Investors should buy SkinBio Therapeutics (SBTX:AIM) as it prepares to launch a new product which could generate tens of millions of pounds in fresh revenue for the business.

The company has developed a proprietary technology platform which harnesses the human microbiome to improve skin health and access the growing market for probiotic products.

On 26 May the company reported impressive results from a study testing the effectiveness of its AxisBiotix-Ps food supplement which is a blend of bacterial strains developed with its partner Winclove Probiotics.

The idea is to balance the gut microbiome and reduce the over production of new skin cells, which causes skin conditions such as psoriasis.

Over 72% of participants who took the oral product for 56 days reported 76% reduced itchiness, 75% less redness, a 73% reduction in irritability and a 65% reduction in flaky patches.

In addition, participants reported improvements in general health including better sleep and energy.

Psoriasis is an autoimmune condition impacting up to 125 million people globally according to the National Psoriasis Foundation.

SCALING UP

The company now plans to scale-up manufacturing with its partner Winclove Probiotics, targeting a commercial launch in the UK, Europe and the US during the final quarter of 2021.

The study data will be submitted for approval by the authorities as a food supplement in targeted regions. The revenues model is ‘click-and-pay’ where customers subscribe and pay a fee to receive the product.

Management is acutely aware of the risks of overpromising and underdelivering, so it has taken a measured approach and will initially limit the number of subscribers.

Pricing strategy and initial capacity hasn’t been revealed but the chief executive Stuart Ashman told Shares that the company would price the product in line with market prices of between £1.20-and-£2 a day.

HOW MUCH MONEY COULD IT MAKE?

Broker Cenkos has taken a conservative approach and assumed pricing at £30 per month and a slow initial take-up, focused only on the UK market.

After five years the modelling suggests revenues of £47 million, which assumes a 10% penetration of the UK market of 1.3 million sufferers, which looks conservative relative to the    study results.

SkinBio is due to give an update on its pricing and marketing strategy over the next three months.

In addition to AxisBiotix-Ps, the company has identified other opportunities. For example, in 2019 it signed a contract with FTSE 100 company Croda International (CRDA) which is using the firm’s core SkinBiotix technology to design and manufacture a new skincare ingredient.

While there are uncertainties and risks to commercialising AxisBiotix-Ps, we believe the current market capitalisation doesn’t fully reflect the potential financial rewards.

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