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OptiBiotix (LON: OPTI) – From science to growing sales

Summary 

  • OptiBiotix Health Plc has made a significant contribution to human microbiome research by developing products that can be used in food ingredients, supplements, and as active compounds.
  • The company is quickly scaling up its sales as it expands its presence through active product partnerships across the globe.
  • A promising product line created on a strong scientific foundation and resilient financial performance underlines OptiBiotix’s potential to grow in leaps and bounds.

The United Kingdom-based award winning life sciences company, OptiBiotix Health Plc (LON:OPTI), has made a significant contribution to human microbiome research by developing products, which can be used in food ingredients, supplements, and as active compounds to benefit human health. The company is quickly scaling up its sales as it expands its presence through active product partnerships across the globe. It has also set a path for its future with a product pipeline of exciting-second generation products under its belt. 

OptiBiotix’s robust product portfolio has made it an important global player in the human microbiome segment. Several industry reports suggest that OptiBiotix is one of the top names that can potentially revolutionise the market on the back of a strong product portfolio, its sound financial health, and the product pipeline for second-generation products close to commercialisation. The human microbiome is one of the fastest growing areas in the life sciences segment, and Optibiotix’s early intervention, in this area and large IP portfolio puts it ahead of competitors.

Scaling up sales with existing product bouquet

OptiBiotix’s first-generation cholesterol-reducing and weight management products LPLDL® and SlimBiome® are generating rapid revenue growth on a low-cost base, which is decreasing consistently. Revenue growth has allowed the company to achieve profitability in both its principal divisions of Functional Fibre and Probiotic.

Global partnerships and agreements on its existing product bouquet have also given the sales a leg-up.

In 2020, OptiBiotix reached a turning point with its first-generation products by capturing a commercial position and establishing brand recognition in over 120 countries. These products aim to establish the company’s credibility in the industry and to test the business model.

OptiBiotix achieved this goal by sealing multiple deals with large retail and pharmaceutical partners, including Alfasigma, Agropur, Holland & Barret and Optipharm. While retail agreements typically have lower margins, they enhance a company’s credibility and add to consumers’ awareness about its products, in turn establishing confidence in the brand.

OptiBiotix has achieved significant milestones in terms of expanding its promising pipeline. In the first half of last year, the company launched three SlimBiome® products along with Holland & Barrett (H&B). In 2021, the product line was extended to eight of H&B’s own brand SlimExpert. AlfaSigma launched products in the first quarter of 2020.

The life sciences company has entered into multiple strategic product partnerships with companies in New Zealand and Australia over the last 12 months. In October, products containing the weight management ingredient OptiBiome®, under the brand of Optislim®, were launched along with ChemistWarehouse, Woolworths, and OptiPharm Pvt Ltd's online shops in these two countries. The agreement was subsequently extended to include Europe, parts of Asia, the Middle East, North America, and the Gulf states, unlocking higher sales growth.

OptiBiotix’s march to capture the larger European market continued with the launch of a food supplement containing the LPLDL® probiotic strain, a cholesterol-reducing component, in Italy. The food supplement’s launch was a big step towards establishing the company as a brand in Europe’s probiotic market, helping it make deeper inroads.

LPLDL® deals will help OptiBiotix expand its technology into consumer-driven avenues and significant international markets. It can help the company’s products find a place at leading retailers like Costco in Canada and Walmart in the US. The company has signed more than 60 commercial agreements in the last three years. Each of these contracts is a significant step towards the success of the LPLDL and SlimBiome products.

The York-headquartered company has also entered into a non-exclusive distribution agreement for distributing CholBiome®X3 and CholBiome® under the VSL#3® range in New Zealand, Indonesia, Thailand, and Australia. It has also signed an exclusive distribution agreement for CholBiome® with South Korea’s Inscobee Inc.

It is not just in Asia and Europe that the company is expanding its product line, it also signed an exclusive agreement in the US market late last year with a company for large-scale commercialisation and production of several of its SweetBiotix® products. OptiBiotix would receive royalty, launch, upfront, and milestone payments for the deal. OptiBiotix reported that in 2021, the partner company began scaling up the production of the innovative range of products.

The partner has agreed to make a six-figure payment on signing the agreement and at 12 monthly intervals until product launch, when they will pay royalties on sales. 

It has also signed a non-exclusive agreement with Smart for Life, a US-based company, for the launch of SlimBiome®-containing cookies in Canada and the US.

Seed Health received FDA Investigational New Drug (IND) approval to undertake a human clinical trial with its multi-species probiotic product containing OptiBiotix’s LPLDL in patients with irritable bowel syndrome.

Future pipeline

In the second stage of its strategy, OptiBiotix is delivering on the huge potential of the company’s second-generation products - the SweetBiotix® family of functional fibres. These function as low-calorie, prebiotic sweeteners, microbiome modulators, and drug biotherapeutics. These products address much larger market opportunities and expand the potential for future growth in revenues, profits, and shareholder value.

A promising product line created on a strong scientific foundation and resilient financial performance underlines OptiBiotix’s potential to grow in leaps and bounds. Gradually, as more awareness is created around lifestyle-related diseases, the demand for better research in fields that can help curb such diseases and maintain a healthy lifestyle would also go up. This will act as a potential tailwind for OptiBiotix’s expansion into newer markets in the future.

Outlook

The company has continued to make strong progress since the beginning of 2021, with strong sales growth, and larger order sizes as existing partners extend their product range.

Investor and consumer interest in the human microbiome continue to grow, presenting the company with a large and expanding market opportunity. OptiBiotix is ideally placed to exploit this opportunity. The first-generation products have won multiple awards, several studies have been published about its products in peer-reviewed journals, it has been granted patents, which have helped double its sales, and new partners have helped increase both its product range and territorial reach.

Asia is a key interest market, and OptiBiotix is building product reputation and brand awareness in countries like Taiwan and Singapore for better opportunities in larger Asia markets.  

OptiBiotix believes that these products have the potential to generate £10-20 million in sales annually, taking the valuation of these businesses to £100 million to £200 million each. 

The stock is priced at GBX 48.50 with a market capitalisation of around £43 million (as of July 26 closing). In January this year, the shares touched a 52-week high of GBX 69. Keeping the financial performance and the growth potential of the company in view, its present valuation looks comparatively low, as per its sole broker, Cenkos Securities Plc’s report. A sound financial result and a series of agreements for product expansion may present a strong case for investors looking for high-growth stocks.

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