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OptiBiotix continuing to put in place commercial building blocks

Snapshot

  • Compounds target gut microbiome to improve health
  • Three main compounds: LPLDL, SlimBiome and SweetBiotix
  • Signing lots of commercial agreements
  • Revenues soaring
healthy gut

Quick facts: OptiBiotix Health PLC

Price: 45.45 GBX

AIM:OPTI
Market: AIM
Market Cap: £38.83 m
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“The company believes it is making strong scientific and commercial progress across all its technology and product platforms”

Stephen O’Hara, chief executive

 

What it does

OptiBiotix Health PLC (LON:OPTI) is an AIM-listed life sciences company developing compounds to tackle obesity, high cholesterol, diabetes and skin care.

It has three main compounds that it is working to commercialise:

  • LPLDL – a probiotic strain that has been shown to help lower cholesterol and blood pressure
  • SlimBiome – a weight management system that promotes a healthy metabolism and the feeling of fullness
  • SweetBiotix – a patented, natural, low calorie alternative to sugar

 

How it is doing

The aim of OptiBiotix is for its compounds to become the ‘Intel of food’. In other words, Opti wants its compounds to be a key ingredient in other foods, supplements, and tablets.

For that to happen, the company needs to do three things: manufacture its compounds, formulate them (put them into tablets, foods etc), and then distribute them.

To that end, Opti has signed a series of manufacturing and supply agreements around the world, and the number of deals has ratcheted up over the past year.

In June, it struck a licensing deal with Canadian giant Agropur, which gives the latter the exclusive right to manufacture, supply and distribute SlimBiome in North America. There are also commercial agreements in place for SlimBiome in the UK and Europe, Thailand and India.

A few weeks later, OptiBiotix signed a non-exclusive license agreement with Tenshido, which now has permission to use the LPLDL strain in cardiovascular food supplements in Japan.

In December it expanded further with an agreement with Extensor, its exclusive partner in Poland for the distribution of GoFigure, granting Extensor exclusive rights to distribute SlimBiome in Poland for a period of 12 months with continued exclusivity subject to performance review.

In the east, OptiBiotix has inked an exclusive distribution agreement with Epic Ingredients to distribute SlimBiome in Malaysia and Singapore.

There are several products containing LPLDL being sold by numerous partners in more than 30 countries around the world.

As for SweetBiotix, recent studies have shown that the sweeteners not only have a clean flavour profile, but can also help to enhance healthy gut bacteria.

In partnership with a ‘well-known branded global beverage provider’, Opti is looking at how its science can help the manufacturer to lower the sugar and increase the fibre in its drinks.

Commercial and critical success has been backed up by a growing body of work that essentially burnishes the scientific credentials of its microbiome-targeting technology.

In the half-year report, turnover grew 169% year-on-year to £191,000. As is common for a company at this formative stage of its commercial development, OptiBiotix was loss-making.

The operating loss was just under £1.5mln, £627,906 less than the year earlier as administrative expenses fell 17.5%. At the period-end the firm had £1.33mln, rising to £1.67mln following the reclamation of R&D tax credits.

Meanwhile, the European authorities approved the unflavoured version of SlimBiome Medical, allowing the company to offer the 'plain' version of the line with natural flavour boosters for "minimal" additional expenditure.

 

What the boss says: Steve Prescott, chief executive

“As we transition away from being primarily a research company, we are looking to grow our commercial team so we are going to add a new commercial salesperson in Europe this year."

"We have a major pharmaceutical company launching a new product in January, we are working with an Indian company and a Philipino company to launch products there as well, those are in the early stages, and then we are working with a major probiotic company as well that has been focused on digestive indications but we would like to expand that to other indications and we will use LPLDL for a cardio product."

 

 

Interview

 

Blue sky

A couple of years ago, OptiBiotix spun out its skin division, SkinBioTherapeutics PLC (LON:SBTX) and listed it on AIM.

Going forward, the plan is to explore similar demergers with the other divisions, building them up, creating separate legal entities and putting them on the market, with a special divi for shareholders.

 

What the analyst says

In a note to clients, analysts at goetzpartners securities pointed that these deals “take the total number of commercial deals for SlimBiome to 20 and are an important step towards further expanding the product's geographical reach and hence sales.”

They said: “We expect revenues from SlimBiome to reach nearly £1m in FY2020E, which we believe is conservative, and >£11m by 2024E, driven by growing sales of existing deals and new deals.”

The analysts noted that Optibiotix is also generating revenues from its cholesterol-lowering probiotic LP-LDL and they expect two further products, SweetBiotix (calorie-free fibre for sugar replacement) and LP-GOS (prebiotic that enhances the effect of LP-LDL) to start generating first sales in 2020, yielding combined portfolio sales of more than £40mln in 2024.

The goetzpartners' analysts reiterated an ‘outperform’ rating and 97p target price on Optibiotix shares – currently trading at 49p - based on their view that the firm is “at the beginning of a long-term revenue growth cycle”.

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