Optibiotix (OPTI) has announced what could be its biggest supply and manufacturing deal to date and it could be generating revenues within a couple of months. Great news for we loyal shareholders! The company has entered into a manufacturing, supply and distribution agreement with Agropur MSI, LLC. The agreement grants Agropur an exclusive license to manufacture, supply and distribute OptiBiotix's SlimBiome weight management technology in the USA, Canada and Mexico. Well not quite. It does not cover cereals, which is already part of another deal...
Founded in 1938, Agropur is a North American dairy industry leader with 8,800 employees and sales of $6.7 billion in 2018. Agropur processes more than 6.2 billion litres of milk per year at its 39 plants across North America and boasts an impressive portfolio of brands and products including Natrel, OKA, Iögo, BiPRO, Agropur Grand Cheddar, Olympic, Farmers, Island Farms, Québon, ISO Chill and Crino. SlimBiome, the Optibiotix weight management product, will be supplied by Agropur's Customs Solutions Group as a specialised functional ingredient. The US weight management market is estimated to be worth $72 billion in 2019 (source: BusinessWire.com). I chatted to Optibiotix boss Steve O’Hara about this, asking how soon this could generate income for his company and how big could it be:
“We are training their sales teams in US in 2 weeks and then they will sell. These deals with companies that have billion dollar revenues we would expect £1m revenues from per year.” Revenues or profits? This is a profit share deal so that £1 million would go straight to the Optibiotix bottom line. Optibiotix has fixed costs of c£1 million a year. This is one of c35 such deals signed and there are more in the pipeline.
This year Optibiotix will make a material profit but over the next two years O’Hara says those profits will ramp up to £7-10 million per annum - and this sort of deal is why. Surely a company such as this would at that point trade on a PE of 15-20? The market cap at 80p is just £80 million and, at up to 90p with a top slice target of 125p+, the stance is strong buy.
Filed under: Optibiotix, Sosandar, LSE Asylum, Woodford Income Focus Fund, Staffline, Vela, Airea
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