OptiBiotix Health PLC (LON:OPTI) Chief Executive Officer Stephen O’Hara caught up with DirectorsTalk for an exclusive interview to discuss their European manufacturing, supply and profit sharing agreement with Sacco and more agreements in the pipeline
Q1: You’ve just announced a European manufacturing, supply and profit sharing agreement, can you tell us a bit more about the agreement?
A1: Most investors will realise over the 6/9 months or so we’ve been moving from a company that was very much focussed on the research to a company that’s been focussed on commercialising its products and this is the second product that we’ve now comemrcialised, the first being Slimbiome, the GoFigure product range. So, this is a strain that we’ve developed, we’ve carried out human studies at the beginning of last year, we’ve built up a lot of IP around this strain now and we’ve taken the science, and in the last 6 months in particular we’ve been sharing the science with the international community, investors are probably aware that I visited and presented at Berlin and more recently in Hong Kong. So, we’re sharing all the information on our science and this is attracting an awful lot of commercial interest and that commercial interest ranges from very large corporates, who are consumer health companies, they’re large corporates who produce probiotics, and a range of groups in between.
This particular agreement has been reached with a very well-known and well-established European group called Sacco, they’ve been around since 1934, they’re one of the leading probiotic manufacturers in Europe. We were attracted to this particular group because over the last year or so, we’ve been approached by a number of manufacturers and many of these manufacturers are quite keen to manufacture your strain but very few of them have the network of contacts and have the credibility that allows the manufacturer to present you to their business contacts to expand your product across the whole of Europe. Now, Sacco have got an incredible record of taking licenced deals and profit share agreements, similar to our own, and working with their partners who are distributors to create a range of products and in doing so expand supply and sale of the strain and they’re responsible for some of the world’s bestselling probiotic strains.
So, they manufacture, they then introduce us to distributors where we create new formulations, those formulations are then sold to the end consumer and we then have a structure whereby we gain value and we gain revenue. In this particular case with Sacco, a profit share of the group where we get a percent of the profit and we built in a number of guarantees in terms of minimum price to prevent discounting, we then also with the sale of the ingredient to a partner, those partners then create a range of different products. When I spoke in Berlin, we had around 30 companies that showed a lot of interest in our product and also in Hong Kong, albeit a different market, so in Hong Kong most of the partners we were speaking to were Asian partners or were from Australia/New Zealand so you can see by going out and informing the site for community, the scientists, academia but also from businesses the work that you’re doing and the products you’re developing attracts an awful lot of interest.
Optibiotix’s structure is fairly simple, rather than go with a single customer where you run the risk that you depend in that customer and that customer may have access to particular markets across the world but not others so you’re limited in terms of your scope. To work with a range of manufacturers, so Sacco are the first and they’re a European manufacturer, we’re also in discussions with other manufacturers across the world who will then introduce us and build up a range of formulations and products with, maybe in each region, another 20 or 30 distributors. So, you build up a network of people either manufacturing or selling your products and in doing so you have potential to create, reasonably quickly, some very good revenue streams. The model is quite well-established and investors might want to look at Probi, who established similar models some years ago, they have sales currently of around about £25 million per year, they were last years’ figures, and their valuation is about half a billion pounds but there are many similarities between ourselves and Probi in terms of their strains and the work they’ve done with their strains. So, we believe this is the first agreement of a number of agreements which support the commercialisation of our strain, initially in Europe and then gradually across the rest of the world. So, it’s a good day for OptiBiotix Health, it’s a good day for Sacco and it’s a good day for shareholders so good day all round.
Q2: So, you obviously have more agreements in the pipeline, is that something we can expect in the short-term from OptiBiotix Health PLC?
A2: So, we have a lot of discussions in the pipeline, some of these are quite late-stage discussions, the challenge you have with agreements is it’s a two-way process and your timescales may not always suit with the timescales of your partners so, we would hope to see a number of agreements over the forthcoming weeks and months. I don’t like to put a timescale on this because it’s beyond your control, you don’t want to be in a position where you’re rushing through an agreement, not doing the proper due diligence and putting the right controls in place, so controls in terms of minimum order quantities and what happens if the agreement goes wrong.
As with the agreement with Sacco, they have to use their best endeavours, if we don’t believe they’re using their best endeavours that goes back to a non-exclusive agreement so we can have other manufacturers in Europe, and these are all typical caveats you put into any agreement that you sign in these industries. Of course, it takes time and discussion to work those through and often manufacturers or distributors are not particularly keen to be held to account for these agreements.
So, OptiBiotix Health expects future agreements, we have a number of discussions currently ongoing and I’d like to see those coming through the next weeks and months and to get them to a point where we can announce those to shareholders. So, this is the start, not the end of this, this is the beginning of the commercialisation of our LPLDL strain, not just for cholesterol reduction but for hypertension reduction, which is market on which is big as cholesterol reduction, and also combination products to reduce cholesterol and hypertension. So, we see a lot of opportunity this year and a lot of activity over the next weeks and months.
