Small Company Champion & Lemming Investors Research and Newsletter Updates

Saturday, 28 November 2020

DeepVerge - Undignified Twitter Spat

 





It has been a while since I last commented on Integumen, or should I say, DeepVerge (DVRG) as the company is now called since it merged with Modern Water Plc last month. Regular readers may recall me bemoaning Modern Water investors getting the better part of the merger, so I had what any child would do, I sulked. However, I still have faith the enlarged group would appreciate value for shareholders if the business plans gained traction, and part of this strategy involved the needed to be consolidated the shares, a point I made to the CEO Gerard Brandon. 

At the time, I was also concerned about the overplay of the Covid-19 by the company's Tweets because as sure as night follows day, there will be a reconning for some companies. It could be Biblical because there is some real crap being pumped on nothing but hopes without financial visibility or margins for companies attempting to develop a product(s) for the treatment, testing, protection, etc. for Covid-19. My fear is that even good companies get caught up in the crossfire. 

Twitter Spat

Investors focus should rightly be on the news related to Interim analysis from University of Aberdeen Labskin study; instead, the noise is all centred around an undignified Twitter spat between Gerard Brandon and Tom Winnifrith. 

Look, I am sure most of Tom's subscribers will agree he can be abrasive, rude and crude, but I don't think anyone has the right to doubt his integrity. The conspiracy theorists will be out in force, suggesting Tom's hatchet job on DeepVerge is designed to allow his cronies in at a lower price. That is typical BBM talk with no regard for truth. I am not attempting to defend Tom, nor would he want me to, after all, he has had several pops at me in some of his updates. My point is investors need to take the heat out of this and not make it personal like any tipster, blogger, financial journalist, etc., etc. He calls some right, he calls some wrong. 

In my opinion (for what it is worth) Tom has been unfair in his comments about DeepVerge on Friday; not only were they crude, Tom appeared to suggest the company is just another company attempting to play the Covid-19 angle; thus sucker lemmings in. DeepVerge is not just a Covid-19 play. As well as the water/waste monitoring technology acquired from the merger with Modern Water, the enlarged group encompasses Labskin, that has the capability to laboratory-grown human skin designed to provides clinical product test services to a wide range of industries from; cosmetics, wound care, health care, personal care and pharmaceutical industries, some of which are working in collaboration.

RinoCloud has created a vertically integrated laboratory to a market platform where biotech to Fortune 100 companies provided with an end to end clinical microbiology test service to accommodate the development of new consumer products.

It is unfortunate Tom argues DeepVerger is another ''cash guzzling Covid-19 ramp'' and essentially calls the company a pile of shit while implying it will need a placing or use the £1.5m death spiral facility. An odd turn of phrase for such a small facility, but what do I know!

Usually, Tom is an admirer of CEO's that show great ability in turning companies around, like Gerard has since he took over old Integumen 2 years ago. At the time the company had almost £3m in debt with revenues of less than £300k. Tom ignores the considerable infrastructures put in place in Dublin and York, allowing for the expansion of the business. Sure, it has cost money to do this - a good way to guzzle the cash; it used to be called investing in the company. 

Tom also harps on about the £4m guidance. Tom should know DeepVerge cannot count revenues from Modern Water in the £4m guidance (given in January 2020) because Modern Water did not become part of the enlarged group until the 9th November 2020. ''The consolidated revenue of both Modern Water and DeepVerge will be well in excess of £4m this year.'' as explained to me by Gerard. That said, I guess Tom's point is; will DeepVerge generate any profit any time soon?

''DeepVerge has 500% uplift in share price in 2 years. Delivered 89% YTD and 85% 1 year uplift in the share price. £4m in organic growth this year £3m in H2 alone.'' This should demonstrate the direction the company is travelling. 

In my opinion, there is no need for Tom to be as abrasive as he is, but that is Tom all over. By the same standard, Gerard should not be calling Tom a troll. That feeds the angst investors will now feel. The best approached would have been for Gerard to request an interview and discuss the company. He may not have been given an audience, I suspect he would and a good opportunity to disarm Tom.

DeepVerge Can Do Better

Where I fully agree with Tom's views regarding both Vox and Turner Pope. To make my point to readers; I warned the CEO of my favourite company (Tom accuses me of Ramping) OptiBiotix Health. When I became aware the company was doing an investor presentation, I warned this would send the wrong signal to the market. It did, it was sold off yet again. Both Vox and Turner Pope are absolute pants known for pumps ahead of placings. Both OptiBiotix Health and DeepVerge need to distance themselves from both Vox and Turner Pope; It is not as though there are limited avenues. 

I know Vox hyped its own statistics to me once when I wrote a few articles for them and the readership figures I requested were nowhere near what my blog statics were, and you need to bear in mind the same articles published on my blog 48 hours after publication on Vox. I will not tell you the figure I was told the mailshot, SM campaign reach was; if true, the percentage transferred to traffic came as a shock to me but pleasing in a way.

Allow the company to do the talking by delivering on its corporate strategy. From time to time, most companies will have a detractor, worse, one with a following that pays for advice. Not because the subscribers are stupid, some are highly intelligent, but time may not be an asset they have in abundance.  Times like this should be seen as a gift if you have spare cash, and you are comfortable with the research already done. 

The last Friday sell-off is most likely due to some investors de-risking in case there is an escalation in negative rhetoric from TW. At the end of the day, it boils down to investors believe in the company, or not. I am speaking of the long term, not the short term noise around the company right now.  





Anyway, back to the RNS which needs no further comment from me.

Labskin demonstrates the ability to host SARS-CoV-2 virus on Labskin cloned human skin microbiome. Breakthrough results allow real-world testing of anti-viral compounds without human volunteers.

DeepVerge announces interim results from its Labskin partnership with University of Aberdeen following analysis of a study to investigate the behaviour of SARS-CoV-2 virus on Labskin's cloned human skin microbiome to enable testing of COVID-19 anti-viral and dental products.

Labskin scientists have successfully populated and maintained the SARS-CoV-2 virus on skin models creating a breakthrough environment that enables testing of household chemicals, anti-viral products, skin and health care products, and their effect on the human skin microbiome as well as their efficacy at killing the virus over long periods of time.

The DeepVerge study is designed to investigate:

-- The transmissibility from surfaces to airways via the skin by measuring its viability when recovered from the surface(s) to skin and skin to skin;

-- What sanitisers kill the virus on the skin (this is anecdotally assumed to be correct based on the World Health Organisation ("WHO") research on other bacteria, but not proven for Covid);

   --    The reduction of titre and/or virulence; 

-- The ability of the virus to activate innate immune response on the human living tissue (Labskin model); and

   --    How long the virus lives on skin. 

These results validate Labskin's ability to provide access to real-world clones of the human skin microbiome while removing the risk of transmission of the virus to human volunteers. For the first time, in safety, clients can test their products, ingredients, treatments and therapies on SARS-CoV-2 and potentially other dangerous viruses and pathogens in real-world environments.

DeepVerge has extended the investigation and will include:

-- Viability of the virus when transferred as full coronavirus particles from plastic and metal surfaces to the laboratory-grown human skin model and the potential risk for infection through the skin;

-- Ability of SARS-CoV-2 to activate innate immune response on the Labskin model; and
-- Ability to reproduce on the skin and how long it remains viable - and therefore infectious.

Gerard Brandon, CEO of DeepVerge plc, commented:

"Society has depended on anecdotal or theoretical evidence to determine how infectious skin is, as humans touch surfaces and each other. The work in Aberdeen provides factual data and empirical evidence of surface to skin and skin to skin transferability to provide quantifiable infection risks. The body of research, protocols and methods created on Labskin, working with the real virus, offers confirmation and sets standards that allow for testing of our client's anti-viral household, skin and health care products so that consumers are given scientific evidence behind products claims to kill or address the risk of transmission of the virus.

"Labskin is now a proxy skin environment for deep research and testing, beyond Labskin laboratories, with our partners in the universities in Liverpool, UK, Genoa, Italy and Shanghai, China. The extended scientific community can monitor how long the virus remains viable on the skin and provide empirical proof of viral load over the length of time that the virus survives - to show how vulnerable and infectious a human can be in their daily interactions and activities. "

Background details of the study

The spread of SARS-CoV-2 is presumed to be transmitted by close contact and respiratory droplets. However, other means of plausible indirect transmission have already been described via fomites (e.g., elevator buttons or restroom taps) [i] . A study published in The New England Journal of Medicine [ii] has confirmed that SARS-CoV-2 has longer stability on various surfaces than the previously known coronavirus SARS-CoV-1. This study has found that the current pandemic virus shows viable infective units after 3 hours in aerosol, up to 4 hours when deposited in copper surfaces, up to 24 hours in cardboard and up to 72 hours in plastic and stainless steel. Although the virus titre was greatly reduced, these findings clearly point toward additional sources of viral transmission that need to be assessed.

Advice from WHO and health agencies to avoid contagion stresses the need for handwashing using ethanol-based hand sanitisers. Guidelines on Hand Hygiene in Health Care: First Global Patient Safety Challenge Clean Care Is Safer Care [iii] . While laboratory experiments show the virus can be killed successfully using a variety of sanitisers, there is little evidence available about the resilience of SARS-CoV-2 when tested on the living human skin microbiome.

About the skin model

Labskin is a unique full-thickness human skin model which was specifically developed for the study of the human skin microflora and the microbiota/host interactions [ [iv] , [v] ]. Its dryness and barrier function creates an ideal environment where an individual or multiple microbial species can thrive on forming a stable community. Labskin can be colonised with microorganisms belonging to the three domains of life, and these can be infected with bacterial, fungal and viral pathogens. The features of the Labskin models make it ideal for studying the transferability of viral particles from any sort of material to skin, for assessing the ability of the virus to remain infective while in the skin surface and to quantify the efficacy of soap washing and hand sanitisers in a realistic in vitro model.

Thursday, 26 November 2020

OptiBiotix Health - Cost of Sales & Profit Margin's

 





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 has a rather complex nature to it thrown in; this being it is both a business to business (B2B and business to consumer (B2c), the former the much larger part of the company and its core strategy. 

It’s safe to say that a good profit margin for any company depends on several factors, including but not exhaustive; location, industry, and product(s). 

Brick-and-mortar retailers usually have a low-profit margin; 0.5 and 4.5%. Compared to online retailers have higher profit margins of c6.5% for the obvious reason, a bricks-and-mortar retailer typically has higher overheads, like rental, and staffing levels.

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:-

 

  1. 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)
  2. 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.  
  3. 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.
  4. Cost of goods:  The cost of goods is influenced by how much a company orders from a supplier and the commitment to a minimum order quantity (i.e. how much you commit to annually).  As volumes, scale companies have a stronger purchasing power to renegotiate the cost of goods.  (Note my comment in the interims 2020 (issued 24th September 2020): Achieving and then growing profitability in each division by scaling sales, leveraging our purchasing power as volumes increase to reduce the costs of goods, and focusing on higher-margin products and my comment in the Results 2019 (issued May 2020): This is not just about continuing to grow sales, but also about managing costs, renegotiating contracts as volumes increase, reducing the cost of goods to OptiBiotix, and focusing on higher-margin products.

Average industry gross margins for comparison are Retailers 25%, Food: 25%, Apple products 38%, Airlines 5%. OptiBiotix gross margin is between 55% & 60%. This will fluctuate because there is an initial trade-off as the company builds the retailer partnerships we are now seeing with Holland & Barratt and Optipharm. However, if successful strong revenues build at the royalty stream which is 100% margin. So as each retail partner buys more product it creates the volume, this, in turn, allows for further opportunities to renegotiation term's; thus increases the group margins and strong cash flow. 


Net Margin: This is the margin after all the operating expenses (salaries, marketing, R&D etc.) have been deducted from the companies revenue and give you the profit.

  1. This will be affected by the admin costs and the one-off exceptional costs you mention. (ex Board changes = severance packages) Our marketing cost is low, and the challenge is how we increase marketing spend and get a return.
  2. OptiBiotix, three major costs are salaries, R&D, and IP.  The latter two should decrease whilst salaries will increase as we add to the team as we grow the business. Salaries are a difficult challenge as we look to control costs but try to compete in an exciting space like the microbiome where talent is in short supply and established companies can offer 2X or 3X salary.

The most important aspect to remember when considering the B2B strategy OptioBiotix is using is the marketing of goods is typically at the cost of the partner, not OptiBiotix. The beauty of this strategy is the company's ''intel inside'' gain market attractions, and brand building is done on OptiBioti's behalf. While this may seem slow because of the nature of incorporating new science into new products, this becomes something of a trade-off because thinking of this logically, a small company still in its infancy concerning its intended partners, many of which have a long and successful history, OptiBiotix does not; thus the need to establish its first-generation products with small partners first. This allowed the company to gain market awareness while building the IP, and often forgotten increasingly valuable assets. During the next transition as an R&D company to a commercial entity, the company's products were winning multiple awards, and the science was being peer-reviewed by key opinion leaders in the industry, further validating the TM/Branding and IP. 

As previously mentioned, think of the electric vehicle industry. Few counties are well equipped with sufficient charging infrastructure. Tesla was aware of this; thus set about putting in place charging amenities in strategic locations at their cost, this, of course, adds to the company COS and eats into their margins.

Saturday, 21 November 2020

OptiBiotix Health - Next Stage Second Generation Products

 




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.


Key points:-

  1. 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.
  2. 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.
  3. 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.   
  4. 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. 
  5. Structurally OptiBiotix is designed, so the company provides the seed funding and develops the product portfolio with scientific and clinical studies, scientific publications, IP, and regulatory approvals.   Once the products have their commercial data package, they are passed onto the divisions who are headed by experienced senior industry leads with large industry networks and a track record of sales growth to build the businessOptiBiotix 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.
  6. 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
  7. 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 
  8. 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
  9. As the need for innovation reduces bring in experienced industry leaders with a track record of building revenues and growing profitability to head each division and drive sales and take each division to profitability.  The aim is to create independent profitable, and sustainable business units.

The Chairman Statement

Most people I communicate with agreed with my view of the chairman. Neil Davidson, in that he appeared to want to push forward a more positive tone rather than the caveated riddled statements delivered by the CEO. Stephen O'Hara. This is why I pointed out the complete disconnect between Neil's more emotional language directly opposed to the conservative - allow the mathematical statistics do the talking. Yes, rightly so there was a covid related caveat.

Market - Investor Perceptions

It is true some agreements have taken far too long to develop beyond an RNS. It is also true small companies like OptiBiotix are easily controlled with gagging orders we have come to learn they are called NDA'S. It is also true some investor and probably the wider market, observers that may be attempting to judge how to value the company on the back of NDA's, or as another OptiBiotix commentator suggests ''another RNS written on Adam Renolds keyboard.'' (It has no numbers).

we can argue a certain Indian company (apparently so fragile they cannot be named) has taken far too long to develop a product (4-year's and counting) and in some ways offers the illusion this is the norm when it is not. (I am on record suggesting the unnamed Indian company is 1/3rd Stephen factors in as failures or may not deliver on the stated agreement). Another one to ponder is the partnership agreement signed with a US pharmaceutical company tasked with adopting a pharmaceutical-grade LP-LDL cholesterol product. It has been a couple of years since the signing, and the promise of six-figure yearly milestone payments as part of the deal.

 

Stephen was asked about this, as this possibly falls into the second-generation product, so it was worth a probe to see how progress is proceeding, or not as the case maybe?


''Yes.  So far so good and the recent IND from Seed for an unrelated product (Daily Synbiotic for IBS) helps. The deal was just for the US, and we are now getting interested from other pharmaceutical partners for other territories.  This is a high-risk, high return opportunity that we have taken largely because our pharma partner is paying all the costs, taking all the risk,  and paying us milestones along the way.''


The high-risk Stephen speaks of is not a cost OptiBiotix bears because the financial risk is with borne by the partner. The only risk to OptiBiotix is one of disappointment if the partner fails to develop a product. If it is successful, then it will be a huge boost to the coffers, and all to the bottom-line with high percentage royalties the norm for pharmaceutical products.


Back to Second-Generation Products


USA based partner, Seed Health, has received FDA authorisation for an Investigational New Drug (“IND”) application for DS-01™, a broad spectrum multi-species, multi-strain probiotic which contains OptiBiotix’s Lactobacillus Plantarum LPLDL ®. The regulatory acceptance enables DS-01 to enter a Phase II randomised, triple-blind, and placebo-controlled a clinical trial to investigate the role of the gut microbiome in patients with Irritable Bowel Syndrome (“IBS”) and the impact of DS-01™ on intestinal microbial communities. 


Stephen commented: “We are pleased to see that Seed has achieved FDA authorisation for an IND in a product containing OptiBiotix’s Lactobacillus Plantarum LPLDL ®. OptiBiotix has whole genomic sequencing, built on a strong scientific and clinical evidence base, obtained FDA GRAS, and pharmaceutical GMP manufacture validation for LPLDL ® which has created the potential for LPLDL® to be commercialised as a pharmaceutical drug product. Seed Health is one of several partners OptiBiotix is working with to bring a range of cardiovascular, general health, and IBS applications to supplement and pharmaceutical markets around the world.” 

"Given the valuation of pharmaceutical companies in this area (particularly the USA), this is excellent news for investors and sets the scene for LP-LDL® to be used in other drug applications.  It also further validates our approach to take a more rigorous and scientific approach than traditional probiotic companies to open up a wider range of opportunities and create real product differentiation. The use of LP-LDL® in pharma enhances the credibility of the product in the other markets.  We can see an increased use for LP0LDL® in pharma now that we have FDA GRAS, and pharmaceutical GMP manufacture validation."

This speaks to the science-based evidence behind OptiBiotix's IP. The FDA undertook a long and protracted evidence-based fact-finding mission which took more than 2-years for FDA approval for LP-LDL®. Moreover, FDA has legitimised LP-LDL® for the inclusion of pharma-grade productsThis is significant not just for Seed, but another US pharmaceutical currently developing a pharmaceutical product with LP-LDL® and of course, OptiBiotix. And remember, these developments have no cost baring to OptiBiotix, these developments only add value to the IP and help build the LP-LDL® brand, a thing of beauty of the B2B model. However, it does have its downsides - It can take longer to develop new products containing new science until science is adopted as we are now seeing with LP-LDL®, SlimBiome, OptiBiome, WellBiome, CholBiome products. The downside, is sometimes we have a situation like today - OptiBiotix appears to be caught out by the news because investors are always seeking information and sometimes this partners like Seed have neglected to keep a partner informed of developments containing their IP.  

With news of a bulk manufacturer for SweetBiotix, the journey to commercial reality is now underway. It is the first piece of commercial jigsaw. It has been said OptiBiotix is in discussions with a dozen or so potential partners seeking to use SweetBiotix. I teased out the difficulties in recent podcasts as well as the time consumption of shelf-life testings that needed to be done to prove stability demanded over a prolonged period of time, especially when OptioBiotix's sweet fibre is added to carbonated drinks that have the potential to eroded the IP. Thankfully, we learned some time ago these shelf-life tests have performed very well. So, much of the hard work has been completed and lets us not forget, another piece of OptiBiotix IP has passed muster. Many of us assume SweetBiotix has the potential to be the blockbuster answer to the global sugar problem. NestlĂ© launched a new reduced sugar white chocolate bar with great fanfare, not a year passed before it pulled the plug due to poor demand. It is a fine balance pleasing the consumer, and some of the world's most successful corporation can make a misstep. I would argue they should have incorporated SweetBiotix - we did not have a bulk manufacturer at the time. 

If I divert slightly to the Bulk manufacturing agreement with an unnamed USA partner with a global footprint, there was some confusion over the term used in the RNS. Stephen: The modest annual fee (12 monthly intervals until product launchwas put into the RNS by the regulator as they argue it could be £999,000 and £100,000 (not my figures) and modest gives and indication without disclosing the actuals which would breach our confidentiality with the partner."

"If they used low, it would mean £100,000, and to me, modest means reasonable and gives investors a fair indication of the scale of the opportunity."

This is per the agreement, not a one-off, then, of course, the usual distribution and product royalty payments as each partner develops a product(s). 

Looking Ahead

Financially, the company is in an excellent position (fools will, of course, argue otherwise). OptiBiotix is not different than any other AIM-listed company - it as people with an agenda twisting the facts to suit their version of a narrative, so the light on placing is thrown around like confetti at a wedding. Stephen explains: "That is just BB nonsense typical of AIM.  If you look at our H1, we have £1.68m in the balance sheet and costs of around £100k per month. This gives us 14 -16 months without sales.  We have always been prudent in any fundraiser and have raised £8.3m in total, delivering a £50m+ market cap.  We are not getting a placing away now or at any time shortly."

I would argue there will be one for the proposed international duel listing, thought to be on NASDAQ unless OptiBiotix reverses into another company. See the 4D example, I brought Stephen's attention. 

I anticipate the duel listing in H1 2021. This will open the door to a better quality of brokers, it is clear the London broker system is broken - FinnCrap has been no use, more of a hindrance than anything. There is no doubt the listing in the USA will align the company with a market more suited to OptiBiotix specialist markets, and these typically demand greater valuations. OptiBiotix will, of course, need to be more open with investors than they are now. By this, I mean quarterly reporting, which should give the market more transparent and if as we genuine investor hope, the revenues are coming in, especially more of the royalty type which company 100% margin (something I have notice is confusing some investors again) then we should recover very nicely indeed. H1 margins are historically lower than H2 because more royalties are booked in H2, as more and more partners products come on stream, the higher the margin figure for the full year. 

There have been at least 3 large product launches in 2020; Alfasigma LP-LDL, Holland & Barratt SlimBiome and Optipharm OptiBiome. There have been numerous other product launches to which we have no grasp of this scale. The former 3 are expected to be significant royalty drivers, but caution is needed because they all launched at different periods in the year and we don't know how much royalties will land in H2. I suspect OptiPharm's will land in H1, I don't know for sure.

We wait patiently for our first SweetBiotix ''intel inside'' partnership....we know at the last count there were potentially 11, like SlimBiome and LP-LDL we could see a raft of RNS's related to SweetBiotix. If so, this could get very exciting quickly because we know the biggest corporations are eager for a substitute that works. After all, sales are being hit.

I am also eager to see where OptiBiotix develops the modulations technology for targeted health. I know the company is excited about this. Stephen commented, “The ability to create designer ingredients which can modify an individual’s microbiome to improve health is a hugely exciting development in global microbiome research and product development.  I believe we are fast approaching the next stage in the development of the microbiome in healthcare, where scientists have the ability to precision engineer components of the microbiome to prevent, manage and treat many of today’s chronic lifestyle diseases.”

Note on Forecasts or Lack of them from the company.

OptiBiotix reported it's H1 at the end of September as required by AIM regs. The company doesn't not ''hide behind NDA's'', and partners do give OptiBiotix forecasts and in some cases, these have minimum order quantities (MOQ) for exclusive agreements. That said, how can a company offer ''reasonably accurate forecasts inside a B2B model when OptiBiotix has no control over a product launch. 

This blog has identified numerous products launched without investors being informed through normal channels. Think of Smart4life, Seed Health, Vogue Beauty or Holland & Barratt (there are others) either launched earlier, without notice or when a deal was thought not to be happening. Partners may over-egg their expectations for any number of reasons; thus, I suspect Stephen is playing a very cautious game until partners have developed a history on which he can trust in what they project. Other commentators of a professional nature should be well aware of these problems.


It would be straightforward for Stephen to use Lenimaths, or be a stereotypical AIM CEO and blag investors and dump shares into the pump. We should be thankful, as frustrating at it is. IMHO we are a fist full of months away from accounting periods changing that offer greater visibility. 

Recent advances in modulating the microbiome

Abstract

We are in the midst of “the microbiome revolution”—not a day goes by without some new revelation on the potential role of the gut microbiome in some disease or disorder. From an ever-increasing recognition of the many roles of the gut microbiome in health and disease comes the expectation that its modulation could treat or prevent these very same diseases. A variety of interventions could, at least in theory, be employed to alter the composition or functional capacity of the microbiome, ranging from diet to faecal microbiota transplantation (FMT). For some, such as antibiotics, prebiotics, and probiotics, an extensive, albeit far from consistent, literature already exists; for others, such as other dietary supplements and FMT, high-quality clinical studies are still relatively few in number. Not surprisingly, researchers have turned to the microbiome itself as a source for new entities that could be used therapeutically to manipulate the microbiome; for example, some probiotic strains currently in use were sourced from the gastrointestinal tract of healthy humans. From all of the extant studies of interventions targeted at the gut microbiome, several important themes have emerged. First, with relatively few exceptions, we are still a long way from a precise definition of the role of the gut microbiome in many of the diseases where a disturbed microbiome has been described—association does not prove causation. Second, while animal models can provide fascinating insights into microbiota–host interactions, they rarely recapitulate the complete human phenotype. Third, studies of several interventions have been difficult to interpret because of variations in the study population, test product, and outcome measures, not to mention limitations in study design. The goal of microbiome modulation is a laudable one, but we need to define our targets, refine our interventions, and agree on outcomes.

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6993818/

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Wednesday, 18 November 2020

OptiBiotix Health - Genuine Health LP-LDL license for Canada and USA

 




License and supply agreement with Genuine Health LP-LDL® license for Canada and USA 

OptiBiotix Health plc (AIM: OPTI), a life sciences business developing compounds to tackle obesity, high cholesterol, diabetes and skincare announce that its wholly-owned subsidiary, ProBiotix Health Ltd. (ProBiotix), has granted a non-exclusive LPLDL® license to Genuine Health Inc. (Genuine Health) for a cardiovascular health product in Canada and the USA. Genuine Health is an established Canadian natural health company that has been formulating natural products for more than 25 years. 

The market is indifferent to today's 79th partnership because there is no indication of financial terms or ETA for any product that will ultimately produce not just royalty payment's, but ingredient sales and distribution agreements. Nevertheless, what is important is the increasing USA/Canadian presence that will be needed for any proposed North American listing, I presume to be NASDAQ. Any such IPO on an important exchange will need a good presence to attract the excitement of institutions and retail investors alike.  Let us not forget, this also leverages the trademark and IP as the ''intel inside'' go-to probiotic. ProBiotix Limited LP-LDL Not only has FDA GMP pharma or GRAS and together is a significant differential and in my view is the future of the industry. This opens up opportunities in pharma above and beyond the existing deals we have in place

RNS

The company makes greens+, omegas, proteins and probiotics. Genuine Health’s greens+ is the #1 superfood in Canada and the only superfood to be validated by nine clinical studies as reported on their website. The Genuine Health website also states that it specialises in natural, science-based, clinically proven products with ingredients which create product differentiation in the North American market. As part of the agreement, Genuine Health will submit products containing LPLDL® for cardiovascular and other health claims to Health Canada, a department of the Government of Canada responsible for the country’s federal health policy. 

The Company believes that if registration is successful, LPLDL® will be the first probiotic supplement in the Canadian market to obtain a specific health claim for cardiovascular health. This agreement is another step in building brand and product presence in the large North American market as a dietary supplement, a live biotherapeutic product (LBP), or a functional ingredient. The agreement is for an initial period of 36 months. 

Mikkel Hvid-Hansen, Commercial Director of ProBiotix Health, commented: “We are pleased to have signed an agreement with Genuine Health in such a large and important market for probiotic products. We believe working with Genuine Health creates a unique opportunity to achieve a probiotic health claim for cardiovascular health and provide further product differentiation in the North American market. We see this as another step in building revenues and market presence of LPLDL® inside a wide range of products, presented in different presentations and formulations, for cardiovascular health in both consumer and pharmaceutical markets around the world.” 

Stewart Brown, Founder and CEO of at Genuine Health, commented: “We are excited to work towards introducing innovative and science-backed products into the North American market through our relationship with ProBiotix. The ProBiotix team continue to produce cutting edge research surrounding the link between probiotics (LPLDL®) and cardiovascular health. This makes them a great partner in our mission to create products that promote whole-body health and wellness, with a particular focus on the powerful role of the microbiome. We look forward to a long and successful partnership with ProBiotix Health.” 

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