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Optibiotix - 3 year supply agreement a first part of being the new ARM: BUY

By HotStockRockets | Sunday 18 June 2017

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.

On 25 April this year Optibiotix (OPTI) announced it had delivered a small sale of 100,000 units of its LPDL capsule to Germany's HLH BioPharma Vertriebs GmbH. That must have gone well as we are today told that Optibiotix has signed a three year deal that grants HLH a non-exclusive license to produce, package and commercialise products containing OptiBiotix's cholesterol reducing LPLDL® strain.

For those who have forgotten, HLH has over 20 years' experience in the distribution of probiotic and natural products under the brand names Lactobact® and Casa Sana® and is one of Europe's leading suppliers of probiotics to the pharmacy market.

Optibiotix says " Sales volumes are difficult to estimate in this new and developing market and further updates will be provided as HLH build market presence and revenue streams." That is honest but will not spark excitement but the numbers here could, given the strength of HLH, be very material indeed. And remember this is just one product in one market hence the reference to Intel in the quote from boss Steve O'Hara:.

"We are pleased to announce this three year supply agreement with HLH which demonstrates an ongoing financial commitment in building the brand from one of Europe's leading suppliers of probiotics to the pharmacy market. We see this as an important next step in building stable long-term revenues and increased brand recognition of LPLDL®. We view this as the 'Intel' inside a wide range of products for cardiovascular health across both consumer and pharmaceutical markets around the world. We anticipate this is the first of many opportunities for multiple revenue streams from sales of the strain, white label, and branded products in different presentations and formulations to meet the needs of a diverse range of national and international markets."

Maybe not Intel maybe ARM. That is the key to this business model. Optibiotix has the IP and just licenses it out. So it suffers no ramp up in its costs and more and more revenue streams come on board. At the start one does not appreciate how big such companies can get, by the time most folks realise what is happening the shares have already wooshed. We have faith that Optibiotix will deliver but understand why - without hard sales numbers - some cannot make the leap of faith. They will later but at higher prices.

The shares are now 67p-73p with market makers taking the piss but ignore that. At up to 80p with a target to sell of well over 100p, as newsflow picks up over the summer with some very big name deals outlined, the stance is BUY.

This article first appeared on HotStockRockets - to catch the next red hot share tip from the HotStockRockets team out shortly for just £5 click HERE

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