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Net, of course it is Zenakine. Dior aren't going to put it on their label and risk a customer deciding to buy another cheaper product with the same "Zenakine" ingredient...

You can keep searching for the Holy Grail and some great detective work has been done, but from an investment point of view you need to accept that the Holy Grail is all around hiding in plain view...

And neither is Sederma going to let SBTX disclose their client list...

JohnLewis

In September you were wondering when might be the time to top up. My view was after the half year results because AIM investors are fickle and we knew the figures wouldn't be great. So now the results are out and now is the time to top up if you are a long term believer in this share (in my humble opinion🤣).

There has been a constant search by PI's for mention of Zenakine on a cosmetic cream. And hey presto they found one! (good work!). But for sure there are many other creams out there in the market worldwide that contain Zenakine but just list the technical ingredients not the trade name (and posters previously posted evidence of this). Therefore the zero response of the share price to this "discovery" is entirely logical. Big investors bought up shares last year knowing this whilst some small investors lost their nerve. The Holy Grail is all around us we just can't see it as we are focussing too much on the trade name "Zenakine".

For those waiting forlornly for a sign from the company, I do not expect SBTX to make any announcement. I hope instead the the company focusses on the things they can control, which in the short term are the companies they acquired and the Axis-Biotix products they launched. These need more focus and a determined effort to maximise the benefit (or possibly minimise the loss in the latter case).

I remain positive for the outlook for SBTX.

The underlying business of OMG is interesting and I really want to believe it is going in the right direction but I can't work out if the acquisitions are working. The CEO says they target acquisitions which are "earnings enhancing" but the results don't seem to tally with this as the margins in acquired Smart Manufacturing businesses are lower than the margins in the existing business. The CFO only says of the recent acquisitions that they "have contributed to group profitability" but that is not the same as being "earnings enhancing". So I guess my concern is the Return on Capital in the acquired businesses is just too low.

Anecdotally I do find it concerning that OMG's description of the IVS business in each RNS still lists a key customer as Zytronics, which is basically a company which is bust and will not be giving them any business...Surely they should update this?

Anyone got any thoughts as to whether this business is going in the right direction and what catalysts there are for a rerate of the shares? (reasoned insights please, not blatant ramping nor just management bashing).

Aquae, as far as I can see Axis-Biotix achieved turnover of £280,000 in the WHOLE of last financial year, a 13% increase on the previous year, but still only a paltry level of turnover. I cannot see how the run rate from July to December suddenly increased to over 100% to give £300k turnover in 6 months even if Superdrug sold some (and I'd bet they hadn't sold much to end December last year as they had barely put the stock out in a few stores....).

Am I missing something here? Or are some shareholders (and the management) wearing rose-tinted spectacles when it comes to Axis-Biotix?

p.s. I remain very optimistic about the progress of SBTX, just not Axis-Biotix. Let's have a rain check on this after the first half numbers.

Yes Aquae, money and effort being spent on converting to capsules for Axis-Biotix. I'm just not convinced this is the best opportunity for the enlarged (post acquisitions) SBTX. With product extensions to the Dermatonics brand there is greater market potential, lower production and marketing costs, faster execution and higher margin.

I guess we'll just have to see what Axis-Biotix delivers - I'm factoring in zero profit from the exercise, just breakeven. Not a disaster but I just think there are better opportunities with lower execution risk.

Hello Aquae and Happy New Year! I agree SBTX don't have the people to work on all the potential opportunities.

I would rather they focussed on quick wins like product extensions to the existing Dermatonics range, and by that I mean creams/balms not medical products at this stage. As for Axis-Biotix, it is a commendable product(s) but will take a lot of time to build into a business that delivers significant sales and, more importantly, profits.

Maximising the benefits of the acquisitions (on which significant sums were paid for goodwill) should deliver greater and quicker returns than building a new product business almost from scratch (the existing Axis-Biotix business is so tiny they are virtually building from zero and the addressable market is so much smaller than the one targeted by Dermatonics). So, for me, it is about where the best opportunities lie for SBTX in the short term, given the limited management resource available within a small company.

Myinvest, agree that building a brand (such as Axis-Biotix which currently has minimal sales) is hard work. In contrast SBTX own a brand - Dermatonics (and Dermatonics built this brand over years of investment, for which SBTX paid goodwill). So for a product extension of the Dermatonics range, you just ask Boots and Superdrug if they will stock your Day and Night Cream in addition to your Foot Balm and Hand Cream....and you add it to your existing online offering. Much easier than trying to build up Axis-Biotix, and especially as Axis-Biotix requires an external non-UK manufacturer with very long lead times and large minimum quantities. This reduces your margin and adds to risk of insufficient or excessive stock if your forecasts are way off the mark....

Shychap, yes SBTX management need to put more focus on the potential for Dermatonics with extension of product range as you suggest. I think Day and Night Creams with Zenakine would be a great fit. The addressable market here is so much bigger than that for Axis-Biotix. And the manufacturing can be in-house and distribution already in place with online, Boots and Superdrug - a much easier proposition therefore. Time and money would have been spent developing the Dermatonics brand and SBTX are not capitalising on this goodwill (which they paid for). Given the limitations of management time and expertise in a small company I would much rather see the effort devoted to Dermatonics (especially if it further enhances the Zenakine opportunity).

Shy, I agree the acquisitions were actually ok given the situation at the time and from what I have seen so far, I don't think they are a problem. However, bearing in mind the leaders of both companies sold to leave/retire, the SBTX management is very stretched and do not seem to be making the most of what they acquired. As a consequence these two acquisitions will likely neither depress nor enhance earnings.

I'm hoping there will be no more acquisitions for the time being but, if there were, it must be a company with strong management which is staying with the business because SBTX management do not have the bandwidth to manage another acquisition.

To my mind the potential market for Axis-Biotix is not big enough to justify the time and capital being spent on it, even though the product has merit. An online only strategy would have been sufficient for this product's potential. I suspect the outcome therefore will be decidedly average and won't move the share price. Not a disaster in the scheme of things but not the best use of capital (but I would be delighted to be proved wrong on this 🤣).

Overall I am positive because Sederma have a good track record and don't need any input from SBTX to grow the Zenakine business.

Hi Pharmhall, I'm persisting with some exposure to UK Small and Mid Caps given I'm based here but it's challenging sometimes. Even if one's analysis is correct and timing reasonable it can take a long while for the market to agree - probably the inverse of "a rising tide lifting all boats" 😒.

If you are focused on UK small and mid-cap and achieved a reasonable return for the year I reckon that's good work. Ken Wotton at Gresham House reckons the tide may turn for UK Small Caps next year - I'm hoping he's right 🤣

https://www.trustnet.com/news/13465812/gresham-houses-ken-wotton-uk-small-caps-could-return-over-30-next-year

Hi John, great post (even if off-topic versus the title 😁). Worth adding it was not just the decision to sell gold but the manner in which it was sold (announcing auctions in advance depressing the price further). It demonstrated the ignorance of markets and basic economics of both politician and UK Treasury.

UK taxpayers have been poorly served by our politicians and the UK Treasury on more than one occasion. The debacle of Black Wednesday (16/09/92) is another example which cost us billions. Both these financial disasters were born out of political motives and helped along by an incompetent UK Treasury.

No matter whether a party is to the left or the right, political motivations are the worst guiding hands when dealing with the country's finances and I fear we find ourselves in the same position yet again today...

Happy Christmas all and apologies for going off topic which I (almost) never do 😊.

Hi net, agree your point about startups and SBTX has certainly gone through that phase.

However SBTX has been quoted for over 8 years and is no longer in startup mode having stated in the recent accounts that no capital needs to be raised for the company to stay in business - "we have been able to update expectations further to be cash positive for the foreseeable future".

So the CEO needs to pivot to communications that are more in line with an established business which reports twice a year and holds an IMC event or equivalent after each report. There are quite a few companies on AIM who operate successfully in exactly this mode and in most reports the CEO is able to report a modest beat on earnings expectations (i.e. they forecast conservatively and so underpromise and overdeliver). I expect that was the advice of the new NOMAD (Singer) hence why shareholder communications have been substantially reduced (this was hinted at in the August 14th trading update).

Companies which can establish a track record of steady growth and profitability attract institutional investors (including, for example, AIM VCT funds). If you are a private investor with a large stake in SBTX this is exactly what you need as, barring a takeover, selling to an institution is often the only way you can exit your holding selling at a profit (otherwise trying to sell crashes the share price before you can exit).

And if you are a private investor with a large stake you generally need an investment horizon measured in years and not months as it takes time to establish a track record. This is the game now folks...

Forecasts are almost always wrong, but as a company management it is wise to be "wrong" by exceeding expectations, not missing them. Quoted US companies report quarterly so should be more accurate at forecasting over a shorter period and yet generally about 75% of the S&P 500 exceed expectations quarter after quarter. I wonder why 🤣

There are lots of complaints on here that the management has overpromised and underdelivered. And then complaints that the management is underforecasting 🤣

The natural human response to having promised more than you delivered is to underpromise and overdeliver going forward. Underpromising and overdelivering is standard practice in most companies. I think we will have to get used to it at SBTX. The management cannot afford to miss again.

Yes agree Toyin. I think we can conclude the SBTX management will do everything they can not to be in the position next time that they miss on "expectations", and indeed to be as sure as they can that they will exceed "market expectations" 🤣.

Shychap, regional players with slick social media are taking an ever larger share of the cosmetics business and these are a significant proportion of Sederma's customer base (look up Croda's constant references to "L&R customers", that is, Local & Regional customers). So products containing Zenakine are likely available to the consumer all over the world without us being able to identify at this stage. So don't expect some "holy grail" moment where a "Zenakine inside" product appears. The only "holy grail" moments will be in royalty figures as and when released.

As for "golden goose" it is actually an ever increasing "flock of geese" all laying golden eggs which are harvested each quarter 🤣

Whilst SBTX cannot sell Zenakine to any other Cosmetic company, I cannot see that they are prevented from buying Zenakine from Croda to put into their own retail cosmetic product - after all, it is just another sale for Croda. Like others on this board I believe this had already been agreed at outset, as was the restriction that SBTX cannot sell Zenakine to cosmetic companies (that is Croda's exclusive contractual right). I do not believe it is too early to do this or that it could harm the relationship. The only harm being caused to the relationship is the behaviour of what appears to be a small minority of misguided shareholders 😢

A Day and a Night Cream under the Dermatonics brand would fit fine with the Dermatonics brand identity (and of course Dermatonics already have distribution deals for Dermatonics products in Boots and Superdrug as well as their own online sales). The market for these creams is huge (much larger than the market Axis-Biotix is targeting) and Dermatonics need only gain a very small share to make a decent return. If BTS is now making the hand cream and the heel balm I would bet they can make a face cream.

It should be a project with much lower capital costs than Axis-Biotix since the in-house manufacture will have shorter lead times and the brand and distribution system is already in place. So it should be a far cheaper go-to-market strategy than launching Axis-Biotix. For this reason I think the SBTX management could handle this project right now whereas another acquisition or launch of a new pillar is a major undertaking which would be spreading limited management resources far too thinly just now (especially with management spending non-productive time defending accusations from shareholders and others about financial conduct 😒).

The Croda deal is great. The acquisitions are ok (especially if we can build them organically with patient shareholders🤣) .

You have to gamble a bit to build a business. The first 2 gambles paid off and on balance the odds were favourable. But for Axis-Biotix, with 90+ days to manufacture, severe penalties if we run out , and a total addressable market significantly smaller than general cosmetic creams, the odds may not be as good on this? Hopefully you are a very lucky gambler! If it doesn't pay off no worries, not a big deal in the scheme of things...

How about boiling the pot on Dermatonics? A Day Cream and a Night Cream powered by Zenakine, branded Dermatonics, and manufactured by BTS would be great. Maybe we don't need more acquisitions just yet? Lots of potential to build organically with what we have....

Agree DireCons, have been saying the same, the Royalties are looking very good. I do however believe there are some products out there containing Zenakine available to the consumer already (more to come of course) and this helps explain the higher royalties. But Sederma are not going to tell you what products are out there as that is tantamount to publishing their customer list.

Except the royalties trump everything and they aren't in the forecast anywhere near the level of reality....from a management perspective why would you not want to exceed expectations?