Materialising value for shareholders is the mantra for the boss of life sciences firm Optibiotix Health PLC (LON:OPTI), and the recent listing of its skin care business as SkinBioTherapeutics PLC (LON:SBTX) has helped kick that off handsomely.
SkinBioTheraputics made a strong debut when it floated on AIM last on April 5, with the shares rising from an offer price of 9p each to close at 13.25p on the first day of dealings, giving the new firm a value of around £14mln.
‘House’ broker FinnCap, which initiated coverage on Opti at the end of January, pointed out in a note that as it still owns a 41.9% stake in SkinBio after the float that represents around 7% of Opti’s current market cap of about £65mln.
The SkinBio business was created when Opti acquired exclusive rights to intellectual property developed by the University of Manchester around a year ago, and Opti injected £650,000 in to develop the business to give it a 77% holding prior to the float.
So Opti shareholders have clearly seen value created from that move, and chief executive Stephen O’Hara has plans to continue doing that.
O’Hara created Opti as a company all by himself in 2012 as a business focused on the rapidly growing microbiome space, which harnesses the positive benefits of microbes that live on the human body.
Microbiome model …
Opti is focused on using microbiome technology to tackle worldwide health issues such as obesity, high cholesterol and diabetes, and looks to partner up with food, health and pharma companies that have established routes to market to distribute its products.
With the SkinBio spin-off, the group is now focused on three development areas – OptiScreen, which is developing gut bacteria to help in lowering cholesterol; OptiBiotics which is developing SweetBiotix, its natural sweet fibre to help with diabetes control; and Slimbiome, its weight management product.
The firm already has commercial partners in place for all its platforms with global brands.
At the end of 2016, Opti partnered with Indian giant Tata to develop various weight management foods and products that contain its SlimBiome technology.
In March 2016, OptioBiotix also signed a deal with Sacco, one of Europe’s leading probiotic manufacturers and raw ingredients suppliers to manufacture and supply OptiBiotix's cholesterol reducing strain, LPLDL, in Europe.
While it waits to secure further deals, the company is on a steady financial footing. At the end of the last financial year, Opti had around £3mln in the bank and an annual cash burn of around £1.2mln.
To give an idea of the size of the markets Opti is working in, FinnCap analyst Alex Pye estimates that the functional (diet) foods market is worth US$200bn annually.
Further action …
Having created value from the SkinBio spin-off, O’Hara recently told Proactive Investors that his target is to build each of the three divisions into separate legal entities and possibly list each separately on London’s AIM market.
O’Hara said he hoped any listing would be planned sometime by the end of this year and the beginning of next, once each division has built up its IP, development programs, and commercial partnerships.
The firm’s boss also said he plans to give some more of the value from the SkinBio float back to Opti shareholders in the future as well, in a way that is best for both firms.
Overall, O’Hara’s aim is to further the commercialisation phase of the business, increasing revenues organically, but is also exploring the opportunity to make a strategic acquisition as well, which may be the only reason for the firm to raise any further cash, give its healthy balance sheet.
Certainly, Opti has provided shareholders with value, with the stock having jumped to a level of around 80p today against a flotation price in August 2014 of 8p a share.
If its boss can deliver on his plans that value could be very much enhanced.