Disclosure: Financial Investigative Media Limited, which is not owned by Tom Winnifrith but by a trust for his dependants, owns shares in companies mentioned in this article. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
We have tipped Optibiotix (OPTI) before and our readers have banked big gains on it. Now the time is right for re-entry and this Adam Reynolds biotech play is one of our two tips of the month - the other can be found HERE for just a fiver. As ever, no member of our team will sell until 24 hours after a sell note has gone out on HotStockRockets.
Optibiotix had results on Friday. The numbers are pretty irrelevant although the cashburn since IPO - c£200,000 - is impressively low. The company still has c £2.8 million in the kitty. The shares were off a touch at 39p to buy on the release but there are two reasons why this stock will jump fast:
1. Fund manager David Newton was a big original backer but seems to have had a spot of bother elsewhere and has been selling. Had he not bunged out c7% of the equity in the past two months the shares would have been well ahead of where they are now ( a market cap of £28 million). We know that the results presentation was attended by 5 sell side analysts and a number of fund managers who have expressed an interest in buying. We reckon Newton is down to c3% and could well be taken out very soon. Clear that stock overhang and, ceteris paribus, the shares will fly.
2. The company's microbial products for use in food, drink and health products have already attracted external partners notably the Dutch firm Nizo. But this statement in the results stands out "Discussions with partners suggest that there is a growing interest in science based nutritional products and the commercial potential of microbiome modulating products. As our development programmes progress and OptiBiotix is able to demonstrate product safety and efficacy, we anticipate increasing partner interest." Indeed. We expect news of big name partnerships within weeks and that this will prompt a rapid re-rating.
If one looks at the market cap of 4D Pharma (25 times that of Optibiotix) you see the potential in this space which is very topical right now. Fat is Public enemy number 1. . It needs only one big name tie up to drive these shares sharply higher assuming the Newton overhang is cleared.
The trade: Buy at 39p ( and at up to 40p) and look to sell at 47p ( a just over 20% gain) within a month.
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