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OptiBiotix technology gaining commercial traction; more to come says broker

OptiBiotix is a pioneer in the human microbiome, which is essentially the bacteria that inhabits the gut and skin
diagram of the human microbiome
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Gut feeling: A breakdown of the ecosystem within the body

OptiBiotix Health PLC (LON:OPTI) said its interim results charted a period of "significant” commercial  progress, including product launches and sales agreements.

Key among the deals inked was one with Tata Chemicals to develop weight management products containing its SlimBiome additive for the Indian market.

It is one of a number of pro-biotic products developed by the life sciences company that tackle obesity, high cholesterol and diabetes.

Sacco deal inked

LPLDL is another of its innovations that is gaining market traction. OptiBiotix struck a profit-sharing deal with Italian firm Sacco to manufacture and supply cholesterol-reducing compound and the first sales of the product were made to HLH BioPharma Vertriebs·    

At the same time it has a non-exclusive agreement with Nutrilinea for the production and commercialisation of products containing the LPLDL in Europe.

Deals with Sacco and HLH, meanwhile, were expanded after the period-end, while in September the company signed a memorandum of understanding (MOU) with Bened Biomed that could open up markets in south-east Asia to the LPLDL strain. The MoU provides a 12-month period to explore opportunities relating to OptiBiotix's cholesterol and blood pressure reducing LPLDL strain and Bened’s PS128, a psycho-biotic that has shown encouraging results in reducing anxiety and depression in animal studies.

OptioBiotix said the agreement includes: the potential for Bened to commercialise OptiBiotix’s  LPLDL strain in Taiwan, Japan, Korea, and South East Asia; the potential for OptiBiotix to commercialise Bened’s PS128 strain in Europe and the USA; and the possibility of combining relevant assets to broaden the commercial offering and global reach

Positive financial performance

The financial performance of the company was positively impacted by the spin-off earlier this year of subsidiary Skinbiotherapeutics as a separate AIM-listed company valued at £4.5mln.

This resulted in a change in value of Opti’s investment in the business of £4.1mln. This adjustment led to the company posting a pre-tax profit of £3.2mln for the six months ended May.

CEO upbeat

Chief executive Stephen O’Hara was upbeat on what was achieved as well as the prospects for remainder of the financial year.

"OptiBiotix has made significant progress in the last six months developing a pipeline of innovative products with a strong scientific and clinical evidence base,” he said.

“This has stimulated industry interest from both national and multinational companies in selling our products in both consumer health and pharmaceutical markets around the world.

“The microbiome has been described by commentators as healthcare's 'most promising and lucrative frontier'.

“As OptiBiotix's microbiome modulating platforms generate products and multiple revenue streams from royalties and supply agreements, there is potential for a significant enhancement in the value of the company.”

Microbiome pioneer

OptiBiotix is a pioneer in the human microbiome, which is essentially the bacteria that inhabits the gut and skin.

It has found, for instance, small changes to the gut flora can affect the way the human body processes food.

With this in mind, it is developing compounds to tackle obesity, high cholesterol and diabetes, as well as potential products for skin care.

Its LPLDL formulation comes from the bacterial species Lactobacillus plantarum.

Lactobacilli are common components of the human intestine and used by the food industry as probiotics.

Strong intellectual property

“[The] strong IP and broad portfolio is being shown to attract high calibre companies and, given the current rate of commercial deal signings, we anticipate current third-party interest to continue converting into licence deals, supply agreements and royalty revenues in the coming months,” said finnCap analyst Alex Pye in a note to clients.

After spinning off its SkinBio business as a separately listed entity earlier this year, the group is now focused on three development areas.

They are 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.

Further spin-offs?

Having created value from the SkinBio spin-off, CEO 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.

He 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 programmes, 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.

Creating value

The aim, he said, 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, given its healthy balance sheet.

Certainly, Opti has provided shareholders with value thus far with the stock changing hands for 69p, compared with a flotation price in August 2014 of 8p a share.

If O’Hara and his team can deliver on his plans, that value could be very much enhanced.

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