OptiBiotix Health PLC Commercial update

RNS Number : 9946A

OptiBiotix Health PLC

20 August 2024

 

OptiBiotix Health plc

("OptiBiotix" or the "Company" or "the Group")

 

Commercial update

 

OptiBiotix Health plc (AIM: OPTI), a life sciences business developing compounds to tackle obesity, cardiovascular disease and diabetes, provides the following unaudited commercial update. This report provides a general update of sales progress on the areas of commercial focus for 2024.  These are:-

 

1.    Increasing the number of partners and sales in the USA as the world's largest economy

2.    Increasing the number of partners and sales in Asia recognising its high growth rate and large and growing consumer markets with over 60% of the world's population, with China (1), India (2) and Indonesia (4) forecast to become three of the world's largest four economies by the 2050s

3.    Investing in e-commerce channels nationally, and subsequently internationally to drive direct-to-consumer sales, reducing reliance on retail partners and increase gross profit margins

4.    A trend towards selling more final branded or white label products which include the Company's ingredients to partners.  This leads to two sales streams: the ingredient which goes in the final product and the finished product sale

 

This update will show progress in each of these areas and the investments in India and the USA starting to deliver larger partners in key strategic markets with large initial orders being placed and the potential for high volume sales.

 

General

The recovery of sales activity in 2023 has continued into the current year, helped by strong e-commerce sales, a number of new large partners placing large orders for final products including Dr Morepen in India, a NASDAQ listed USA e-commerce and direct selling company placing an order for a tomato soup final product, the launch of LeanBiome® in Muscletech® at the start of 2024, and continued growth in Asian markets.  As these partners build their brands in their respective markets and grow sales they have the potential to transform the business. 

 

Sales orders for the first six months of the current year were under £600K approaching the FY 2023 reported revenue of £644K which was subsequently surpassed at the end of July 2024. These sales orders include confirmed orders received in the first six months of the year and are provided as a general update on progress. The figures will differ from reported revenue in the half year accounts to 30 June 2024, which under IFRS 15 accounting rules are only included when goods are accepted by the customer, even though prepayment may have been received.  The difference reflects the success of attracting new overseas corporate partners who have ordered final product and the longer timescales this entails between placing an order for a new product launch and the customer receiving goods.  Excluding milestone payments received in H2 2023, reported revenues in H1 2024 will be ahead of H2 2023.

 

Consumer Health and Ecommerce

OptiBiotix has made significant investments in its e-commerce business to drive direct-to-consumer sales as a strategic move to reduce reliance on retail partners and increase profit margins. The Consumer Health division has the advantage of receiving online sales income immediately and allows more control over the Company's brands and messaging whilst reducing reliance on distributors.

 

The Consumer Health division continues to grow rapidly during the year with sales to 30 June 2024 exceeding £200K, higher than the £185K achieved for the whole of 2023.  The biggest contributor to sales was China, with OptiBiotix online and Amazon UK making up the rest with a roughly equal split with a small contribution from Amazon UAE which launched late in H1 2024. The change from TikTok to Tmall reported in the annual accounts has led to less sales as expected, but at a much lower marketing cost. OptiBiotix online, with much lower marketing costs, has returned a net profit every month in 2024 to date. Amazon UK has shown the highest growth rate but has been loss making every month in 2024, reflecting the investment in marketing to grow OptiBiotix's customer base on this platform. However, 25% of all Amazon customers pay by monthly subscription as repeat customers. As the Company grows its customer and subscriber base and increase sales from repeat purchases, marketing costs tend to reduce as a percentage of sales which is expected to lead to profitability. SlimBiome^® remains among Amazon's top sellers for appetite suppressants and achieved record sales during Prime month in July 2024 and was awarded Amazon choice in Q1 2024.

 

After waiting many months for a European VAT certificate, the Company can now sell through new Amazon channels in Germany with Amazon India expected to follow in late September or early October 2024. As OptiBiotix increases the number of countries it sells into via Amazon and optimises its product offering in different markets, the Board anticipates continued sale growth through 2024 and beyond.

 

North America

The Company was pleased to report at the start of the year the launch of LeanBiome® in MuscleTech's Nitro Tech Ripped range, a premium protein powder designed to support athletes who want to lose fat and build lean muscle. MuscleTech defines itself as the No.1 selling Bodybuilding Supplement Brand in America https://www.muscletech.ca/research/.  The inclusion of LeanBiome^® in a leading global sports brand like Muscletech is a significant endorsement of our product. Muscletech continues to fill its distribution network in Europe with further orders for LeanBiome® anticipated in H2 2024.  LeanBiome^® is now included in two leading sports nutrition brands, Myprotein and MuscleTech, across the world, a market worth $45.2bn in 2023, and expected to grow at a CAGR of 7.5% per annum to 2030, (Grand View Research, 2023). 

 

In line with the Company's strategy of selling more final product and expanding its interests in the USA, the Company continues to advance sales opportunities with a number of large North American companies.  As announced on 29 July 2024, the Company was pleased it receive its first order from one of these, a NASDAQ listed USA e-commerce and direct selling company, for a tomato soup final product which is expected to be launched in January 2025. 

 

The Company continues to have ongoing discussions with a number of large US partners to include its ingredients in partner final products. These include SlimBiome® and SweetBiotix® (which has been developed in a finished product for a large global partner), and our microbiome modulators. The Company is hopeful that further announcements with corporate partners in the USA will be made in due course.

 

OptiBiotix Health India

This area of the business has seen a material transformation in outlook with the announcement of the agreement with Morepen (announced on 13 March 2024) to sell products containing SlimBiome^® under the Dr Morepen brand. This is an established, well known, and trusted brand in the Indian market and represents a material step forward for the Company's products in the Indian market. OptiBiotix will receive revenue for both the ingredient and final product sales with the first order received in May 2024 of over £175K for delivery and launch in Q3 2024. The initial launch planned for Q3 2024 will involve five products with subsequent launches later in the year and at the start of 2025. Based on Morepen's current forecasts this agreement could contribute in the region of £6-7 million revenue per annum to OptiBiotix in the next four to five years as announced on 13 March 2024.

 

The Board believe these agreements, plus other partner launches planned for Autumn 2024, the upcoming launch of products with Morepen, and reorder of products with Apollo pharmacies could contribute significant revenues and bring profitability to this part of the business in 2024. 

 

Asia

In 2023, OptiBiotix signed agreements with four new partners in Asia for SlimBiome® and have received just under £80,000 worth of initial orders. These include Nasol Pharma International (Vietnam), Bonanaza Neutra (Thailand), Colorinda Chemtra (Indonesia), and NexusWise (Malaysia and Singapore). These are all well-known specialist distributors in their field of expertise who work with local manufacturers and brands to launch products containing SlimBiome®.  The Board believes this is a strategic investment in high growth markets that are anticipated to grow slowly but has the potential to deliver significant revenues in the future. 

 

Outlook

This commercial update shows the Company has made good progress in H1 2024 on its stated aims of securing a number of commercial agreements for the sale of its products with large partners in key strategic markets (USA, and Asia), growing direct to consumer sales, and selling more finished products. Whilst working with large partners takes longer and tends to be subject to more stringent confidentiality, the size of some of the first orders and the potential for high volumes sales merits the investment. The key now is to ensure as these products launch with new partners in new territories, the Company supports its partners with training and marketing assets to ensure sales growth and repeat orders.  If successful, given the scale of the opportunity, success with one or more of these partners will be transformational for the Company.

 

The Company has a high level of corporate interest in its second-generation products and is in discussion with a wide range of industry partners over product application and launch timescales, some already announced and some with new potential partners. The Board are pleased with the progress being made by DSM-Firmenich and its preliminary forecast for SweetBiotix^® of >100,000 metric tonne per annum, demonstrating its intent and potential scale of the opportunity.  The Company asks shareholders to respect the need for confidentiality and will make further announcements once these have been concluded.

 

The fundamentals of the Company's marketplace remain very exciting with recent market reports (announced on 29 July 2024) highlighting that products across all of OptiBiotix's portfolio have potential to meet growing market trends as a solution to a wide and growing range of lifestyle-related health challenges. Given the high customer ratings and industry awards for its products if OptiBiotix can leverage this market interest by increasing customer awareness of its products either directly through social media channels or indirectly through its partners, the Company has the potential to build a successful and profitable business. 

 

Stephen O'Hara, CEO of OptiBiotix Health plc said: "We have made real progress this year in progressing our commercialisation strategy of broadening our partner base by securing a number of new corporate partners in key strategic markets like the USA and Asia, investing in e-commerce channels, and selling more final product. We continue to see sales momentum building in 2024 with sales orders received in H1 2024 approaching FY 2023 reported revenue and in July 2024 surpassing it. 

 

"Having spent a number of years carrying out clinical studies to gain health claims on our first generation products, we are now gaining commercial traction with large partners in key markets. We anticipate this trend will continue in 2024 and hope to add to this, other partners who are interested in our potentially industry changing second-generation products.

 

"With appetite suppression, gut health, sugar alternatives, and modulation of the human microbiome attracting ever-increasing interest, we look to the future with a high degree of confidence."

 

This announcement contains information which, prior to its disclosure, was considered inside information for the purposes of the UK Market Abuse Regulation and the Directors of the Company are responsible for the release of this announcement.

 

For further information, please contact: OptiBiotix Health plc		www.optibiotix.com
Neil Davidson, Chairman	Contact via Walbrook below
Stephen O'Hara, Chief Executive
Cairn Financial Advisers LLP (NOMAD)		Tel: [phone]
Liam Murray / Jo Turner / Ludovico Lazzaretti
Peterhouse Capital Limited (Broker)		Tel: [phone]
Duncan Vasey / Lucy Williams
Walbrook PR Ltd		Mob: [phone]
Anna Dunphy

 

About OptiBiotix - www.optibiotix.com

OptiBiotix Health plc (AIM: OPTI), which was formed in March 2012, brings science to the development of compounds which modify the human microbiome - the collective genome of the microbes in the body - in order to prevent and manage human disease and promote wellness.

 

OptiBiotix has an extensive R&D programme working with leading academics in the development of microbial strains, compounds, and formulations which are used as active ingredients and supplements. More than twenty international food and healthcare supplement companies have signed agreements with OptiBiotix to incorporate their human microbiome modulators into a wide range of food products and drinks.

 

OptiBiotix is also developing its own range of consumer supplements and health products. The Company's current areas of focus include obesity, cardiovascular health, and diabetes. 

 

 

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