The ecosystem of good bacteria that lives in every human body - or the human 'microbiome' - is a hot topic in science. Predictably, therefore, lots of biotech companies have crowded into the market place for microbiome-inspired products. Yet Aim-traded OptiBiotix Health (OPTI) is different - it targets healthy food supplements rather than pharmaceutical therapies.
- Innovative technology
- Operating in potentially massive markets
- In partnership with big companies
- Royalty payments starting to flow
- No City forecasts
- In a competitive market place
Using its two technology platforms - OptiScreen and OptiBiotic - OptiBiotix has churned out a pipeline of gut bacteria that have a proven impact on weight and cholesterol levels. The plan is to incorporate these bacteria into new health foods and supplements as treatments for obesity and diabetes. In theory, the platforms have the potential to generate bacteria to treat a huge range of diseases and OptiBiotix has recently established a skin healthcare subsidiary.
True, the plan to use its technology in health foods and steer clear of therapeutics (at least for the time being) prompts some reservations. David Cox, healthcare analyst at broker Panmure Gordon, would "like to see some progress on the non-food side of OptiBiotix's technology". Granted, the profits from health-food products are small compared with the rewards of a successful drug, yet the size of the market for any consumable that can tackle obesity and diabetes is worth taking seriously. Besides, OptiBiotix's technology has begun to generate serious commercial interest. The company has been working in partnership with Slim-Fast, owned by a specialist private-equity firm, to develop a weight-management product, and it is attempting to create a healthy sugar alongside Dutch food supplements giant Royal DSM (Euronext:DSM).
Its business plan also ticks boxes often missing in early-stage lifesciences companies. For a start, OptiBiotix is actually making sales. First-half revenues of £88,000 for 2015-16 are likely to be enhanced in the second six months by health supplements from GoFigure, a part-owned company purchased in July. The supplements, which contain weight management bacteria, have recently been launched in the nine UK stores of US supermarkets chain Whole Foods (Nasdaq:WFM). Ideally, Whole Foods - the 15th largest supermarket in the US - will eventually sell the products stateside.
Until royalty payments start to flow on the launch of a partnered product partners absorb the development costs. That kept OptiBiotix's own cash outflows at just £0.9m for the first half of 2016-17. In contrast - although not necessarily strictly comparable - therapeutics-focused microbiome specialist 4D Pharma (DDDD) reported a full-year cash outflow of more than £9m in 2015-16.
OPTIBIOTIX HEALTH (OPTI) | ||||
|---|---|---|---|---|
| ORD PRICE: | 76p | MARKET VALUE: | £59m | |
| TOUCH: | 74-76p | 12-MONTH HIGH: | 102p | LOW: 38p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | negative | NET CASH: | £3.56m | |
| Year to 30 Nov | Turnover (£000) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 0.0 | -0.9 | -3.0 | nil |
| 2015 | 28.2 | -1.4 | -1.8 | nil |
| % change | – | – | – | – |
Normal market size: 7,500 Market makers: 4 Beta: 0.4 | ||||
