SkinBioTherapeutics (SBTX) has announced the results of the AxisBiotix-PsT consumer study of patients suffering from psoriasis and it says that it will now be seeking regulatory approval for the product as a food supplement in parallel in the UK, US and Europe… targeting a commercial launch of theAxisBiotix-Ps™ product in Q4 2021. Do the maths! This is going to be massive.
The product is a blend of bacterial strains specifically designed to modulate the immune system by harnessing the gut-skin axis, to address problems associated with sensitive skin conditions such as psoriasis. From 91 participants who reported for the 56 day study, the results included 76% reported that their skin felt less itchy and 75% reported that their skin appeared less red and “participants who responded positively about their skin health, also reported positive changes to their lifestyle. On average, at day 56… 66% reported positive changes to their general mood… 62% reported having more energy”. This product is a food supplement and as such needs to be taken on a daily basis and customers will pay £1 a day. With a significant partner, Winclove Probiotics, already in place this should be very low cost, high (well above 50%) margin business for SkinBioTherapeutics. The company states “psoriasis is believed to affect between 2-3% of the UK population (c.1.8 million people) and up to 125 million people worldwide [source: www.psoriasis.org]. The condition can occur at any age and currently, there is no cure - mainstay treatments are typically steroid or immuno suppressant-based”. Even 25,000 customers - which is what the company has indicated is a medium term target - could be more than £9 million of that high margin revenue per year and there is clear potential for much, much more. Chats we have had with boss Stuart Ashman lead us to expect customer numbers of 100,000+ within a couple of years.
It is cautioned that “during the first phase rollout will be controlled to both establish the supply chain and ensure subscribers have a reliable and consistent supply of product” and there are of course steps to go to even get there. We also note that 142 commenced the study and completed the day 7 questionnaire but the completing participant number still looks reasonable given the nature of the study including a rapid switch from a clinical-based study to a home-based one, using a mobile app. But do the maths. This is just one product stream and could easily be one generating profits of £20 million+ within a couple of years. There is also emphasised “a range of other development programmes coming through” – notably a deal with FTSE-100 Croda (CRDA) with £25 million+ per annum almost 100% gross margin revenue potential. Currently the market cap here is below £110 million. We expect news on Croda, which has already invested £5 million into this JV, within the next three or four months.
There is potential selling risk with OptiBiotix (OPTI) having a still more than 20% shareholding and its boss Steve O'Hara appearing minded to offload part of that in a cack-handed and tax inefficient way for his own investors. We hope that he sees sense on that point and merely distributes some of the Skin shares to his own investors which would be more tax efficient and would create more liquidity so boosting the Skin share price. But the maths look compelling. There is every reason why this company could be making profits of £40 million+ within a couple of years. With massive growth potential even from there surely it would command a well into double digit PE and that implies that the shares could be a six bagger from here! Having recommended SkinBioTherapeutics shares at 17.75p, we understand that you may wish to de-risk and selling up to 20% of your holding would not be unwise (and the writer reserves the right to do the same). But ahead of two commercial launches this year (Croda and Winclove) and with other deals in the pipeline you may well wish to hold on to 100% not 80% of your holding and that would be more than understandable.
This article first appeared on the N50 website which Tom Winnifrith runs with Steve Moore & Lucian Miers. To access the website for a new share tip from Tom & Steve JUST OUT THIS AFTERNOON and a new shorting piece out yesterday click HERE
Filed under: SkinBioTherapeutics, Neil Woodford, UK Oil & Gas, [email protected] Capital, Zoetic, N50 website
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