SkinBioTherapeutics PLC (LON: SBTX)  

SkinBioTherapeutics PLC is an FTSE AIM All-Share index listed life science company focused on skin health. The Company’s SkinBiotix platform can improve the barrier effect of skin models, improve repair, and reduce bacterial load. It focuses on three specific skin healthcare sectors: cosmetics, infection control and eczema.

Development Pipeline

• First Commercial Product: SBTX had successfully completed the commercial launch of AxisBiotix-Ps™. Moreover, it deals with a probiotic food supplement to help alleviate the symptoms associated with psoriasis.
• Accelerated Progress of Croda: The Company had made significant progress regarding the development of SkinBiotix®. Furthermore, it is considered as the foundation for an active skincare ingredient.

Growth Prospects

• Placement of Shares: The Company had broadened the shareholding base by pitching in new institutional investors to support the next stage of the Company's development as a commercial entity. Meanwhile, the major shareholder, OptiBiotix Health, had sold a significant stake in the Company.
• Croda Project: SBTX had scaled up the manufacturing to 600 litres and then moved to 20 cubic metres in September 2021 and in line with the agreed project plan.
• Development Plans: SBTX expects to initiate two programmes of work with the University of Manchester and move into its own lab facilities at the Biosphere in Newcastle upon Tyne.
• Cash Balance: SBTX had an adequate cash balance of £4.6 million as of 30 June 2021, which seemed sufficient to fund upcoming projects.

Key Risks

• Federal Tapering: The expected Federal tapering at the pace of USD 15 billion per month starting later this month may adversely impact the equity markets.
• Surge in UK Inflation: The UK inflation reached a 10-years high as it surged by around 4.2% for the 12 months ended October 2021. It may cause a sooner-than-expected interest hike.
• UK GDP: The UK economy witnessed a slowdown as the GDP grew quarter-on-quarter by around 1.3% during Q3 FY21, which remained merely lower-than-expected growth of around 1.50%.
• Rise in Interest Rates: New Zealand came up with a second interest rate hike in the last two months. Moreover, rising inflation worldwide had put pressure on several Central Banks as they struggled to curb it.

Now, we will analyse the Key Fundamental Statistics & Shareholding Pattern of SkinBioTherapeutics PLC.

OptiBiotix Health Plc is the most significant shareholder as it holds nearly 36.14 million shares as of 30 September 2021.    

H1 FY21 Financial & Operational Highlights (for the six months ended 31 December 2020, as of 15 March 2021)

(Source: Company Results)

• R&D Expenditure: The R&D expenditure of SBTX stood at £205,000 during H1 FY21, reduced from the prior-year levels. 
• Increase in Cash Balance: The Company had increased the cash balance from £2.5 million as of 31 December 2019 to £5.5 million as of 31 December 2020.
• Decent Profitability: On the profitability front, the Company had narrowed down the net loss from negative 0.64 pence per share during H1 FY20 to a negative 0.44 pence per share for H1 FY21.

Share Price Performance Analysis

(Source: Refinitiv; Analysis done by Kalkine Group)

On 25 November 2021 at 10:30 AM GMT, SBTX’s shares were trading at GBX 55.10, down by around 2.48% from the previous day closing price. Stock 52-week High and Low were GBX 88.00 and GBX 14.25, respectively.

From a technical perspective, the stock price is hovering between the lower Bollinger band and the middle Bollinger band, indicating an upside potential in the stock price. Moreover, the 14-days RSI stood at ~39.20 levels.

Over the last one year, SBTX’s stock price has delivered a positive return of ~246.04%, and it has outperformed the FTSE All-Share Pharmaceuticals & Biotechnology index (benchmark sector) with a return of around 9.13% and FTSE AIM All-Share index (benchmark index) with a return of approximately 16.98%.

Valuation Methodology: EV/Sales Approach (NTM) (Illustrative)

Peers used in the valuation methodology (EV/NTM Sales)

Business Outlook

SBTX had made significant operational progress as it witnessed a transition from a development company to a commercialized company. The Company had completed the commercialization of AxisBiotix-Ps™ and planned to target the US and UK markets initially, with the EU following very shortly. Meanwhile, the Company would continue to commence the development of additional potential products targeted at assisting in alleviating skin conditions. Considering the penny nature of the stock, SBTX may undergo sizeable correction because of the rising interest rates prospect and lower-than-expected UK GDP growth. Overall, the Company aimed to deliver long-term growth by focusing more on customer needs, and clients can take a reasonable position based on their risk appetite.

Considering the commercial launch of AxisBiotix-Ps™, adequate cash balance, broadening of the shareholding base, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on SkinBioTherapeutics PLC at the current market price of GBX 55.10 (as of 25 November 2021 at 10:30 AM GMT), with lower-double digit upside potential based on 79.24x EV/NTM Sales (approx.) on FY22E sales (approx.).

*The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and Peer information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

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