SkinBioTherapeutics PLC

SkinBioTherapeutics PLC (LON: SBTX) is an AIM All-Share listed life science entity focused on skin health.

Investment Rationale – SPECULATIVE BUY at GBX 37.40

• Growth Prospect: SBTX is targeting acne as the next AxisBiotix opportunity and plans to initiate a consumer study in 2022.
• Business Transformation: SBTX has transformed itself as a commercial business from merely a research and product development business in FY21. The launch of AxisBiotix-Ps™ and its first sales to psoriasis sufferers, holds significant growth potential.
• Narrowed Losses: SBTX has reduced its losses and holds better liquidity to navigate the Covid-19 related challenges.
• Technical Indicator: From a technical standpoint, 14-day RSI (~21.19) indicates an oversold signal, while the stock price has breached the lower standard deviation of the Bollinger Bands.
• Outperformance Against Index: SBTX’s stock price has yielded over ~127% of return in the past year, showing significant outperformance against the benchmark, FTSE AIM All-Share index.

Key Risks

• Pandemic Induced Disruption: The resurgence in the Omicron variant of coronavirus can limit the Company’s ability to formulate, innovate, launch and commercialize new products. The Covid-19 mayhem and travel restrictions can significantly impact the supply chain, and inventory management.
• Liquidity Risk: The Company has not reported profit yet, and thus, can face liquidity risk. Moreover, macroeconomic instabilities can cause credit risk and delay the launch of new products.

Financial Highlights (for the year to 30 June 2021, as on 30 November 2021)

(Source: Company Website)

• Product Launch: The launch of AxisBiotix-Ps™ was launched 12-month earlier, and thus, early sales were commenced in the UK and US.
• Liquidity: The Group ended the year with a cash balance of £4.6 million (FY20: £2.2 million).
• Operational Achievement: It showed progress in Croda-SkinBiotix® programme and scaled up lysate manufacturing to commercial volumes.

Share Price Chart

 (Data Source: REFINITIV, analysis done by Kalkine Group)

Valuation Methodology: EV/Sales Approach (FY22) (Illustrative)

Conclusion

Post FY21, the Group launched the AxisBiotix product on 29 October 2021. However, the Covid-19 pandemic has disrupted its workflow. Nevertheless, the Company has better liquidity following the equity placing in November 2021. The key focus for FY22 would be to build market share for AxisBiotix-Ps™, with an initial focus on the UK and US markets.

P.S. SBTX is trading as a penny stock with a history of operating losses. Therefore, investors are recommended to gauge their risk-return profile before punting on this stock. The stock made a 52-week high and low of GBX 88.00 and GBX 14.25, respectively.

Based on the successfully completed AxisBiotix-Ps™ consumer study, narrowed losses, improved cash balance, growth prospects, and favorable valuation conducted above, we have given a “SPECULATIVE BUY” recommendation on SkinBioTherapeutics PLC at the current market price of GBX 37.40 (as on 1 December 2021, at 8:18 AM GMT), with lower double-digit upside potential based on 57.18x EV/NTM Sales (approx.) on FY22E Sales (approx.).

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

*The reference data in this report has been partly sourced 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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