Skinbiotherap. Regulatory News (SBTX)

SkinBioTherapeutics plc

Half year consolidated results

Manchester, UK - 29 March 2022 - SkinBioTherapeutics plc (AIM: SBTX or the "Group") a life sciences company focused on skin health, announces its unaudited half year consolidated results for the six months to 31 December 2021.

Operational and financial highlights

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

- Soft launch commenced on 29 October 2021

- Influencer marketing programme initiated February 2022

- While current sales are materially below budget they are growing and expected to be significantly increased by enhanced marketing spend

- US market penetration slower than expected

- The Company remains positive as to the efficacious nature of the product and consequently its long-term potential

· Croda is engaging with its VIP clients about SkinBiotix as an active cosmetic ingredient; the Group continues to anticipate licensed royalty revenue generation by the end of 2022

· Formulation under development for acne food supplement, with consumer study expected to start during 2022

· Strong progress with oral research programme and skin health and disease programme at the University of Manchester

· Post period end: proposed appointments of full time Chief Financial Officer and non executive director, subject to the completion of normal regulatory due diligence

· Cash as of 31 December 2021, £3.2m (2020: £5.5m).

Outlook

Given current subscriber levels prior to implementing any significant marketing spend, the Company expects that with only three months to year end its revenue for the full year to be materially below market expectations. However, without having implemented its full marketing campaign, it is not possible to predict at this time the quantum of the impact on sales.

Stuart Ashman, CEO of SkinBioTherapeutics, said:

"This has been another period of progress for SkinBioTherapeutics, with the accelerated AxisBiotix-Ps™ roll-out following the 'soft launch' phase of commercialisation, together with continued progress of our other strategically important pillars and new research.

"The business was initially floated, structured and funded as a B2B entity. With the emergence of AxisBiotix- Ps™ we have evolved to become a B2C direct to consumer sales and marketing entity as well. This has required a change in strategy, spend and structure. With AxisBiotix-Ps™, despite many challenges including the ongoing COVID pandemic, the team successfully managed the soft launch just five months ago. Whilst at this stage the initial numbers are much lower than initially anticipated, we've seen and continue to receive very positive feedback from customers which is very gratifying. Understanding retention levels is important to longer term forecasts and this takes time.

"The aim for the second half of the year is to continue the ramp-up of sales, with an influencer marketing programme which was initiated in February 2022. Having now recruited an experienced NED with digital marketing and consumer trend experience, we are bringing in additional customer service and digital resource to boost efforts. We're still at a very early stage of the sales journey, however it's clear from the customer feedback that AxisBiotix-Ps™ is a product that has already had a very positive impact.

"It is important to note that this is a sector-blurring product. There is, quite literally, nothing to compare it to and, as such, we are blazing a trail and creating a new product category."

"Other pillars of the business such as the SkinBiotix formulation with Croda/Sederma and the acne programme continue to progress. We anticipate royalty revenues from the SkinBiotix agreement and the start of the acne consumer programme to commence in 2022."

The information communicated within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 and has been arranged for release by Doug Quinn, CFO of the Group. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

-Ends-

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About SkinBioTherapeutics plc

SkinBioTherapeutics is a life science Group 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 Company'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 Manchester, UK. For more information, visit: www.skinbiotix.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 identified 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 reflect the Directors' current beliefs and assumptions and are based on information currently available to the Directors.

Chairman and Chief Executive's Statement

SkinBioTherapeutics was originally established and structured as a B2B business with a strategy to license its technology to industry partners. However, in response to the challenges of COVID-19, the Group pivoted the strategy by initiating and completing a successful human study and progressing to a direct-to-consumer (B2C) focus. This culminated in the 'soft launch' of its first product, AxisBiotix-Ps™, the probiotic food supplement, developed to help alleviate the symptoms associated with psoriasis, on World Psoriasis Day, 29 October 2021.

Since the calendar year end, the Group has concentrated on accelerating the second phase of its roll-out in the US and UK with a larger-scale multi-media marketing campaign using 'influencers' who themselves are psoriasis sufferers.

The challenge now is to expand the consumer marketing programmes and quickly build the customer base, with the associated recurring revenue stream. In addition, management is keen to push forward other strategic pillars, including the cosmetic active ingredient programme with Croda, and the oral and acne programmes.

Financial review

The Group reported its first revenues during the period under review from the launch of AxisBiotix-Ps at the end of October 2021. In the two month period to 31 December 2021, AxisBiotix Limited recorded sales of £22k and a gross profit of £13k. Cost of sales includes the cost of product provided under the 'buy one get one free' introductory offer which ran from launch date to the middle of February 2022. Shipping costs are included within shipping and distribution costs of £10k and all products are shipped from a warehouse facility in the Netherlands, strategically located for distribution for the future European roll out. As shipping volumes increase, the operating margin is forecast to improve, reflective of additional fixed cost recovery and thereafter as the Group considers actions such as bulk shipping to different geographies and onward local distribution.

Overall expenditure was in line with management's expectation. Research and development expenditure in the period was £397k (H1 2021: £205k) and included costs from the consumer study for AxisBiotix-Ps as well as the oral research programme initiated with the University of Manchester. Ongoing operating expenses were £765k (H1 2021: £423k), reflective of the Group transitioning from a virtual business to one with established infrastructure together with the marketing costs associated with the launch of AxisBiotix-Ps. Overall the Group made a loss from operations of £1,158k (H1 2021: £628k).

Operating cash burn during the period was £1,397k (H1 2021: £667k), consistent with the increased cost base detailed above and the initial AxisBiotix inventory procurement of £412k. The Group finished the six-month period to 31 December 2021 with a cash balance of £3.2m (H1 2021: £5.5m).

Operational review

SkinBiotix Pillar (skincare/cosmetics)

SkinBiotix is the Group's proprietary discovery platform and since November 2019 has been subject to an agreement with Croda Plc and its specialist cosmetic division Sederma, whereby Sederma is responsible for the development, manufacture and commercialisation of the SkinBiotix platform focusing specifically on the growing skincare actives market in consumer skincare indications. The Sederma agreement is limited to consumer 'active skincare' and therefore, SkinBioTherapeutics is able to develop its own line of cosmetic-related SkinBiotix products, based on Sederma's formulation, and continues to explore this opportunity.

Through the course of the collaboration, Sederma continues to identify additional potential scientific and marketing claims for the end ingredient. In parallel to the manufacturing scale-up process that Croda are progressing at its facility near Widnes, Sederma is continuing its lab work to further substantiate any additional potential claims.

Croda has engaged with its VIP clients and management continues to anticipate licensed royalty revenue generation by the end of 2022.

AxisBiotix Pillar (gut-skin axis)

- Psoriasis

AxisBiotix-Ps™ is a probiotic food supplement developed to help alleviate the symptoms associated with psoriasis. It is the first commercially launched product for the Group and pursues a 'direct to consumer' business model. Having been established as a B2B business originally, the Group is having to resource itself to support higher levels of engagement with end users. Traditionally, this activity would be covered by the licensee industry partner and in most cases incorporate significant marketing spend and activity. Whilst the psoriatic community is highly communicative with regards to the condition and its treatment, there is a considerable level of engagement required to drive the desired level of market penetration.

When the management team was developing the product and the commercialisation strategy, it deliberately chose a 'soft' and controlled launch rather than a major, high profile one. Given the debilitating effect of the psoriatic condition where any disruption of supply could severely impact a customer, management was adamant that all the sales and distribution processes should be rigorously tested at controlled low volumes to enable the evolution of a continuous, scalable supply. Given the continuing Covid pandemic and other macropolitical events, the management believes this was the correct and prudent strategy.

The product 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 consequently 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.

Since the period end, in February 2022, the Group initiated the second phase of its 'direct to consumer' commercialisation strategy which utilises 'influencers' who themselves are psoriasis sufferers to communicate with their followers through targeted social media, online advertising and video testimonials.

As of today, the Group has 10 influencers engaged on the programme. The influencers 'tell the story' of receiving the product, beginning to take it and the effects it has on their psoriatic symptoms. Management continues to engage with the influencers and introduce others as consumer engagement increases. At its heart, this campaign is about educating a community about the potential of probiotics in managing and supporting their psoriatic condition, and specifically raising awareness of AxisBiotix-Ps and the AxisBiotix brand.

The influencer activity, along with highly targeted Facebook/Instagram ads, created using the influencer content and their audience's data, started in February 2022. The influencers have, so far, posted once, showcasing the product and highlighting its benefits. The content has been delivered to over 100,000 of the influencers' followers and produced an extremely positive 20% overall "engagement rate".1 Facebook/Instagram adverts, created using the influencers content, maximising the overall campaign ROI, have so far generated over 3.5 million ad impressions reaching over 1.9 million individuals. In this same time period, although starting from a low base, the online store has seen a 287% increase in traffic, a 428% increase in social media referrals and a 335% increase in subscription sales, compared to the same period, prior to the activity starting. Influencers are now due to post for a second time, to another 100,000+ followers, updating them on the success they have seen whilst using the product and the content is excellent. More influencers are being selected for phase two of this activity, which will start at the end of March 2022.

AxisBiotix-Ps has been launched initially in the UK and US, and management is currently exploring other markets, anticipating selling directly to consumer in other European countries and pursuing distributor opportunities for wider markets such as Asia. The management anticipates progressing both of these additional opportunities during the second half of 2022.

Although sales have been slow, the Board remains positive as to the efficacious nature of the product and consequently its long-term potential based on the consumer study and incoming positive testimonials from customers. As detailed above, the activity to support this level of engagement is in its early stages and it is difficult to estimate over what timeframe this can be achieved. As is common in B2C businesses, investing heavily in marketing and engagement activity will support the growth rate but will impact both the operating margin and cash position. Conversely, holding back on this type of activity lengthens the timeframe to achieving the goal.

1 (Instagram average engagement is 0.81%).

- Acne

Psoriasis was the first indication targeted to leverage the gut-skin axis and whilst AxisBiotix-Ps was designed specifically to alleviate the symptoms associated with psoriasis, study participants who suffered from conditions including acne, rosacea and eczema benefited from taking the product.

The Group is in the process of developing a new bacterial blend targeting acne and anticipates being able to initiate a consumer study during the course of 2022. Subject to a positive outcome from the study, the Group will then seek to commercialise the product and will assess its options for the most appropriate commercialisation strategy.

MediBiotix Pillar (MedTech applications e.g. woundcare)

This channel is targeting the use of the Group's SkinBiotix technology in medical device applications. Eczema was identified as an initial target, and management now believes this is best targeted via a food supplement, leveraging the gut-skin axis in much the same way as AxisBiotix. Developing an eczema specific food supplement will be assessed alongside the other food supplement opportunities.

The Group continues to explore opportunities for the application of the SkinBiotix technology in the treatment of various classes of skin wounds. This is a complex area - the introduction of bacteria to an open wound - but one that offers significant opportunity. Management believes this is best achieved through a joint development agreement with a woundcare company and is continuing discussions in this regard.

CleanBiotix Pillar (anti-infection)

The area of healthcare acquired infections (HAI) and bacterial resistance remains an area of critical concern for healthcare providers and has been brought into sharp focus through the pandemic. Staphylococcus aureus (SA) is the most common and one of the most aggressive skin pathogens and is one of the major causes of HAI. The Group's SkinBiotix® technology has been shown to have significant capabilities in preventing SA from adhering to and growing on the skin and thus offers a potential route of protection from SA-induced healthcare acquired infections.

As with woundcare and MediBiotix, this is a challenging area both from technology and regulatory perspectives but equally offers significant opportunities. SkinBioTherapeutics continues discussions with several potential partners to work with to develop all aspects of this market channel.

Other Research Programmes

The Group has two additional programmes of work underway at the University of Manchester.

The first programme is running until the end of 2023 and is focusing on how the microbiome can influence and rebalance the body's response to inflammation in skin health and skin disease.

The second and shorter of the two programmes is exploring the use of different bacteria, including SkinBioTherapeutics' proprietary lysate, SkinBiotix, for oral health and wellbeing. This programme looks to identify strains of bacteria that can assist in the prevention of gum disease, tooth decay and halitosis that could ultimately be commercialised in a toothpaste or mouthwash.

Board and management appointments

Post period end, the Company announced the proposed directorate appointments of a new full time Chief Financial Officer and non executive director.

Manprit Singh Randhawa most recently worked as CFO at the leading educational technology firm, Juniper Education Group. Previously, he was CFO at Smoothwall and before then, at Onbone Oy, a medical technology business. It is proposed that Manprit will be taking over from Doug Quinn, SkinBioTherapeutics' current part-time CFO, upon Nominated Adviser confirmation of his appointment.

Danielle Bekker is to join the SkinBioTherapeutics Board as a non executive director. She brings experience in direct to consumer marketing, including a focus on the use of influencers and digital media in the FMCG (Fast Moving Consumer Goods) space having launched her own direct to consumer beverage business. She has a core set of skills that the Board believes will be invaluable to the Company as it commercialises its first product, AxisBiotix-Ps™, and subsequent products e.g. to address acne. She also has strong supply chain management and governance skills, having worked with big corporates as well as ecommerce skills developed by founding her own business in the drinks industry.

Outlook 

It is only five months since SkinBioTherapeutics launched its first product and began generating revenue. The Group has transitioned from a soft launch to an engagement programme with social media influencers who are themselves psoriatic sufferers. Early results, both in terms of the product benefit with the influencers and the engagement with their followers, are very promising. How soon social media engagement converts to purchasing customers is still to be seen.

Given the low subscriber levels prior to implementing any significant marketing spend, the Company expects its revenue for the full year to be materially below market expectations. However, without having implemented its full marketing campaign it is not possible to predict at this time the quantum of the impact on sales. The board remains confident in the effectiveness of the product and its long term market potential.

Beyond AxisBiotix-Ps, the Group has a broad base of technologies and during the remainder of 2022, management is looking to Sederma's launch of SkinBiotix as a cosmetic ingredient, the outcomes from the oral programme with the University of Manchester and the resultant early engagement with potential commercial partners. The Group also aims to complete the formulation of the food supplement to address acne and initiate a study. Finally, once the regulatory due diligence is completed, the Group looks forward to welcoming the proposed appointees, Manprit Singh Randhawa as the new full time CFO and Danielle Bekker as non executive director.

Martin Hunt (Non-executive Chairman)

Stuart J. Ashman (Chief Executive Officer) 

Consolidated Statement of Comprehensive Income

For the 6 months ended 31 December 2021

Consolidated Statement of Financial Position

As at 31 December 2021

Consolidated Statement of Cash Flows

For the 6 months ended 31 December 2021

Consolidated Statement of Changes in Equity

For the 6 months ended 31 December 2021

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 share options granted and exercised.

Retained earnings represents accumulated profit or losses to date.

Notes to the half yearly report

1. General information

SkinBioTherapeutics plc 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 15 Silk House, Park Green, Macclesfield, SK11 7QJ.

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

The financial information set out in this half yearly report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The statutory financial statements for the year ended 30 June 2021, prepared under International Financial Reporting Standards ("IFRS"), have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain statements under Sections 498(2) and 498 (3) of the Companies Act 2006.

Copies of the annual statutory accounts and the half yearly report can be found on the Group's website at www.skinbiotherapeutics.com/.

2. Significant accounting policies and basis of preparation

2.1 Statement of compliance

This Interim Report has been prepared using the historical cost convention, on a going concern basis and 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, using accounting policies which are consistent with those set out in the financial statements for the year ended 30 June 2021.

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

There are no IFRSs or IFRIC interpretations that are effective for the first time in this financial period that would be expected to have a material impact on the Group.

3. Segmental reporting

In the opinion of the Directors, the Group has one class of business, in two geographical areas, namely that of the identification and development of technology that harnesses the human microbiome to improve health.

4. Taxation

5. Loss per shares

As the Group is reporting a loss from continuing operations for the period 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.

6. Share capital

7. Events after the reporting date

The Group has evaluated all events and transactions that occurred after 31 December 2021 up to the date of signing of the financial statements.

No material subsequent events have occurred that would require adjustment to or disclosure in the financial statements.