The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
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PART 1 -
Most informative post I have read, reproduced to help prospective investors.
I have now reviewed the recent presentation in depth and thought I would post a synopsis of my views and thoughts for what they are worth. I haven't bothered to proof read so apologies for grammar/spelling etc
1. Microtox PD
Following on from the RNS confirming the technology not only works but is amazingly accurate multiple sites have been retrofitted and are deployed and working. There are over 3000 existing units in over 60 territories worldwide so we don’t know exactly how many have been fitted but they stated that they are currently receiving real-time Covid test results every 15 mins.
The plan now being implemented is to scale this production up to deploy to the new customers and they are currently in the process of developing stand alone microtox BT unit that is far more cost effective and scalable. This makes absolute sense to me. Current Mictrotrace units that can be retro-fitted can cost £50k so to produce a far more cost effective smaller unit is the route to MASS PRODU TION and large scale take up.
When there were numerous comments on this board about contracts I made my views clear that nothing should be expected probably this year on that front, and they have now confirmed that this scale up operation is planned over the next 12 months.
The categorically confirmed that they were in discussions with public health agencies and at government level regarding this scale up which for me again makes perfect sense as governments will be looking for cost effective options.
EXPECTATIONS WERE THE DEPLOYMENT OF 200 MICROTOX MONITORING UNITS PER MONTH BY MID 2022. This is huge.
Pure speculation but to produce a unit for say £10k each would produce £24m in revenue plus the recurring reagents sales.
One very exciting development is that they are now working on a multi-chip to detect numerous pathogens. This could have huge implications for both Mictotox PD and BT. For the PD units it means that the installed units could be looking for several pandemic potential viruses, helping to make sure this damn thing doesn’t happen again.
2. China Resources
For me this is the most exciting issue in the short term. Following the heads of terms RNS the scope of the original draft have been extended and the proposed timescale has over-run. From personal experience in selling companies this is no surprise. I know there will be those here that think there are problems, and possibly there are, but I have never has a HoT timescale come in on time, and although I have dealt in multi-millions china Resources are on a wholly new level. For me I saw no hint of concern from the directors in fact they were more than confident that this was coming soon. I don’t see the point in going on about the potential here except to re-affirm that you are basically in partnership with the state of china who have committed to invest over £18 billion into waste water over the next f
PART 2
3.Microtox BT
I try to be relatively level headed and not look through rose tinted glasses. So for me Mictotox BT development timescale is a disappointment. In the medium term this has the potential to literally be a game changer, but there are clearly delays in the development procedure and expectations created by G Brandon are not being fulfilled. I felt he whaffled a bit on this subject.
Having said that the science that has been proven in PD is exactly the same as that for BT. The breathaliser science (PBM Hale) is proven to work. The ongoing challenge is to develop that into a marketable and cost effective personal medical device which requires far more hoops to jump.
Now that we appear to be coming out of the covid pandemic and knowing that the Microtox BT has the potential of detecting over 40 other pathogens, and the fact that they are now working on the multi chip develoment, I do wonder if the emphasis is moving away from a ‘Covid test’ alone as in reality they have probably missed the boat and now looking more towards the other more long term applications.
A large emphasis was made on the multi chip development and how this would be utilised in the Microtox BT. The overall impression was that the target for Microtox BT was now more for the medical profession ie GPs which could revolutionize the referral process. Imagine a scenario where a simple breath test at GP level can eliminate several different possible ailments without the need to taking blood samples and sending off for testing.
Having said that talk of the cruise industry was again discussed so there is clearly some negotiations going on in that sphere.
All in all Microtox BT remains one of the most exciting prospects in the portfolio with the potential to be a real game changer but is going to take a longer time to develop than would have been hoped for. The latest snippet from Dr Moschos on 23rd July clearly shows the development is ongoing.
So we are off measuring particle sizes at the various places of the device under various conditions using a @particlesplus 8506 6 channel counter kindly loaned to @AnilNamdeoNCLwho is helping us here. We should have these results soon- again we're checking every i and t.
It is worth keeping an eye on Dr moschos twitter as he is quite active.
PART 3
4. Skin Trust Club
I have always been sceptical regarding the level of potential for this part of the portfolio but I have to say the pure enthusiasm and confidence of both Fionan Murray and Gerard Brandon is contagious and they are certainly putting our money where their mouth is.
.The SKT Android App to be launched by the end of August
.Announcement of a major marketing/Brand partner to be announced imminently with a view to build SKT into a global brand
. A major marketing initiative to be launched Sept/Oct
. Lab space by Sept/Oct will be geared up to 20,000 test kits capacity per month
.Launching the SKT Apps into us and China by mid 2022 and along with existing partners in US and china territories gearing up for a further 20,000 test kits per month
.Clients for test kits are B2C direct sales, small B2B (pharmacies, Dermatologists, beauticians etc) and large B2B (large cosmetics companies many of which are existing clients of Labskin) G Brandon has hinted on more than one occasion of the test kits being available in US drugstores so time will tell if that is just hot air or not
The additional AI data collected visa SKT is proving even invaluable for the Labskin clients services
For me if only a fraction comes to fruition the SP will be far above the current targets in the near/medium term and if most of it comes off in the med/long term the sky is the limit – you pays your money and takes your choice
Does Skin Trust Club actually offer the customer anything useful, or is that question just being swept under the rug?
I worry that its main purpose is just to distract shareholders from the unfullfilled promises we were given about the breathalyser last September.
HelloSanDiego - best you watch the AGM Presentation and research for the full answer - or just accept YES from me ...
HelloSanDiego, You've completely missed the value of Skin Trust Club data.
See my DVRG research at https://discord.gg/frd55mTvaA, here's a bit about the indirect benefits/revenue from the mirobiome data Skin Trust Club will generate:
++++++++++
I believe the real value is in the microbiome data and virtual clinical trials for Labskin corporate customers.
Clinical trials are damn expensive, skincare companies can no longer rely on relatively inexpensive animal testing, many countries have/are banning it and rightly so, we shouldn't be testing cosmetics on animals!
With Labskin AI backed data they can run virtual clinical trials, I'm estimating (educated guess) each virtual test subject will be worth around £500 per test. The margin on this revenue will be HIGH, VERY HIGH.
I also expect different microbiomes profiles will fetch different £ values. I'm estimating the average test subject will be worth £500, Labskin have no serious competition here, so they can set the price.
Consider a skincare company which wants to test a product on normal skin, there's going to be a lot of users with normal skin, so Labskin will have lots of normal skin microbiomes. Now compare that to a company testing a product which treats Psoriasis, Eczema, Rosacea... Labskin will have less microbiomes with that profile, they could fetch a higher value.
As Skin Trust Club grows its user base, the Labskin database gets larger with many more types of skin types and microbiomes. They already have the largest microbiome database in the world, this adds to their data pool: their moat gets deeper and deeper overtime protecting their position.
So where it takes 3,333 users to generate £1m in direct revenue a year, those same 3,333 users could generate a further £1.67m a year if each microbiome sample is used in ONE virtual clinical trial at a cost of £500 per virtual sample.
To gain useful data a skincare company will want a decent amount of virtual test subjects, 1,000 per virtual clinical test probably won't be unusual. A single virtual clinical trial could generate DVRG £500,000 in high margin revenue. These are not one off revenue amounts, the same 1,000 virtual test subjects could be used in dozens of clinical trials over a long-period of time.
It's impossible to estimate how much value there is here, but the fact DVRG have ramped up labspace and people so they can offer the Skin Trust Club service strongly suggests they are expecting to make huge revenue gains here. They already work with 18 of the top 20 skincare businesses and Labskin have no serious competition, they can set the price high because the alternative is pay a lot more for clinical trials with real people and wait weeks/months for the results.
++++++++++
I wrote the above before we knew they planned to be able to test 60,000 skin swabs a month over 3 continents by the end of 2022. This has the potential to generate £100m+ in revenue a year.
What I got was that people are expected to pay £25 a month for a test that gives them some details about their skin 'biome', which can then be passed to their beautician. The implication is that it will somehow make them look better.
But isn't that what dermatologists do if that's a service they actually need?
Wouldn't this customer demographic be more inclined to put the extra £25/month into designer label makeup?
Chanel lipstick, Dior foundation or some analytical data which may or may not be useful? I think I know what most people would be more inclined to pay for.
no they would not IMO and take up of the skintrust club confirms this is so.
HelloSanDiego, you should spend a few hours researching what Skin Trust Club is as you you've got it completely wrong.
The swab is self administered (at home), a user doesn't need a dermatologist to gain info about their skins microbiome and products which are suitable for their skin type.
What we discovered recently is professionals are also interested in adding Skin Trust Club to their offering, so dermatologists etc... are seeing value in a service which was designed to be used at home.
DVRG have the largest skin microbiome database in the world, this gives them something others cannot offer, lots of data backed by AI. Dermatologists can't offer what Skin Trust Club offer, they won't have the microbiome database to determine what the significance of a particular microbiome has AND won't have a database of products suitable for that microbiome.
David, I haven't got it completely wrong.
I know the swab is self administered at home, and I know that a person doesn't need a dermatologist to gain info about their skin's microbiome.
Here's what I'm unsure about:
- Does that info actually offer the customer any benefit?
- Are the products it recommends really any better for them?
- Would their money be better spent with a dermatologist?
- Is there any reason why the established cosmetics brands haven't been doing this for years if the info is potentially so valuable?
- L'Oreal is worth over €200bn. Why didn't they buy Integumen if there's so much potential there?
These are the questions I haven't seen answered.
HSD, speaking from personal experience the STC products recommended to me have improved my skin dramatically. Can't speak for others mind.
Totally agree re STC My wife says she has noticed a massive difference
Well impressed
Forgot to say that the two products recommended were sensibly priced . Both under £25
I’m also taking part in a Labskin remote clinical trial . Have to say I’m impressed with what they sent and how the process is managed
Gwoods, that's rubbish, Skin Trust Club roll out wasn't a bust, they are just starting the service after beta testing.
Did you expect £millions in revenue from a brand new service from day 1 BEFORE they had the staff to handle the tens of thousands of swabs etc... a month?
Potential revenue from 20,000 swabs a month is £18m per year (assuming £75 per swab). That's the capacity they are aiming for in the UK by the end of this year.
According to https://www.**********.co.uk/rns/announcement/8408c738-7051-48ab-88e3-cfb7b1de4949/ their max capacity to end of June was 5,000 (I'm assuming monthly???). At £75 per swab that's £375k in revenue per month, IF running at full capacity it's £2.25m in revenue between June 1st and December 31st.
Takes time to build a business, some of the recent cash is for ramping up the Skin Trust Club service, takes labspace and manpower to process thousands of swabs a month.
Why would they be ramping up ability to test up to 20,000 swabs per month in the UK and 20,000 in the US and 20,000 in China by end of 2022 if the service was already a bust?
We can't judge Skin Trust Club at this stage (it's like a new startup), going to be at least another year before we know if it's gained and maintained traction.
HelloSanDiego, you said "What I got was that people are expected to pay £25 a month for a test that gives them some details about their skin 'biome', which can then be passed to their beautician. The implication is that it will somehow make them look better".
I read that as you believed they needed a beautician to understand the results, which isn't the case. Skin Trust Club have a database of products they recommend based on results, so the users doesn't need anyone to analyse the results, they just need the app. However dermatologists etc... are seeing the value in what the app offers and can use that to help their clients with skin problems.
Your questions:
- Does that info actually offer the customer any benefit?
In theory yes, it's a new service, time will tell if people find benefit from the app. You'll see a few here have used the service and say it's useful.
- Are the products it recommends really any better for them?
As above.
- Would their money be better spent with a dermatologist?
Depends on the individual and skin issues. Would you see a dermatologist for minor skin issues or because you just wanted to get the best out of your 'normal' skin?
- Is there any reason why the established cosmetics brands haven't been doing this for years if the info is potentially so valuable?
Someone has to do it first and Labskin have been building their microbiome database for over a decade, that's a big hurdle to leap over for a new entry.
- L'Oreal is worth over €200bn. Why didn't they buy Integumen if there's so much potential there?
You can make that argument for lots of things, why didn't Pfizer buy BioNTech BEFORE they created a groundbreaking Covid vaccine? Why didn't Microsoft buy ZOOM (competitor to MS Teams) before the pandemic and loads of people started using ZOOM? Why didn't a company like SKY buy Netflix before it grew so large?
"I read that as you believed they needed a beautician to understand the results, which isn't the case"
I think it was just a misunderstanding then. I'm 90% sure it was Gerard Brandon who first suggested, in a recent video, the ability for customers to send the data to their beautician using their smartphone. That's why I thought it was a major selling point.
It's good to hear that some people have seen a benefit from it. But anecdotal evidence of the service's benefits from a few shareholders only goes part of the way to overcoming my doubts. If it's being marketed, either directly or implicitly, as a medical service I'd like to see some trial data proving it works.
It is not being marketed as a medical device.
I said medical service.
I also said "implicitly".
Sometimes you've just got to tell them to F uc k Off!
sipps, David,
great contributions. Thank you. Really well-rounded overview and so much more detail than I could either be bothered to collate or find the time to write.
To add to the why/utility element of STC. Dermatologists are to some degree limited in what they can achieve from inspection/observation; it is not possible to account for genetic heritage/undiagnosed allergen sensitivity/non beneficial bacterial contamination from mere observation, all of which I believe can be encompassed in the STC sampling; this why DVRG are receiving interest from dermatologists, it gives them access to an additional, useful diagnostic tool with demonstrable utility.
Ingredients in many cosmetics, both natural and synthetic, can have a significant deleterious effect on skin health (especially true of cheaper formulations) as can elements (favoured by ladies in particular)such as perfumes, as an example.
In years gone by, many ostensibly 'high-end' cosmetics companies produced products laced with perfumes, both synthetic and natural and called their so-called products claimed to be hypo-allergenic; they regularly had customers complaining bitterly that their expensive product had caused all manner of problems; acne; rashes etc
Lanolin is a common low-cost ingredient that many skins fail to tolerate; people use these products for years, flopping around from one inappropriate product to another, not understanding what is at the root of their problem.
This then (hopefully) gives you a little insight into the potential utility of the product STC is offering to the lay person; It facilitates you making better choices in selecting skin care products that exclude the ingredients that the science says you should avoid, for your particular skin type and microbiome makeup.
Hope that illuminates things for ya!
Urggh! hadn't realised whilst writing that, the GWoods/Muggins crew had arrived for some concerted de-ramping.....geez.
Gwoods, I'm not missing the trends at all, I see them clearly.
It's a recent fact they have 18 of the top 20 skincare companies as clients, that's great news, it's because they significantly improved the Labskin service (went from a basic cloned skin service at low cost to one backed by AI, a full service at higher cost) and Skin Trust Club microbiome data feeds into this new service.
All that microbiome data has value to skincare companies performing clinical trials, they can pre-test new formulas via Skinlab to rule out bad formulations before spending big on clinical trials. They will also be able to analyse how a formulation impacted the microbiome and use it in marketing rather than the usual 68 out of 78 women said their skin felt better blah...
If you don't see this, you are missing the obvious reason why Skin Trust Club is so valuable long-term. Direct revenue from users of Skin Trust Club, indirect revenue selling the microbiome data to Labskin clients for virtual clinical trials etc... the latter has the potential to make more HIGH margin revenue than the former.
Have to say that's the first time I've seen someone try to spin really good news (18/20 top skin companies as clients) as bad news, very strange. Now they are adding the top 30, top 40, top 50 companies as clients, is that also bad news? I'm sure you are aware there are hundreds of skincare companies and between them they create thousands of new products which require testing.
DavidLaw, I fear you are wasting your time. You are either dealing with an individual that is simply dishonest, or so stupid that are incapable of carrying out the most basic of research:
@gjbrandon
#Labskin clients now (" These) include the likes of Estée Lauder, Unilever and L’Occitane – and that’s just the start of a long list.”
3:56 pm · 19 Oct 2020·
https://mobile.twitter.com/gjbrandon/status/1318204387572043776
GWoods. Are you smoking something strange? What’s the matter with you? Deramping is one thing, but get your facts right. You’re a joke.
I reported the muppet Rat.
This person continually ignores reasonable debated points, and insists on bullying people around demonstrably factual, established points. In this instance, he implies the company is being untruthful about its involvement with 18 companies involved in healthcare. The company has established contracts for lab services in place, yielding revenue with these companies..... He turns up to misinform, disrupt, de-ramp. He's not a shareholder, he's a manipulator.