Skinbiotherap. Regulatory News (SBTX)

15 December 2022

SkinBioTherapeutics plc

Unaudited full year results

Newcastle upon Tyne, UK - SkinBioTherapeutics plc (AIM: SBTX or the "Group"), a life sciences company focused on skin health, announces its unaudited full year consolidated results for the 12 months to 30 June 2022.

Operational and financial highlights

· Commercial progress of probiotic food supplement, AxisBiotix-Ps™

o  Influencer marketing programme initiated February 2022

o  Retention rates of subscribers at 80%+; steady but slow sales growth

· Partnership with Croda plc is in the product development stage, with timing controlled by Croda. Product launch expected to occur in 2023 which would trigger initial royalties revenues from Croda later in the calendar year

· Continued progress on formulation of acne food supplement with consumer study to start in 2023

· Oral research programme and skin health and disease programme at the University of Manchester

· Appointments of full time Chief Financial Officer and non-executive director

· Cash as of 30 June 2022, £1.8m (2021: £4.6m)

Stuart Ashman, CEO of SkinBioTherapeutics, said:

"This financial year has been a mixed one for the Group. The team experienced the excitement of launching its rst direct to consumer product, and the ow of positive feedback from customers who have found relief for their conditions - for some, for the rst time in decades. The testimonials taken from these patients and the ongoing high retention rates of 80%+ on a monthly basis reinforce the high level of condence that management has in the product and its long-term market potential. Progress from the other pillars illustrate the additional commercial opportunities within the Group and support the early discussions ongoing with potential industry partners.

"Post initial launch of the AxisBiotix-Ps™ product, the Board believes it is in the interests of the Company and a better way to generate long term value to its shareholders to seek to secure an exclusive deal with a global multinational for AxisBiotix-Ps™, rather than signing multiple distribution deals across different markets. While the Company looks to undertake out-licensing discussions, it will continue to roll out the AxisBiotix-Ps™ product into Europe and the Rest of World.

"SkinBioTherapeutics has a small team which has achieved a signicant amount in 12 months. Development continues apace in the post year period and another busy, exciting year is anticipated in 2023."

The Company's audited report and accounts for the year ended 30 June 2022, including all notes to the financial statements, are expected to be published and sent to shareholders by 23 December 2022.

-Ends-

For more information, please contact:

About SkinBioTherapeutics plc

SkinBioTherapeutics is a life science company focused on skin health. The Group's proprietary platform technology, SkinBiotix®, is based upon discoveries made by Professor Catherine O'Neill and Professor Andrew McBain.

The Group is targeting a number of skin healthcare sectors, the most advanced of which are cosmetic skincare and food supplements to modulate the immune system by harnessing the gut-skin axis. In each area SkinBioTherapeutics plans to exemplify its technology through human studies. The Group's first product, AxisBiotix-Ps™, a food supplement to address the symptoms of mild to moderate psoriasis was launched on 29 October - World Psoriasis Day.

The Group listed on AIM in April 2017 and is based in Newcastle upon Tyne, UK. For more information, visit: www.skinbiotherapeutics.com.

Caution regarding forward looking statements

Certain statements in this announcement, are, or may be deemed to be, forward looking statements. Forward looking statements are identied by their use of terms and phrases such as ''believe'', ''could'', "should" ''envisage'', ''estimate'', ''intend'', ''may'', ''plan'', ''potentially'', "expect", ''will'' or the negative of those, variations or comparable expressions, including references to assumptions. These forward-looking statements are not based on historical facts but rather on the Directors' current expectations and assumptions regarding the Group's future growth, results of operations, performance, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, business prospects and opportunities. Such forward looking statements reect the Directors' current beliefs and assumptions and are based on information currently available to the Directors.

Chairman and Chief Executive's Statement

Financial year 2022 saw a significant milestone in the Group's commercial development with the successful launch of AxisBiotix-Ps™. Following the BRIGHT Study in early 2021, there were very encouraging signs that AxisBiotix-Ps™ could become a truly remarkable treatment of psoriasis symptoms. As such, we ran a soft sales launch of the product in October 2021 from which we have seen sales growth and very high retention rates from subscribers of the product.

The rate of sales growth has been significantly lower than the Group originally anticipated which was disappointing to all stakeholders. The Directors believe that growth could have been accelerated faster if distribution had been handed over to third party distributors, however, the terms discussed with regional providers were deemed by the Directors as not beneficial to the Group in the longer term.

Post year end, sales have continued to increase albeit still at a slow pace, however, the retention rate of approximately 80% on a monthly basis supports management's belief of the long-term potential for the AxisBiotix-Ps™ product. The Board believes it is in the interests of the Company and a better way to generate long term value to its shareholders to seek to secure an exclusive deal with a global multinational for AxisBiotix-Ps™, rather than signing multiple distribution deals across different markets. 

The Company's strategy also involves the evaluation of inorganic opportunities that would provide synergies and accelerated routes to market. The Group continues to review acquisition opportunities. More information is provided below on the current acquisition strategy. 

Over the year, the Group has also been pushing forward other strategic pillars, including the cosmetic active ingredient programme with Croda, the oral programme, and the formulation of the acne programme. The Group has generated positive progress across these three areas post year end and the Directors anticipate further progress in the new financial year.

The make-up of the Company changed significantly during 2022, with the addition of several new members to the team. Doug Quinn, who has left the Company with the best wishes of the Board, was replaced by a full-time CFO, Manprit Randhawa, whose previous experience in growth companies will be invaluable to the Company as we move from R&D to commercialization across several pillars over the coming years. In addition, staff numbers have increased from 3 full time members of staff to 8 during 2022, highlighting the investments into the commercial delivery of AxisBiotix-Ps™, as well as the build-out of the internal formulation and scientific capabilities the Company has at its disposal.

Financial review

In the year to 30 June 2022, the Group reported sales of £75k (2021: £nil). Cost of sales, including the initial introductory offer and shipping, were £29k (2021: £nil), and gross profits were £46k (2021: £nil). As stated at the interims, as shipping volumes increase, the operating margin should improve due to economies of scale (bulk shipping) and onward local distribution.

Overall expenses were £2,761k (2021: £1,497k). This included research and development expenditure of £861k (2021: £506k), which covered the consumer study for AxisBiotix-Ps™ and the oral research programme. In addition, ongoing operating expenses of £1,856k (2021: £991k) reflected the adaption of the business infrastructure to conduct direct sales to consumers and ongoing marketing costs.

The operating loss was £2,716k (2021: £1,497k).

The cash balance as at 30 June 2022 was £1,805k (2021: £4,610k) reflecting the increased cost base and initial stocking prior to the AxisBiotix-Ps™ launch.

Current trading and outlook

Post year end, revenues of AxisBiotix-Ps™ have continued to increase gradually from the sales run rate as at 30 June 2022, as consumers adopt the product. Marketing spend on the AxisBiotix-Ps product has been significantly reduced from earlier in 2022 including the halting of the influencer campaign. Retention rates for subscribers are currently at least 80% with retention rates being measured as the number of subscribers who are remaining as a subscriber at the end of each month, compared to the same cohort that were in existence at the start of the previous month.

Acquisition strategy

The Group is in ongoing discussions to acquire a private company that provides a variety of branded topical products for common dermatological conditions such as psoriasis and eczema to NHS hospitals, dispensing practices and retail pharmacies. The proposed target is profitable and the Group sees a number of synergies to improve this. However, there is no certainty of timing or execution as the Company would need to agree additional funding using debt and/or equity and any acquisition would be conditional on satisfactory diligence.

Operational review

SkinBiotix Pillar (skincare/cosmetics)

This is the first pillar for the Group, based on its proprietary discovery platform. In November 2019, SkinBiotix® signed a deal with Sederma, the specialist cosmetic division of Croda Plc, to develop, manufacture and commercialise the SkinBiotix® platform. The aim was to develop an active ingredient which would be incorporated in consumer skincare indications. During the financial year, Sederma has been scaling-up the manufacturing process, identifying additional potential scientific and marketing claims for the end ingredient, and started to engage with its 12,000+ strong customer base. Post year end, the Company continues to engage with Croda Plc on the launch plan of SkinBiotix®. The product development timing is controlled by Croda, however the Directors believe that the product launch will occur in 2023 and thus the Directors expect some initial royalties revenues from Croda to commence in 2023.

As part of the agreement with Croda/Sederma, SkinBioTherapeutics is able to develop its own line of cosmetic-related SkinBiotix® products. The formulation is based on the one from Sederma.

AxisBiotix Pillar (gut-skin axis)

- AxisBiotix-Ps™ (Psoriasis)

The first product to be commercially launched by SkinBioTherapeutics is Axis-Biotix-Ps™, a probiotic food supplement developed to help alleviate the symptoms associated with psoriasis. Following a soft launch on 29 October 2021, an active marketing initiative began running from February 2022.

Although the primary focus of the Group is to partner its products and technologies with industry players, the global pandemic forced a change in strategy with this pillar, to sell direct to consumers. The restrictions of COVID-19 resulted in a consumer participant study rather than a hospital-based study. However, the results of the study were still compelling and have played a significant part in the ongoing marketing of the product to the psoriasis community.

The soft launch for the UK and US markets took place in October 2021 and was followed by a more concerted marketing push in February 2022. Axis-Biotix-Ps™ is sold in boxes of 28 sachets with sufferers taking one sachet per day. Results from the consumer study indicated it can take 3-4 weeks for the benefits of AxisBiotix-Ps™ to be achieved and so during the launch period, customers received an additional box for free. The product can be bought as a single purchase (box of 28 sachets) or subscribed for on a 28- or 56-day cycle. The website can be found here.

The marketing push was focused around social media "influencers" who were themselves sufferers of psoriasis. The Group commissioned 10 of these influencers to engage with their followers via social media, telling the story from receipt of the box and taking the supplement to talking about its effects. These posts and the profile of AxisBiotix-Ps™ were amplified further through online advertising and video testimonials. The ultimate aim is to educate the psoriatic community about the AxisBiotix-Ps™ brand and the potential for probiotic supplements in managing and supporting their condition. The influencer campaign has now concluded.

Geographically, the main focus was consumers in the UK and US.  While there are early discussions with potential parties around out-licensing, management continues to look at developing new markets and refining its operations to build a stronger validation case around the AxisBiotix-Ps™ product. Since financial year end, the Group has been preparing to launch in Europe, starting with Spain and Italy, following regulatory approval. European sales can be managed directly via the Group's e-commerce platform with distribution from warehouses in the UK (for UK customers) and the Netherlands (for European customers).

Many people who suffer from psoriasis are highly engaged when it comes to talking about the condition and different treatments; we have seen this in real time about AxisBiotix-Ps™ during the consumer study and post launch. As a result of this engagement and also with the US and UK Psoriasis patient associations, internal expectations for sales growth were high. However, even though management are happy with the retention rates levels, sales have grown significantly slower than expected, as disclosed to shareholders in the HY results. Sales at year end were £75k (2021: £Nil).

The sales rate of growth up to and post year end might have accelerated more steeply with a greater marketing spend and/or by using third party distributors. The Group was not set up to be a B2C business with the associated sales spend, with this initial B2C strategy coming about as a result of adaptation from COVID-19; management has always managed resources in a careful manner and was not prepared to redirect resources to the detriment of the other products and pillars being developed. As a result, the Board decided it was not in the best interests of the Group to pursue third party distribution deals which might jeopardise future potential strategic tie-ups with industry partners.

- Acne

The next product in development under the AsixBiotix pillar is one targeting acne. Early signs of efficacy were seen in the participant study with benefits reported by people suffering from other conditions, from acne, rosacea and eczema.

During the year, the Group has been developing a new bacterial blend. Management is pleased to report that the pilot formulation is stable and it is looking to design a consumer study in the same form as the BRIGHT study for Axis-Biotix-Ps™. This study is anticipated to commence during 2023. In the meantime, the team is assessing the options for the most appropriate commercialisation strategy, on the basis of a positive outcome.

MediBiotix Pillar (MedTech applications e.g. woundcare)

The MediBiotix Pillar is focusing on applying SkinBiotix technology in medical device applications, looking at targeting eczema in the first instance. The aim would be to alleviate eczema symptoms using the gut-skin axis in the same way that AxisBiotix acts to alleviate symptoms in psoriasis. This development route is still being explored by management.

Other areas for application include various classes of skin wounds. Due to the complexity but significant opportunity of the woundcare area, Management believes a joint development agreement with an industry partner is the best way forward. Early discussions with potential global partners in the medtech sector have commenced.

CleanBiotix Pillar (anti-infection)

With the impact of the pandemic coupled with the increasing incidence of healthcare acquired infections, such as MRSA, preventing infection is of paramount concern to healthcare practitioners. From early studies of SkinBiotix, there is data demonstrating its effectiveness in preventing the most common skin pathogen, Staphylococcus aureus (SA), from sticking to and growing on skin surfaces. The potential for SkinBiotix technology in this area is exciting, but is also challenging, therefore, this would be another area where outlicensing the programme would be the obvious option.

Other Research Programmes

During the year, the Group has been running two research programmes with the University of Manchester; an oral programme and an inflammation study.

The first phase of the oral programme was completed in August 2022. The study was conducted by Professor Andrew McBain of the University of Manchester, and results strongly supported the use of specific bacterial (probiotic) strains or lysates in the prevention of periodontal (gum) disease. Application of a mixture of bacteria and lysates to oral cells showed protection against the pathogen associated with periodontal disease and also a dampening effect on inflammation. Different bacteria/lysates showed different abilities, therefore further work is required to identify the optimal mix to take forward into human studies. Management is encouraged by the strong foundation this data provides for the Group's continued research into the benefits of probiotics on oral health and positions the team to commence early licensing talks.

The second programme is looking at how the microbiome can influence and rebalance the body's response to inflammation in skin health and skin disease. This study is progressing as expected and is due to read-out at the end of 2023.

Board and management appointments

In April 2022, the Group appointed its first full time Chief Financial Officer and non-executive director, Manprit Randhawa. Manprit was previously CFO at the leading educational technology firm, Juniper Education Group, and before then, he was CFO at Smoothwall and also at Onbone Oy, a medical technology business. He took over from Doug Quinn after an orderly handover during Q2 2022.

The Group also strengthened the Board with the appointment of Danielle Bekker as a non-executive Director. She has considerable experience in direct-to-consumer marketing, including a focus on the use of influencers and digital media in the FMCG space, which has been helpful with the campaigns run to promote AxisBiotix-Ps™.

Martin Hunt (Non-executive Chairman)

Stuart J. Ashman (Chief Executive Officer)

Consolidated Statement of Comprehensive Income

For the Year Ended 30 June 2022

Consolidated Statement of Financial Position

As at 30 June 2022

Consolidated Statement of Changes in Equity

For the Year Ended 30 June 2022

Share capital is the amount subscribed for shares at nominal value.

Share premium is the amount subscribed for share capital in excess of nominal value.

Other reserves arise from the equity element of a convertible loan issued and converted in the period to 30 June 2017, and from share options granted.

Retained earnings represents accumulated profit or losses to date.

No Statement of Comprehensive Income is presented in these financial statements for the Parent Company as provided by Section 408 of the Companies Act 2006. The loss for the financial year dealt with in the financial statements of the Parent Company was £1,964,209 (2020: £1,222,665)

Company Statement of Changes in Equity

For the Year Ended 30 June 2022

Share capital is the amount subscribed for shares at nominal value.

Share premium is the amount subscribed for share capital in excess of nominal value.

Other reserves arise from the equity element of a convertible loan issued and converted in the period to 30 June 2017, and from share options granted.

Retained earnings represents accumulated profit or losses to date.

Notes to the Financial Statements

For the Year Ended 30 June 2021

1 General information

SkinBioTherapeutics plc ('the Company') is a public limited company incorporated in England under the Companies Act and quoted on the AIM market of the London Stock Exchange (AIM: SBTX). The address of its registered office is given on page 1.

The principal activity of the Group is the identification and development of technology that harnesses the human microbiome to improve health.

2 Significant accounting policies and basis of preparation

a) Statement of compliance

The consolidated and company financial statements of SkinBioTherapeutics plc have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union, IFRS Interpretations Committee (IFRIC) and the Companies Act 2006 applicable to companies reporting under IFRS.

b) Basis of preparation

The consolidated and company financial statements have been prepared under the historical cost convention modified by the revaluation of certain financial instruments. The accounting policies have been applied consistently in all material respects.

The consolidated and company financial statements are presented in Sterling (£) as this is the predominant functional currency of the Group and Company, and is the currency of the primary economic environment in which it operates. Foreign transactions are accounted in accordance with the policies set out below.

c) Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 30 June each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

d) Application of new and revised International Financial Reporting Standards (IFRSs) (continued)

The adoption of these Standards and Interpretations is not expected to have a material impact on the financial information of the Group in the period of initial application when they come into effect.

3 Segmental information

IFRS 8 'Operating Segments' requires operating segments to be determined based on The Group's internal reporting to the Chief Operating Decision Maker. The Chief Operating Decision Maker has been determined to be The Board of Directors which receives information on the basis of the Group's operations in key geographical territories, based on the Group's management and internal reporting structure. Based on this assessment the Group consider there to be 2 operating segments.

Administrative expenses are not segmented for accounting purposes.

Year Ended 30 June 2022

Due to the nature of its activities The Group is not reliant on any individual major customers.

4 Expenses - analysis by nature

Group

2022 2021

£ £

Other income (1,032) (137)

Selling and distribution costs 43,804 -

Depreciation of right-of-use asset 29,422 2,429 Depreciation of plant and equipment - 1,700

Research and development 861,383 505,627

Directors remuneration (including share-based compensation) 624,563 577,216

Staff costs 142,342 36,224

Foreign exchange differences 1,127 2,755

Auditors remuneration

- audit fees 26,250 17,000

- other services 2,260 3,200

Total operating expenses 2,761,459 1,497,108

5 Finance costs

Group

2022 2021

£ £

Interest payable 10,135 926

10,135 926

Interest payable represents amounts arising on leases accounted for under IFRS 16.

All staff were directly employed by SkinBioTherapeutics Plc.

Some of these staff costs are included within research and development and some in share issue costs.

All the directors above can be considered to be key management and have the responsibility for planning, directing and controlling, directly or indirectly, the activities of the Company.

The remuneration of directors and key executives is determined by the remuneration committee having regard to the performance of individuals and market trends.

The Company operates a defined contribution pension scheme for employees and directors. The assets of the scheme are held separately from those of the Company in independently administered funds. The amounts outstanding at 30 June 2022 are £2,633 (2021: £1,650).

The number of directors to whom retirement benefits are accruing in respect of qualifying services under defined contribution pension schemes is 2 (2021: 2). The highest paid director received total emoluments of £368,449 (2021: £372,718) during the year.

7 Taxation

Group

Income taxes recognised in profit or loss 2022 2021

£ £

Current tax

Current period - UK corporation tax - -

R&D tax credit 173,729 67,294

Tax credit for the year 199,622 65,065

The tax charge for each period can be reconciled to the loss per the statement of comprehensive income as follows:

The Group has an unrecognised deferred tax asset of £1,132,844 (2021: £765,964) at the period end, which has not been recognised in the financial statements due to uncertainty of future profits. The Group has an estimated tax loss of £5,962,339 (2021: £4,031,388) available to be carried forward against future profits.

8 Loss per share

Group

As the Group and Company are reporting a loss from continuing operations for the year then, in accordance with IAS 33, the share options are not considered dilutive because the exercise of the share options would have an anti-dilutive effect. The basic and diluted earnings per share as presented on the face of the income statement are therefore identical.

9 Company's result for the period

The Group has elected to take the exemption under section 408 of the Companies Act 2006 not to present the Parent Company income statement account.

The loss for the Parent Company for the period was £1,964,209 (2021: £1,222,665)

12 Intangible assets

Group Company

£ £

Cost

At 1 July 2020 420,538 420,538

At 30 June 2021 528,941 528,941

At 30 June 2022 625,754 624,255

Accumulated amortisation

At 1 July 2020 - -

At 30 June 2021 - -

At 30 June 2022 250 -

Net book value

At 30 June 2021 528,941 528,941

Intellectual property is to be amortised over the expected period that the asset generates income. A small part of the IP belonging to the active subsidiary, AxisBiotix Limited, commenced amortisation in the year ending 30 June 2022. Other IP amortisation is expected to commence in the year ending 30 June 2023.

13 Investments

Company: Investments in subsiduary undertakings £

Cost

At 1 July 2020 5

At 30 June 2021 113,733

At 30 June 2022 325,755

As at 30 June 2022, the Company directly owned the following subsidiaries:

Name of company Country of incorporation Proportion of equity interest

SkinBiotix Limited United Kingdom 100% of ordinary shares

AxisBiotix Limited United Kingdom 100% of ordinary shares

CleanBiotix Limited United Kingdom 100% of ordinary shares

MediBiotix Limited United Kingdom 100% of ordinary shares

PharmaBiotix Limited United Kingdom 100% of ordinary shares

14 Inventories

Group

2022 2021

£ £

388,537 -

15 Trade and other receivables

Group Company

The fair values of the Company's current trade and other receivables are considered to equate to their carrying amounts. The maximum exposure to credit risk for trade receivables is represented by their carrying amount. There are no financial assets which are past due but not impaired. No current financial assets are impaired.

The amounts owed by subsidiary undertakings include a loan to AxisBiotix Limited for £1,531,177 (2021:

£771,544) which was discounted to £1,205,425 and then impaired by £0,000, in addition to earlier years impairment of £34,124 to give a current value of £1,142,891 (2021: £623,688) under IFRS 9, as set out in note

2. There is no interest payable on this loan which is assumed to be payable 3 years from the date of these statements. The Company has confirmed that it has extended the original repayment date from 30th June 2023 to 30th June 2025.

16 Trade and other payables

Group

Company

Trade and other payables principally consist of amounts outstanding for trade purchases and ongoing costs. They are non-interest bearing and are normally settled on 30-day terms. The directors consider that the carrying value of trade and other payables approximates to their fair value. All trade and other payables are denominated in Sterling. The Company has financial risk management policies in place to ensure that all payables are paid within the credit timeframe and no interest has been charged by any suppliers as a result of late payment of invoices during the period.

The fair value of trade and other payables approximates their current book values.

A summary table with maturity of financial assets and liabilities presented below is used by management to manage liquidity risks. The amounts disclosed in the following tables are the contractual undiscounted cash flows. Undiscounted cash flows in respect of balances due within 12 months generally equal their carrying amounts in the statement of financial position, as the impact of discounting is not material.

The maturity analysis of financial instruments at 30 June 2022 is as follows:

18 Financial instruments (continued) Company

Carrying amount

On demand and less than

3 to 12 months

1 to 2 years 2 to 5 years

The maturity analysis of financial instruments at 30 June 2021 is as follows: