Probiotix Health PLC - Final Results

ProBiotix Health plc

('ProBiotix' or the 'Company' or the 'Group')

Final results

ProBiotix Health plc (AQSE: PBX), a life sciences business developing probiotics to tackle cardiovascular disease and other lifestyle conditions, announces its audited results for the period ended 31 December 2022, the Company's inaugural results as a separately listed public company following its flotation on the AQSE Growth Market on 31 March 2022.

Highlights

á    The Company continues to achieve rapid growth with revenue of £1.3m, a 19% increase on FY 2021 (£1.1m*)

á    Cash balance of £1.74m as on 31 December 2022

á    Financially robust with no debt and a strong balance sheet

á    Successful flotation on the AQSE Growth Market on 31 March 2022, raising £2.5m for future development of the Group

á    Third human volunteer study confirming safety and efficacy of LP_LDL®

á    Research and clinical study agreements with two UK and one Italian university to examine the role of LP_LDL® to improve sleep, and reduce stress and anxiety

á    The appointment of Steen Andersen as Chief Executive Officer of ProBiotix

á    Appointment of Nutraconnect Pte Ltd, based in Singapore, as a new commercialisation partner to develop strategies to expand sales opportunities for both LP_LDL® and CholBiome®

á      New customers gained in China, Israel, Hong Kong and Belgium

Post period

á    Strong order pipeline in 2023 with confirmed orders to first week of June 2023 of £1.1m

á    Launch of Cholbiome_CH a dual action bilayer tablet containing phytosterols and LP_LDL® to increase opportunities in the US market

á    An enhanced strategy focusing on turnkey solutions and new line extensions

*2021 revenues of £1.1m for ProBiotix Limited, the Company's principal operating subsidiary

Steen Andersen, CEO of ProBiotix, commented: "Since I became CEO in January 2023, I have developed a strategy which focuses the business on becoming a solutions provider of finished probiotic products in consumer formats, both under our own brands and partner private labels, with the objective of building ProBiotix into a £10m turnover company in the years ahead.  Although the markets are challenging, we have a strong balance sheet with no debt, good sales growth and a healthy cash reserve.

"Given the scale of the market opportunity, the proven efficacy of our existing products, the substantial scope for expansion of our product range and geography and the financial strength of the Company, we look to the future with enthusiasm and high confidence in building a valuable company for shareholders".

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Chairman and Chief Executive's Report

This annual report presents the Company's inaugural results as a separately listed public company, following its flotation on the AQSE Growth Market on 31 March 2022. The Company can demonstrate good scientific and commercial progress with strong sales growth in a difficult economic global environment.  This is a testimony to the quality and uniqueness of our products as highlighted by our clinical studies, excellent customer reviews, and high customer retention rates and creates the potential for strong future growth, particularly as economic conditions improve. The Company remains financially robust with no debt with a strong balance sheet.  Whilst investors may have concerns over the current market capitalisation the board are confident that this is a reflection of current public markets and comparisons with similar probiotic companies suggest the stock is undervalued with potential for a substantive uplift if stock market conditions improve.

In January 2023 Steen Andersen joined the business as CEO.  He has developed a strategic plan to focus the business on becoming a solutions provider of finished probiotic products in consumer formats, both under our own brands and partner private labels, with the objective of building ProBiotix into a £10m turnover company by 2028. 

Strategic overview

ProBiotix is a life sciences business developing probiotics to tackle cardiovascular disease and other lifestyle conditions.

The market opportunity

The global probiotics market is forecast to reach $94.48 billion by 2027, at a CAGR of 7.9%, of which approximately 85%  is in food and beverages with a strong consumer trend towards use of dietary supplements, driven by an increasing consumer awareness towards healthy living and disease prevention e.g.  within the cardiovascular, and a growing trend for using clinically proven probiotics as a natural replacement for pharmaceutical solutions (Fortune Business insights, 2022). 

ProBiotix's strategy is to develop next-generation microbiome solutions for a wide range of health conditions and to deliver commercially successful products supported by a strong scientific and clinical evidence base. We aim to partner with scientifically driven dietary supplement companies, pharmaceutical consumer health companies globally who have a strong strategic focus on human microbiome and the use of probiotics in disease prevention and wellbeing. 

Since its creation, ProBiotix has made considerable progress and has successfully transitioned from a research and development specialist into a commercial structure with products already commercialised around the world.

The Company has now completed three independent clinical studies with human volunteers which consistently show that ProBiotix's principal product, Lactobacillus plantarum ECGC13110402 (LP_LDL®) can reduce key cardiovascular risk markers, such as total cholesterol, LDL (bad) cholesterol, and Apolipo protein B (biomarker of atherosclerosis), by up to 34.2 per cent, 28.4 per cent and 28.6 per cent respectively. We now have eight conference poster presentations on LP_LDL®'s safety, efficacy, and mechanisms of action and three peer reviewed publications have shown LP_LDL® to be safe and well-tolerated, as well as showcasing statistically significant reductions in multiple cardiovascular disease risk biomarkers within six weeks. Independent peer review publications are critical to support regulatory approval for health claims in international markets and increasingly a prerequisite to attract the interest of large partners.

The fact that 50 percent of all deaths globally can be related to cardiovascular disease, and 80percent are believed to be preventable, underlines the scale of the opportunity for LP_LDL®.  

The CholBiome® portfolio

ProBiotix commercialises LP_LDL® in a unique range of patented and proprietary food supplements under the CholBiome® brand and as private label. The CholBiome® portfolio in 2022 comprised four products, which can either be sold under the CholBiome® brand or customers' private labels:

á      CholBiome®
Contains LP_LDL®as the only active ingredient, to focus on healthy cholesterol maintenance and deliver tangible health benefits.

á      CholBiome®_X3  
A cholesterol-reducing formula that combines three targeted ingredients into a triple-layer tablet. It consists of LP_LDL®, Monacolin K from red yeast rice, and Vitamin B3 (niacin) to deliver a tri-factor approach that utilises synergistic mechanisms of action to reduce cholesterol and aid overall cardiovascular health.

á      CholBiome®_BP
A blood pressure reducing formula that combines four science-backed natural ingredients - LP_LDL®, Thiamine (Vitamin B1), L-arginine and CoEnzyme Q10 - to provide a multi-targeted mechanism approach for aiding hypertension and improving cardiovascular health.

á      CholBiome®_VH  
A vascular health formula that combines three specialised ingredients in a triple layer tablet. Consisting of LP_LDL®, Thiamine and Vitamin K2 Vital (from Kappa Bioscience) to provide a multi-targeted mechanism to work against the build-up of lipid and calcium deposits in the blood vessels.

The CholBiome® product portfolio provides a platform allowing us to create different formulations targeting individual customer needs and open the widest possible range of international markets. This is important because regulatory conditions vary widely around the world. For example, Monacolin K is used extensively across Asia but is prohibited in food supplements in North America and subject to restrictions on dosage in Europe. Our CholBiome® product range has been developed to meet existing and anticipated regulatory requirements in all key potential markets, and has been further extended in 2023 with the launch of CholBiome®_CH, a new dual-action cholesterol-reducing bi-layer tablet containing both LP_LDL® and Plant Sterols / Stanols (PSS), also known as phytosterols, with health claims which will support our continued growth in both Europe and the US.

Public listing and its benefits

ProBiotix floated on the AQSE Growth Market on 31 March 2022, raising £2.5m through a placing and subscription of shares to accelerate the future development of the Group. Prior to this date it was a wholly-owned subsidiary of AIM-listed OptiBiotix Health plc ("OptiBiotix"). OptiBiotix has retained a 44% shareholding in the Company following its flotation. 

We believe that the separate listing of the Company will enhance recognition of the value of the probiotics opportunity by allowing investors to perceive and evaluate ProBiotix as a standalone business in way that was not previously realised within its former parent company. The listing also improves our access to funding, enabling the Company to meet its working capital needs more effectively than it could either as an unquoted company or as a division competing for resources within a broader quoted group.

The enhanced status of the Company through the public trading of its shares offers significant benefits in raising its corporate profile and improving its ability to attract and retain key staff. The appointment of an industry-leading figure such as Steen Dannemann Andersen as CEO, announced in June 2022, is unlikely to have been possible in the absence of a public listing. The ability to attract personnel through the future grant of share options will be of great value in securing, retaining and motivating high calibre personnel.

The Company believes that the scale of the opportunities available to ProBiotix are greater than those previously being exploited within OptiBiotix, where there was competition for available resource across many parts of the business.  A separate listing, and the ability to fundraise independently, will enhance the Company's ability to further explore the potential of LP_LDL® as discussed in the outlook.  These developments have the potential for substantial future value enhancement.

Commercial and scientific overview

During 2022 we announced:

á    Publication of a third human volunteer study on the medical efficacy of LP_LDL®, demonstrating through a placebo-controlled trial that LP_LDL® delivered large and statistically significant reductions in total cholesterol, LDL-C (bad) cholesterol and Apolipoprotein B (widely accepted as the most important causal agent of atherosclerotic cardiovascular disease), with no compliance, tolerance or safety issues. The results of this and other studies suggest efficacy similar to many statins and other treatments more typically associated with pharmaceuticals, suggesting considerable potential in high value pharmacy and consumer health markets for the use of LP_LDL® in individuals who are unwilling or unable to tolerate other treatments.

á    Publication of a consumer study undertaken among customers from our e-commerce website of CholBiome^x3, our proprietary food supplement containing LP_LDL®, which confirmed its effectiveness in reducing cholesterol with no reports of side-effects or any tolerance issues.

á    The appointment of Steen Andersen as Chief Executive Officer of ProBiotix Health, discussed in more detail below.

á    The launch by our partner Granja Pocha in Uruguay of a new probiotic functional yoghurt brand, Yo-Life®, containing ProBiotix's patented cholesterol-reducing Lactobacillus plantarum strain (LP_LDL®).  Granja Pocha is one of Uruguay's largest and most respected dairy producers. Since the launch of Yo-Life® we have seen increased use of LP_LDL® in other dairy products, with the launch of a spreadable cream, a drinking yogurt and Greek yogurt starter culture in the USA, and a creamy herb cheese in Canada.

á    Entry into an agreement with the University of Southampton, University of Leeds and Fondazione Edmund Mach - Centro Ricerca e Innovazione ("FEM"), based in Trento, Italy to examine the role of LP_LDL® to improve sleep, stress, and anxiety. Sleep aids and stress management products are the fastest growing category within healthcare (Goldstein Market Intelligence, 2020) and this is another step in extending the range of applications for our products into large growing markets where there is an unmet clinical need.

á    The appointment in September of Nutraconnect Pte Ltd, based in Singapore, as a new commercialisation partner to develop strategies to expand sales opportunities for both LP_LDL® as an ingredient and Cholbiome® finished products across the Asia Pacific region.

The pace of our entry into new geographical areas reflects the fact that ProBiotix is dependent on its partners' thorough and successful registration in each territory of our LP_LDL® ingredient or CholBiome® finished products as dietary supplements. Whilst such regulatory approvals are time-consuming and costly, they represent a significant barrier to entry to many companies, reducing the competitive landscape and creating the potential for long term recurrent revenues for the Company.

Results

The subsidiary consolidated in these Group accounts was acquired via a group re-organisation and as such merger accounting principles have been applied. The subsidiaries financial figures are included for the period from the date the Company took control of it (31^st March 2022).

It is not possible under accounting principles to compare with previous years as this group does not have a comparative period.

Sales for the period were £1.3m with a gross profit of £739k.  After total administrative costs including listing fees are taken into account there was a loss before tax of £215K.

Following the raising of £2.5m through a placing and subscription of new shares as part of the listing, the Group ended the year in a very strong financial position with cash balances totalling £1.74m.  

Board and management

The appointment of Steen Dannemann Andersen as Chief Executive Officer ("CEO") was announced in June 2022.  Steen joined the Company in January 2023, after completion of his notice period with his previous employer. This appointment was part of a long-planned strategy to appoint an experienced industry business leader to the Company to drive sales and profitability, allowing Stephen O'Hara, who led ProBiotix in 2022, to focus on finding and developing new technologies that will provide the pipeline of new products and applications to ensure future growth for both ProBiotix and OptiBiotix.

Steen has brought to ProBiotix more than 30 years' experience in building businesses in the Probiotics industry, having been President of Deerland Probiotics and Enzymes, President and CEO of Bifodan, President and CEO of Fluxome, and Vice President of Human Health at Chr. Hansen. Deerland is a market leading turnkey probiotic solution provider acquired by ADM in November 2021 to help ADM meet the $775 billion global demand in health and wellness. Prior to joining Deerland, Steen was President and CEO of Bifodan, a leading provider of ready to market probiotic dietary supplements and over the counter (OTC) pharma products. Bifodan was acquired by Deerland in November 2019.  Steen was integral in building these businesses, increasing global reach, revenues, and profitability. Prior to this he worked as CEO and President at Fluxome, a young biotechnology company, and Vice President of Chr. Hansen's Health and Nutrition unit where he built an organisation and position in the market allowing the company to become a leading provider of probiotic solutions within the dietary supplement space.

Steen brings experience of selling high value turnkey probiotic solutions as supplements and OTC solutions in international markets, building strategy and organisations, a wealth of industry contacts, and is well respected within the probiotic industry. He has a strong track record of rapidly growing sales and profitability and has been involved in a number of acquisitions and takeovers in support of accelerating business growth. His experience in the Probiotics industry will help build ProBiotix's business in its next phase of growth, as it moves from selling ingredients to delivering high value turnkey solutions.

The Company has also benefited from a number of board level senior appointments which bring both industry and public market expertise to the business.  These include Adam Reynolds as Chairman, and Marco Caspani as Non executive Director, and Mikkel Hvid-Hansen as Commercial Director.  Stephen O'Hara will continue in the near term as a director to support the transition.

The Company anticipates further changes to the board, management, and Commercial team as ProBiotix progresses its independence from OptiBiotix and focuses more on its strategy of becoming a solutions provider of finished probiotic products to capitalise on the opportunities created by our growing pipeline of final products.

Outlook

ProBiotix has traded strongly since the beginning of the new financial year and has a strong order book from existing and new customers.

Our CEO Steen Dannemann Andersen is already leveraging his industry-leading contacts to introduce ProBiotix to new customers, some of which - including SymbioPharm one of the top three probiotic brands in Germany - have already placed a significant order. We are also enjoying continued strong growth in e-commerce sales direct to consumers albeit ongoing issues with our supply chain has impacted on the availability of our best-selling product CholBiome_X3.  The Company identified a new manufacturer in 2022 and first orders were supplied in H1 2023.

We have recently made an addition to our CholBiome® product portfolio, with the launch at Vitafoods Europe in May of CholBiome®_CH, a dual-action cholesterol reducing bi-layer tablet containing both our patented and proven cholesterol-reducing ingredient LP_LDL® and Plant Sterols / Stanols (PSS). These have different mechanisms of action which combine synergistically to support the reduction of the cholesterol the body makes with LP_LDL®, and dietary cholesterol through stanols and sterols. The introduction of CholBiome®_CH provides us with an opportunity for growth in the US market, where the use of Monacolin K found in CholBiome_X3 in food supplements has been banned by the FDA since 1998.

In the first three months after joining the Company in January 2023, our new CEO undertook a comprehensive initiation programme to develop a full understanding of our business and its people. He has now set out a strategy to focus the business on becoming a solutions provider of finished probiotic products in consumer formats, both under our own brands and partner private labels.  Moving towards final product formats allows us to strengthen our value proposition by de-bottlenecking the challenges for our customers to handle sensitive probiotics in their own manufacturing thereby increasing customer loyalty which eventually will lead to higher revenue and profitability potential for ProBiotix as well as support building strong entry barriers around the business.

We will focus initially on developing turnkey consumer solutions and growing our business with existing customers by moving from sales of bulk ingredients to finished formats, and the introduction of line extensions. In the first phase of implementation of this strategy, we will concentrate on expanding our sales structure in Europe and the Middle East, and building a platform for growth in North America, before moving in the medium term to explore the potential of additional markets in the Asia Pacific region, South America and South Africa. We will also seek to prove the potential for direct-to-consumer sales, focusing initially on the UK.  This is likely to be through the OptiBiotix online platform with OptiBiotix acting as an agent of ProBiotix online products.

As part of our focus on finished products, we will expand our range by developing new dosage formats such as sticks and chewable tablets, in addition to our existing capsules and tablets, and develop new and improved packaging formats to extend shelf-life. In research and development, we will develop or in-license new probiotic strains to expand our product offering and sustain the robustness of our heart health claims based on LP_LDL®, while diversifying into new indications within the area of metabolic health.

This strategy presents a clear five-year pathway for ProBiotix Health to build annual sales of £10 million while shifting the balance of the business from deriving 85% of turnover from bulk sales of LP_LDL® in 2022 to making 85% of sales from finished products.

To support this new strategic focus and ensure the delivery of the expected results we will need to make changes to the internal structure of the business and recruit additional personnel, including a sales director for Europe and the Middle East and new sales manager for North America, together with an operations manager and a development scientist to add impetus to our product development. Recruitment and additional staffing costs mean that whilst we expect sales to grow in 2023 the additional investment will impact on profitability in 2023, but will form a much stronger platform to deliver growth and shareholder value in the medium and longer term.

We will continue to work with AQUIS and explore opportunities on other markets, including AIM, to increase liquidity in ProBiotix shares.

The Company sees 2023 as a year of opportunity and continued growth with a focus on commercialising final products and building the Company sales team and supporting structure to drive future growth. This will be supported by a developing product pipeline with new probiotic strains extending the applications and use of LP_LDL® into new areas, all supported by strong science and human studies.  

The scale of the market opportunity in probiotics, the proven efficacy of our existing products, the substantial scope for expansion of our range and geography, the significant benefits of public listing, the quality of our leadership, the clarity and distinctiveness of our future strategy and the financial strength of the Company, all allow us to look to the future with confidence and enthusiasm.

A Reynolds

Chairman

23 June 2023

S Andersen

Director

23 June 2023