Small Company Champion & Lemming Investors Research and Newsletter Updates

Sunday, 26 April 2020

OptiBiotix Health - Raises One Million for Rapid Expansion

Friday, 17 April 2020








OptiBiotix Health plc (OPTI), a life sciences business developing compounds to tackle obesity, high cholesterol, diabetes, announces that the Company has raised £1.0 million through the issue of 2,500,000 new ordinary shares of 2 pence each, this followed a 10p sell-off on low volume as MM's do what they do best, feed off the lemmings.




The apparent discount at 40p per share is nothing more than a trick of time—the 55-minute podcast with group CEO. Stephen O'Hara explains his logic for a keep the lights on placing...It is not a keep the lights on placing, it is not a spoof, it is about a rapid build-up of the business at an opportune, if not what will prove to be a very pivotal moment for the business. 

There is a long list of product expansion across 70 countries that need large-scale production and stocking, capital is needed to expand at pace and maintain a healthy cash balance to make sure the company is well-positioned to build more inventory for future agreements yet to be completed. 

Investors need to be mindful the bulk of revenues receipts do not arrive until H2. This will balance out as more partners come on stream. 

Listen to today's podcast for an expansive overview of where the company is now when future events. The clues are there, you just need to pay attention. 

If there is a criticism, it is a small dilution of c3% should have been nearer 9% to feed the demand and increase expansion. 

There are a couple of highlights you should listen for, which are very significant in terms of revenues rocketing in the next few months: 

1: 2 mins into the interview Stephen O'Hara discusses two separate examples of what could develop if current negotiations come to fruition. In both cases, he uses H&B as an example of the scale of the opportunity. OptiPharma is calculated to be worth 10 x £3-5m pa H&B and other deals worth 30 to 40 times that of H&B. He then goes on to retail prospects in USA, India and China, again, with the usual caveats.

2: 26 mins in Stephen O'Hara discusses the USA., retail product being shipped. He can't announce because they have not given a date for the launch. So, it has been confirmed. If my memory serves me correctly; 20 tons of SlimBiome has been shipped to the as-yet TBC retailer.



You can listen to the interview is via SOUNDCLOUD.



SkinBioTherapeutics - Stuart Ashman Interview 27032020






I had the opportunity to have a very encouraging chat with SkinBioTherapeutics PLC (SBTX) CEO. Stuart Ashman on Friday 27th. Over the course of 30 minutes, we covered a lot of ground discussing the progress of the company in the 3 months since we last spoke. 


The share price will tell you the company is in dire straits, in fact, the lesser informed could argue the company has gone backwards, may need a bailout placing, if it survives Covid-19. Wrong, wrong, wrong. The truth of the matter is SkinBioTherapeutics has two strong commercial agreements with encouraging noises from other opportunities which have arisen on the back of Croda and Winclove probiotics.

The company is in a strong financial position with a cash runway of c2.5 years - it should be cash positive way ahead of it sucking on air.



Elric: Can you explain to investors how the company has been progressing with life under the restrictions imposed on so many companies due to Covid-19. I have argued companies such as yourself, your partners and OptiBiotix partners already work in sterile environments where PPE equipment is standard, the only hurdle is transporting to and from locations. And explain the company's commercial pathways.

Stuart: As you know we operate as a virtual company, so we don't need huge ivory tower offices, with just three full-time members of staff, we have no large rental or mortgage costs, and our research is contracted out to the University of Manchester allowing for huge cost savings for the company. As it happens, we have moved into the commercial development phase of the business, meaning reduced research costs, although research continues in other areas. So, we are very much into the commercial development phase as you can see with the recent commercial agreements signed with Croda and Winclove. 

Both of these partnerships are developing well, both our partners work in the environment you describe. Croda has been working with a skeleton staff on cosmetic claims and the dedicated production line for the SkinBioTherapeutics lysate, so far, COVID-19 has not had a negative impact on us. Similarly, Winclove has also progressed very well, in fact, they are ahead of schedule, so things are looking very encouraging indeed.

In terms of the Winclove deal, we are at the stage where we are looking at how to deliver a product that assists in the treatment of symptoms associated with psoriasis, this includes product form, be it a powder which could be added to cereals or drinks, or tablet form, for example, even in the form of a lozenge much like those mints you get with your bill after a meal. We are also looking at the price point at which to pitch the product. The route to market, online, retail, what sort of packaging, how many sachets, etc. So, there is a lot of desk/telephone work, continuing, collating data, etc. We now have an opportunity to get ahead of the curve over the next three months, we have a great opportunity. Had the coronavirus happened 12 months ago, we would have been at a very different stage, quite frankly we would have ground to a halt. We are now at a key development stage, so very much in a different position and somewhat ahead of schedule with Winclove and on schedule with Croda.

Elric: Can you go into a little more detail why Winclove was chosen and the development of psoriasis product.

Stuart: We chose Winclove because of the very specialist nature of blending 6 separate probiotic strains together. What people often don’t appreciate is the complexity of blending 6 probiotics together. Some probiotics do not “play well” with others, Winclove are specialists in this area, they may not be the biggest formulates in the world, but for this field, they are absolutely the best partner. Winclove manufactures a range of probiotics and food supplements that are critical to many people's health and wellbeing, and as such in the Netherlands, they are classed as essential workers. 

Food supplements for the treatment of Psoriasis have been done in the past using a single strand of bacteria. Our blend of 6 probiotics addresses multiple symptoms of psoriasis. 

Psoriasis sufferers tend to have deficiencies in their immune system which can lead to flareups resulting in the skin becoming flaky and very itchy. Our blend of 6 probiotics works very well. As I touched on earlier, we shouldn't underestimate the difficulty in blending 6 probiotics together, it is like finding 6 needles in 6 haystacks, a lot of probiotics do not play well together, they can technically fight and kill one another, so Prof Cath O’Neil and her Research team have done exceptionally well to blend 6 probiotics to produce a product to tackle a significant disease.

The reason we have chosen the food supplement route to market is that it is the fastest route to commercialisation as I demonstrated in a strategic plan. Our route to market - is to target the lowest hanging fruit which is primarily cosmetics because no clinical trials are needed, the next step food supplements, both Croda (cosmetics) in November & Winclove (food supplements) in February, in the next few months and years we will take the next steps up the product development ladder.

Elric: Remind investors what Croda brings to the table.

Stuart: In terms of Croda, they should not be underestimated, they bring a 12,000 plus clients from around the world to the party, which gives SkinBioTherapeutics access to all the biggest names/brands in the cosmetics markets. Once the project completed, this becomes almost passive revenue for us. 

Elric: And Winclove, like Croda, has been severely underestimated by investors. OK, I get there has been a bit of a crash caused by Covid-19, which has and still is impacting of some investors need for cash to cover margin, or other cash needs due to loss of work, lockdown, etc., all this has exacerbated the downtrend in a lot of stocks that as yet don't have quantifiable revenues going forward...this probably would not have mattered anyway.

Stuart: Winclove offers us a huge opportunity with psoriasis, well, not just psoriasis, but acne, eczema, as well as multiple other areas, these are huge opportunities with easy access into the food supplement market because of lower regulatory hurdles rather than the more stringent/costly and time-consuming medical device or pharmaceutical route.

Elric: I understand the food supplement route first, low hanging fruit, this is the same route OptiBiotix uses, by developing OTC food supplements, allowing the building of low hanging revenues streams while pharmaceutical-grade routes offering multiple higher margins revenues at premium prices, this reduces the strain on the cash, thus less dilution for shareholders. This is something DDDD investors are learning to the cost of their investments, placing after placing because of the long and expensive route to market for their first commercial product and it still seems like it is years away. It is a poor business strategy!

Stuart: If you think about the daily routines psoriasis suffers go through, it is about making their lives easier with a simple delivery of a food supplement. Remember, there is no cure for psoriasis, we can only treat the symptoms. Some of the suffers from psoriasis have the additional burden of periods of social isolation, so it is about finding a way of making their lives so much easier with a product they can walk around with, this would represent a significant improvement in their quality of life.

Elric: By the way, the global psoriasis market was valued at about $30.13 billion in 2018 and is expected to grow to $46.57 billion at a CAGR of 11.5% through 2022. The psoriasis drugs market consists of sales of psoriasis drugs.

We know there is a growing need for supplements that aid the build-up of the immune system, we see new products all the time. Anecdotally, also there is a need to build the immune system to help fight viruses like Coronavirus, as well as reports of increasing sales in SlimBiome which offers all the nutritional needs a body needs, so I imagine the focus on improving the immune system will gain momentum. Just an example, I purchased 3 weeks of Bimuno, which aid the boosting of the immune system. It is easy and convenient to use, add to cereal or drink, job done, no change to the flavour or texture. 

Stuart: Part of our focus has been tapping into psoriasis suffers communities online - they have been an incredible resource for us. We have been asking what would suit a cross-section of people, questions ranging from flavours through to packaging. Would be a lemon flavoured powder that can be added to a glass of water be an option, would an odourless, flavour-less powder that can be added to a bowl of breakfast cereal or a cup of coffee, or a lozenge sweet, in case the daily routine is interrupted, the option to suck on a sweet if there isn't a liquid drink available because you are on a train or bus. 

The coronavirus has created a great opportunity for us to tap into these communities over the next three months as many people are in isolation and now working from home and are easily reachable. This has allowed us to continue to build a database of information that will help us develop multiple applications.

Elric: We spoke three months ago, at the time you indicated the psoriasis product is about 12 months away, is this still the case?

Stuart: We are actually somewhat ahead of where I said we would be at that time. I said we need 12 months to complete the formulation, in fact, we are significantly ahead in terms of that phase. Under ordinary conditions, we would be looking to accelerate the human trials now. 

Elric: Interesting, because during our last chat you said you had a cash runway of c2 years, so given you are significantly ahead of the curve, how does this impact on the cash, I am guessing this improved the wriggle room? 

Stuart: Yes, it does. I wouldn’t want to be put on the spot by saying how much room this gives us or if we commercialise any earlier until we come out of the lockdown and see what impact it has had.

Elric: In terms of Croda, you say this has also been developing well with minimal impact on progress. How has Croda progressed?

Stuart: Croda is progressing well, no specific bumps in the road, all on schedule. There is always a possibility of a delay, but at the moment, Croda is progressing well with the production line. At the same time, Sederma continues to develop and validate claims to present to their clients, promoting our anti-ageing claims. 

Elric: I imagine the two commercial agreements have resulted in several doors being opened to news potential clients?






Stuart: Yes, astute of you to say so. There has been a lot of interest from multiple areas, some rather surprising ones too! and given my background, you wouldn't need to be Sherlock Holmes to work who some of them are! There are multiple opportunities for us in the future. If you think of the current climate we are in now where everyone is acutely aware of infectious deceases, people are now wearing facemasks, they are looking at ways they can protect their skin. For example, Metholacilin Resistant Staphylococcus aureus (MRSA) prevention is a significant market for us, this represents the 4th rung on the commercial ladder, CleanBiotix MRSA is a very aggressive bacteria that is often contracted in a hospital environment, our core science prevents the latching of MRSA when applied in a cream/gel. Creating a barrier cream. The research into this area continues with Prof Cath and her team at the University of Manchester. It is a fainting field to be working on that allows us to explore what probiotics can assist in blocking aggressive bacterial strains.





Elric: I could name any number of companies, be they listed on AIM, FTSE100, small-cap, bluechip, all have taken a beating in the current market selloff because of the scramble for cash at almost any cost. Stops have been hit, leverage positions supported by the sale of paid-up shares. I expect we will recover as we always do when the melodrama has played out, and investor return, as they always do. I imagine SkinBioTherapuetics will be one of the recovery companies because it does not need cash call, it has a fairly visible path to commercial revenues. As you say, you expect to be net cash positive well ahead of any need to raise funds for other projects.  With this in mind, why have you or other members of the BOD not sort to take advantage of what if believe to be pretty close to the floor? I get the fact as a director, CEO. You buy shares you cannot sell them unless the share price is on an exceptional run, and or you can place them into safe hands. I also get a sale does not mean you as a director think the company is now a bad investment, cash requirements are needed for a multitude of reasons, helping a child with university fees, deposit for a house, etc.  So what would you say to those that would question why you have not bought the decline?


Stuart: I welcome the question, and I’m pleased you have asked it. We are a tiny company, there are just three full-time employees, and you are correct in what you say, it is difficult for a board member to sell shares because t is often viewed as a negative. I personally took a substantial pay cut to take on the role as CEO, I fact I’m happy to divulge it as close to 40%. This is not a decision anyone would take likely, and I did it for multiple reasons, firstly, part of the remuneration package there is an option on 3 million shares. These options have stringent performance targets which I believe are achievable. However, they are linked to very specific and very aggressive milestones, many would think some of these are not achievable........unless you knew what I knew. The milestone options can be several commercial agreements worth £x, sales volume, £x or share price being x, there many different criteria to be met before I have the option on the stock. Secondly, I firmly believe in the opportunities to commercialise what is truly wonderful science. We now have 5 pilot strategies that see the science in Cosmetics, Food Supplements, Medical Devices, Cleaning / Disinfectants, and Pharmaceuticals. Opportunities are galore! 






Also, there are stringent legal restrictions placed on PLC boards to prevent insider dealings, bearing in mind we are a minimal board, so we are all effectively in possession of inside information for much of the time, it is an excellent line. If you think about it, there are trial data, H1, H2, human studies, start, end, there are several closed periods investors are just not seeing but the NOMAD is.


And finally how much is there enough? I have 3 million options which I think will be at significant multiples of where they are now as I achieved each of the milestone criteria.


End



While the focus for investors in the near term commercial progress of Winclove and Croda, there other low hanging fruit opportunities from within SkinBioTherapeutics, like CleanBiotix, part of the company we have not even begun to discuss in any detail. 

Each year, 700 000 people worldwide are killed by multi-resistant bacteria – microbes that cannot be wiped out by any antibiotic. According to a recent study, this death toll could rise by factor ten until the year 2050: without powerful agents, up to 10 million people could die. See the YouTube provided by Stuart, pay particular attention to slide 6. https://youtu.be/Odys3Bf9q8w

In addition to the general market woes and the effects, this has had on investors, there has been an additional burden - the sale of SkinBioTherapeutics shares by its parent company, OptiBiotix Health PLC (OPTI). While it is in a rapid growth phase and lumpy revenues, which are heavily geared toward H2, it has also found itself in need of additional capital while it waits for partner royalty payment terms to be met. For example, OptiBiotix reduced its holding from 42% to 37% to ensure it had the capital required to meet the launch of new products with Alphasigman, Agropure and Holland & Barratt, all in January. I would hope this may not be necessary going forward as the revenues build. Still, with OptiBiotix, it is often what you do no know that can catch you out...will there be additional funds required for an even larger retail agreement ahead of receipts in H2? If so, will it have an impact on SkinBioTherapeutics? The measure should be on the safe hands placing, each time there has been no impact on the actual trade itself, but who is to say it has not through investor perception SkinBioTherapeutics is not being used as an ATM?

My view is it should not matter what the parent company does if share sales are placed with safe hands with 12-month locking, which seems to be the preferred method. Investor focus should be on what SkinBioTherapeutics commercial development, in this regard, it is doing just fine. 

I have recently had to fund a legal battle against 2 OPTI protagonists that cost me £435 in initial letters requesting cease and desist. This could have easily have gone to the next step, and costs greatly increased by a factor of 5. Please help support me via the link below.






                                                            








POPULAR COMPANIES