Since listing on AIM during 2016, it was all about a microbiome idea and developing the science, backing that science up allowing it to brings science to the development of compounds which modify the human microbiome - the collective genome of the microbes in the body - to prevent and manage human disease and promote wellness. Through its R&D programme working with leading academics in the development of microbial strains, compounds, and formulations. These have been double-locked IP and Trademarked in most territories around the world, this is about building the solid foundations before utilising these compounds and ingredients into everyday products, primarily in a strategy as B2B, supported by a B2c model. Part of the building blocks has been the strategy to develop in-house own brands, like the GoFigure weight management range, CholBiome cardiovascular range and SmartSnake as shop window range - this has attracted large global corporations from all corners of the world.
The shop window strategy is a very small part of the business I note sometimes some investors get really frustrated about because:
1. The range is not extensive enough
2. Online sale perception is low
3. No marketing to engage the general public beyond investors
This is not the focus of the company strategy. I am sure as the B2B model matures a time will come to expand the range of products and promote is and the company more. The online store is not intended to be a rival to Holland & Barratt's, it is a shop window for prospective B2B commercial partners, not a B2c. Obviously, it is a B2c which will grow organically as the OptiBitox grows its product range and the ''intel inside'' brands through the B2B partnerships which are now developing more and more products in something like 170 countries.
More than 20 international food and healthcare supplement companies and distributors have signed agreements with OptiBiotix to incorporate their human microbiome modulators into a wide range of food products, including baked goods, cookie snacks, gummies, frozen foods, OTC supplements, dairy and beverages. Some of these are part of the second generation products the company chairman, Neil Davidson seemed excited about during hiss recent Proactive Investors interview.
- OptiBiotix’s strategy was designed in the context of a new and evolving area, the microbiome, to limit investor risk where you are creating new science for an entirely new market where no microbiome products existed. With any new science in a new space, there is always the risk the science will fail, or it takes a long time to develop the science and market as infrastructure support existing products. This is particularly the case for products which are a step change from existing products. In the same way, as electric cars have struggled to gain market acceptance, even though everyone accepts they are the future, sugar producers like Tate and Lyle, Sudzucker etc., have large investments in sugar cane, sugar beet producers and manufacturing plant which is totally different from that required from an enzymic process to produce SweetBiotix and OptiBiotix's microbiome modulators. The challenge with being first in the microbiome space with new technology and products is that in the early days there was very little access to microbiome testing services or data to show an association between particular microbial groups and health. This is now developing, particularly in the USA.
- The overall aim was to produce multiple shots at goal focusing first-generation products on chronic lifestyle diseases, health conditions with high mortality and morbidity where there are limitations in existing treatment options. Through R&D OptiBiotix has garnered microbiome data on these products it has focused on the health benefit and not the microbiome. Once sales, industry credibility, and a distribution network is established, the focus switched to microbiome and pharma products. WellBiome is the first step in bringing microbiome supported health and wellbeing products to market.
- The company has been fortunate in that unusually all the developments and clinical studies have been successful, which is great news for investors because this significantly de-risks the company. However, there has been challenging balancing all the opportunities. First, you need to build the scientific, clinical, and regulatory dataset to allow to show key differentiate its first-generation products like SlimBiome, WellBiome, and LPLDL, whilst building the science, IP and early clinical for the next-generation products. This gives us shareholders a high degree of surety as we have the scientific, clinical, and commercial success of the first generation products (SlimBiome and LPLDL) and the prospect of a large upside if any one of our microbiome modulators failed. SweetBiotix or live biotherapeutic next-generation products are commercialised globally – which is looking increasingly likely. In my view, this is a lower risk strategy than a bivalent drug biotherapeutic strategy where an investor can win big or lose all.
- We now have FDA GRAS, GMP pharma manufacture, and an IND for LP-LDL with potential application extensions into diabetes and immune health, 5 human taste studies on SweetBiotix with partners exploring applications in dairy and beverage products, and good scientific data on LPGOS and other microbiome modulators. These are solid foundations to interest large commercial partners and commercialise. With first-generation products growing sales and second-generation products having a solid scientific, IP, regulatory, and commercial base with early partners, this puts OptiBiotix in a strong position.
- . OptiBiotix is also the investment arm identifying and acquiring technologies, building the development and management team, and creating new companies (e.g. SkinBiotherapeutics). This gives investors in OptiBiotix a further opportunity for value creation as that asset appreciates in value.
- Invest heavily in science, human studies, regulatory approvals (GRAS, GMP), and double IP (patents and trademarks) in early years to establish a strong position in the microbiome field and differentiate from tradition market-driven products. Enhance credibility with independent peer-reviewed publications and launch Medical device (e.g. SlimBiome Medical) and pharma products (e.g. Ezimega 3, DS-01) to highlight differentiation and enhance products credibility in other markets
- Sign agreements with multiple partners in multiple territories across all areas of the value chain (manufacture, formulation, distribution) to control and extract maximum value. This limits risk for any individual deal, product, or territory
- A scalable business model. This means that once products and brands are proven in early markets, the time and costs of taking products to other markets are much reduced. As products are established and patents granted IP and R&D costs reduce creating a position of growing sales and reducing costs
- As the need for innovation reduces bring in experienced each division and
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