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.
As I noted in my ten macro themes for 2015 article (HERE) the analysis that Steve Moore and I serve up is bottom up – that is to say company specific – not so much macro driven. But the odd macro think session establishes useful tramlines for the investment process. My first, second and third share tips for 2015 are already live and so onto Number 4.
This is not the classic value proposition that Steve and I normally go for. I admit that it is speculative but should say that for reasons I cannot quite work out it is the largest equity holding in RMPC’s modest portfolio. Well one reason is that the shares have done jolly well. We tipped Optibiotix (OPTI) at 8p on the HotStockRockets website a couple of months ago. It is now 17.25p-18p. This is definitely one to buy at up to 20p and I reckon we will see 30p before very long.
The company is a play on obesity and related issues, something at the front of my mind having just enjoyed my third Christmas meal with Christmas pudding in 4 days.
OptiBiotix has, already during its brief six month life on AIM, announced positive results of trials of its anti-obesity compounds in fruit yoghurts in tests carried out by its Dutch partner Nizo. The trials showed clearly that adding the compounds did not impact on taste, texture, etc. It is now undertaking a 50 patient study to clearly demonstrate efficacy although we already have data supporting that.
Then it will be onto the signing of manufacturing deals with partners. In other words we are on the way to commercialisation. These deals could be big – certainly for a company which – at 18p is still only capitalised at £13 million and still has £3 million of cash.
To illustrate that point of what recent licensing deals for cholesterol reducing products – a similar market – are worth. Consider BioGaia licensing its Lactobacillus reuteri strain to Nestle for €50.8 million (Feb 2012) and Schiff Nutritions $40 million (2011) deal for Ganeden’s Bacillus coagulans BC30 strain.
For Optibiotix, we are aware that preliminary discussions with AB Bio, Du Pont, and Probiotics International suggest early commercial interest.
Other deals in the area of weight management if Optibiotix wants to go down the co-development route are Plandai’s £2 million upfront plus 5% of future revenues deal with Phyto Nutricare (April, 2013), and Trovita Healthcares product formulation licensing deal with Galen (Aug, 2013). Again we are told that preliminary discussions with ingredient manufacturers suggest early commercial interest.
Of course there are risks but with a strong balance sheet, a cracking management team which is proven in this field not only in delivering on technology but in realising value for shareholders via a trade sale – the ultimate end game for Optibiotix the upside is clear.
It will take just one commercial agreement to demonstrate the potential of this company and to set the shares on fire and I expect that within months. My short to medium target to sell is 30p and so even buying at 18p today offers 66% upside. Thus Optibiotiox is my fourth tip of the year.
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