Thanks for pointing out the disclaimer @mikebrisy very important.

While I apply my own BS metre to any of these interviews, it is important to note that the interviewer was actually being paid to be fawning all over BVN.

Thank you

I can't remember the company in question but I do remember there was some meme stock a while back being discussed on reddit where this mob East Coast were involved. Many people were getting overly excited by the "research" and in turn lost a bunch of money as the share price tanked.

Interesting @occy. I havent looked at any of their "work" previously.

I think any of these need to be taken with a grain of salt.

My default position is that someone is trying to sell me something. Its my job to filter out the BS.

@Arizona no worries!

I also attended the investor webinar of Friday (for which I think the East Coast Research gig was a practice run).

In the discussion across the two presentations a couple of new things emerged.

1. By onshoring manufacuturing to Australia, BVN clarified that this refers to packaging only.
2. BVN promised they will give a more detailed update on progress in international markets later in the year.

For those interested, Friday's webinar was quite good in that BVN went in more detail through each of the products than I have heard him going before. I've written in to the investor hub and asked if the recording will be made available.

In the rest of this post, I'll disucss the two items mentioned above.

On 1: Onshoring Manufacturing

The onshoring initiative is an example of the continuous operational improvement that BVN is focused on to drive %GM from 60% (61% in 1H FY25 and up from 52% at IPO in 2021) to an ultimate level of what he believes is achievable of 65%.

I had previously thought the move might include encapsulation and packaging. But not so. Packing presumably means going to one of the several contract manufacturers in Australia, providing them with the capsules in bulk containers which are imported from Italy, and then the contractor will put them in blister packs, and then in the cardboard presentation boxes.

The major advantage is that this will reduce the shipping costs from Italy to Australia. Finished blister strips in boxes contain a lot of empty airspace. So shipping bulk containers of capsules will significantly reduce the shipping volume,

If a standard 20 foot shipping container can ship about 150,000 boxes of product, the product is pretty lightweight, so freight will be priced by volume. Doubling the packing density by shipping in bulk will half the international freight cost.

Estimating the impact: let's say A$3,000 shipping cost per container for 150,000 boxes is c. $3,000 for 300,000 boxes equivalent. That's a saving per box of $0.01. Now let's assume that the COGS for one box is $8.00. (Pharmacy selling price = $30; markup 50%; net revenue to $BIO c. $20; $BIO %GM = 60%; COGS to $BIO = $8)

The %GM improvement of this change is therefore $0.01/$8.00 x 100% = 0.125%.

This assumes that BVN can negotiate an equivalent contract packaging deal in Australia as in Italy. (Australia likely to have higher labour rates, but other factors will drive total costs for contracted manufacuting).

Or a ballpark saving of 0.1% gross margin improvement.

While it's not much, this is an example of the detailed incremental type of improvements that BVN is focused on to raise %GM. The direct freight saving is slim, but there are other advantages, given that Australia represents over 90% of current demand. Holding inventories of bulk capsules closer to the market will also reduce warehousing / inventory costs, as it will be possible to schedule short runs of product packaging closer to the sell-in date to end customers. My numbers are only ballpark guesstimates, but the important point is that they show that $BIO are very focused on operational improvements in their drive to increase gross margins. This is all bread and butter supply chain management - and it is good to see that they are on it.

On 2: International Markets

BVN commented that investors have been asking about progress in international markets. He noted that the only update they'd given to date was at the full year result, (where "International Sales" in FY24 were $894k up from $460k in FY23). He promised to give an update in the near future.

Those numbers will need clarifying, because I assume they include New Zealand (as last time I checked, NZ was a state of Australia, but sometime BVN refers to ANZ in one breath, so I'm not sure.)

I'm hoping we can get Blair to break out NZ, UKI, and Canada. This is important to me because UKI has been going a couple of years now and so it would be great to understand its trajectory. That's said, any update will be good.

Bascially, no significant new news in the presentations. Other than BVN making clear that it is important to him to continue his track record or meeting or beating every target he puts out there. And he wants to do that for Vision 27.

Held in RL and SM

OK, so IR at $BIO have gotten back to me within a few hours. Friday's webinar wasn't recorded.

But, fear not, I have gotten hold of the transcript via marketscreener.com. It's a big less promotional than the East Coast presentation, and a little more detailed in parts.

Here's the exchange with $BIO IR:

You 09:34AM 10/03/2025

Are you going to publish a recording of the webinar?

Biome Australia

ASX:BIO

11:06AM 10/03/2025

Dear Michael,

Thank you for the question. 

Unfortunately the webinar was not recorded this time. 

However there was a recent interview with Shares in Value that covers a lot of the same content.

this can be viewed here. 

https://youtu.be/Q9a62NqVMLg

TRANSCRIPT

Note: Paul Hart, Canary Capital is an investor in $BIO, and invested pre-IPO. He has acted as the "interviewer" at several $BIO presentations.

Biome Australia Limited, H1 2025 Earnings Call, Mar 07, 2025

March 06, 2025

 Share

Blair William Brabin Norfolk   MD, CEO & Director

Probiotics as a category never led the digestive track. So, they do not have any interaction with drug -- metabolization of drugs. So -- and we have clinical evidence. The most important reason after risk is we have clinical evidence on the finished product for the condition used alongside the medication. So, it's an opportunity to not just help a patient solve a health problem as is the company's mission, but for pharmacies to have a brand-new revenue stream that they never had and be able to co-sell. This product alone will generate roughly $22 gross profit for the pharmacist, the pharmacy owner on top of the $6.80 prescription they're getting for Rosuvastatin, for example. So, if you think of that as a percentage and an opportunity, it's a 300% to 400% uplift in that transaction for the pharmacist at the same time is helping a patient and feeling good about doing something that's going to improve a patient health outcome.

A couple of other products I'll briefly mention, Biome Eczema and Biome Acne. These are our dermatology section. As you might imagine, they're going very well in Priceline Pharmacy being that has a strong emphasis in skin within their wider group and their younger female demographic. Biome Eczema is clinically proven in 2 studies, one on children, one on adults to reduce eczema symptoms, not just prevent flare-ups, but reduce the symptoms once you have a flare-up and reducing symptoms by 52%. Biome Acne, again, reduces acne lesions by 40%. So, these are really material clinical outcomes on probiotic medicines that have never been [Technical Difficulty] before in the global market. As Biome continues, we are seeing more companies pop up around the world with the idea of condition-specific, but we have locked down a lot of the IP and research, so they are exclusive to Biome. So, we've really not -- we don't have any material competition in the market on conditions or diseases.

Biome Lift, a mental health concept. So, this has now got 3 clinical trials, including one that Biome led with La Trobe University, which was published late last year. That last study was on subthreshold depression. So, we have research on this product used for healthy people who are stressed, anxious, having poor sleep, significantly improving all of those areas of mental health concerns. But then also now looking at a disease population in subthreshold depression, which is really important, certainly with the credibility for doctors. But for Biome, rather than launching 15 or 20 new products every other year, we're actually increasing the use case of each product into new patient populations. So, it's a new way of doing things within our industry that hasn't really been seen before. The idea of expanding the product into new populations, new targets, which is much more seen in the pharmaceutical world as people will know now with a number of diabetes drugs now being used for weight loss. So essentially repurposing and finding new populations that we can expand the existing products like Biome Lift into.

Biome IBS. This is one of our best-selling products. I think the name speaks for itself. Irritable Bowel Syndrome is one of the leading volume drivers of the probiotic category, and Biome has the best-in-class product based on the strains that we have and the evidence behind them, very effective product for IBS patients. And within a day or 2, people usually see a significant reduction, if not a complete reduction in symptoms of IBS, which is bloating diarrhea or constipation and other gastrointestinal discomfort.

Last but not least, Biome Dental. This one also launched in 2024, I think in the second half of FY '24, so first half of the calendar year. This is the world's leading oral probiotic. And this is not the last time you'll hear me talk about this because this is a really important product and topic in the future of health care. The exploding research around the oral microbiome is continuing and the downstream effect of managing oral dysbiosis or not having the appropriate bugs in your oral cavity is significant links to other downstream effects in diseases that are starting to be discovered a link, whether they're neurological breakdowns like Alzheimer's, Parkinson's disease or many other cardiovascular and/or metabolic health concerns that are now seeing a strong link to the start of your digestive tract, which essentially is your mouth. Biome Dental has 11 published clinical trials. It's our most well-evidenced product. Significant reduction in gum disease or gingivitis, reduction in cavities or dental carries and significant improvement of Halitosis, which is essentially medical bad breath.

So, those are the products. A quick summary of the business highlights before I welcome Paul into the conversation. So, as we shared and already said, we've now expanded our Australian distribution to more than 6,000 points, which is about half of the addressable market for Biome. That's made up of health practitioners, which are integrated doctors, naturopaths or community pharmacies, which community pharmacies represent about 68% to 70% of our total revenue. We have some very strong repeat purchase data, which I think is nice, certainly to see as an investor or shareholder and how well the business is doing at repeat purchase. Not just scaling through signing up new accounts, but growing the base and the ongoing repeat purchase and use case of the product.

So, TerryWhite came up very kindly shared with us a little while ago some of the rewards databases. It's hard to get meaningful scan data from retail for a brand that's sort of B2B or B2B2C. And they shared that our average customer is buying about 2.5 monthly boxes per transaction and they're returning at least 6x a year, which is quite incredible because that does imply that they're buying more than 12 monthly boxes every 12 months on average. For an e-commerce play, not Biome, if you're seeing 3 purchases of a monthly product in 12 months, that typically seems a very strong business for repeat purchase. So, for our customers showing that data, it does really underpin our growth, meaning that the product works and people -- patients are coming back to buy it again and again.

As a brand, Activated Probiotics has maintained the #1 growth spot in our category. That's in vitamins and practitioner only in pharmacy. So, for the last 4 years plus, we've been the highest growth brand and now we're also climbing the ranks to be one of the larger brands in the category as well. In our specific area, we're now #2 to one other brand in terms of total revenue. #1 in growth as well at TerryWhite and Priceline, our 2 largest customers for the full-service community pharmacies and our wholesalers, Symbion and API, the pharmaceutical wholesalers.

More recently, we launched the business in the Canadian market as a test. I'll talk to that more in a moment, but we've been in the EU markets through Ireland and the U.K. practitioner market for 2 years now and recently launched into the health retail market about 12 months ago. Sales for half 1, if you weren't already aware, we closed out with $8.9 million or a touch under $8.9 million versus $13 million for the entire last FY '24. We've reached EBITDA now for 4 consecutive quarters. And as I'm sure you're aware and as seen on the slide, we announced net profit for the first time of roughly $100,000, excluding our R&D rebate or roughly $400,000, including our R&D rebate for H1 FY '24.

Gross margin continues to improve. Pre-IPO when the business was founded in the first few years, we were getting low-50s. We've now climbed into the 60s. And my CFO, Douglas, who spoke briefly earlier for letting you know there was a delay, he and I are working quite hard with the rest of the team and our supply partners for that number to keep increasing. which is unusual, I think, for businesses like us as we scale, there's usually a lot of pressure on price and discounting. But as Biome and our Activated Probiotics is a premium brand, we don't employ a discount model. We sell products that solve problems or solutions. As a result, we are able to convince our retail partners to manage the full retail price supporting everyone's margin.

I think that's probably enough so I can hand over to Paul to join the conversation. Welcome, Paul.

Paul Hart  

Good day, Blair. Thanks for inviting me again today. First, I'll give a bit of background in terms of our involvement with Biome for the last 2 years. In fact, it's actually been longer than that because I came in as a seed investor. At Canary Capital, what we're looking for, for our network of investors is outstanding companies to invest their money in. And we want -- our job is to find these companies very early before the market has woken up to the -- and realize the real potential value that these companies can have.

So, we were investing in Biome in seed. We also invested at the IPO. It obviously dropped after the IPO. And if we liked it at $0.20, I'll tell you what, we really loved it at $0.06 and between sort of $0.06 and $0.10, and that's where we actually ended up buying a lot of shares for ourselves and for clients. So, the performance of the investment has been absolutely outstanding. It's one of our best ones ever. And it's been outstanding in terms of delivering 6x, driven by the fact that the company has delivered on every single target that they have put out to the market and that really helps and the market has recognized it.

So, now on to some discussion about the half year and the company. I'm just going to say, firstly, a big congratulations to you, Blair, on the arrival of your second baby girl. It's obviously an exciting time for you. Hopefully, you're getting some sleep. What -- but how do you see this impacting your own, say, overseas travel plans, the amount of time you can spend expanding the business in relation to growing the overseas markets?

Blair William Brabin Norfolk   MD, CEO & Director

Look, I suppose at the end of the day, it's life, isn't it, but very, very excited to have my second little girl join the family and all the aunties and uncles in the office will be thrilled with their extra baby sitting duties as well. Look, I mean, we released our -- I've got the slide up here, Vision 27. We released our Vision 27 to the ASX back in September. And a key component of that is not just the revenue target of $75 million to $85 million over the next 3 years cumulatively. It's really the international market acceptance and growth. I know that our insto investors, our retail investors, our 708s and also future investors are all really focused on showing what's the scale going to be like, how are we going to execute our business model in these international markets. And I can say I'm absolutely focused on that.

What's key to being able to allow me to, a, have a second child, but also travel a lot has been we've really developed -- worked hard to develop our line managers. So, I was asked this question on an interview the other day, but we've now got 10 key line managers that operate essentially in their own business silos. They have their own staff reporting into them. They have their own strategy. They have their own objectives and I'll check in with them every week, but they don't need to be micromanaged. And long gone are the days that we were a start-up run by one guy who I might get to get the pat on the back when things go well or if we have a bad day, maybe the opposite. But there really are some quite incredible people that I look forward to bringing in the forefront and introducing to shareholders and investors over the coming periods.

But because of that, I've been able to spend a lot of time outside the office, also due to the fact of having a very supportive wife who's at home in Australia with my 15-year-old daughter, 15-day-old daughter, while I'm sitting in California right now at Expo West, the biggest natural event of the year for us globally. But essentially, we now spend a lot of our year traveling and the Board has asked me to spend a significant amount of time between North America and Europe this year to really support my effort as CEO as Head of Sales to be able to continue to develop those markets. So hopefully, that gives people the confidence that the Australian business is well under control. It's growing well, and I'm able to spend a lot more of my time strategically in bringing in value and growing those international markets.

Paul Hart  

Thanks, Blair. Just on the results, obviously, half 1 2025, first net profit, which is a great result. Obviously, Australia is still the biggest portion of the business. What have been the strongest drivers of the revenue and profit growth for the company during the first half of FY 2025?

Blair William Brabin Norfolk   MD, CEO & Director

Look, I always like to tell the background of the last year or 2 on we do a lot of conservative things well and they add up to a lot of growth and therefore, reaching that milestone of net profit. So look, at the end of the day, Activated Probiotics, our brand has become a household name. The repeat purchase, the number of health professionals recommending it is quite astronomical. I mean we've done it -- we've estimated now there are more than 25,000 health professionals in any month recommending our product. There might be 4 or 5 working in pharmacy. There might be 10 or 12 working in a single medical or naturopathic clinic that are recommending it. They all show up as one account.

But the sheer volume of health professionals that have now decided Activated Probiotics is best-in-class, most trusted product within -- certainly within the probiotic space, if not the complete complementary medicine market has allowed us to leverage that trust. So look, some companies, some brands really rely on marketing messages. We've taken the more painful and difficult approach to build trust, to build trust with health professionals and essentially gain their endorsement. So about 1.5 years ago, we saw a significant increase in our market cap and our growth rate actually increased with Activated Probiotics. And we saw the word of mouth and the brand becoming a household name.

For example, we'd switch on a pharmacy in Northern Territory that our sales reps didn't even know had the product because they would have just bought it through the wholesaler. And these pharmacies have never been trained, don't know about us, and they have 15 to 20 boxes going out the door just from customers coming in and asking. So, what's really transitioned is the number of customers asking for the product is now significantly greater than the health professionals recommending it, which is the key driver of the business. But really, what's translated to net profit is I've got an incredible CFO, Douglas, who is listening in. So, I'll give them a nice compliment rather than a gentle jab.

And look, Doug's been incredibly diligent in managing the finances of the business and most importantly, the supply chain. So, our supply chain for those that don't know, a lot of the products come in from Italy, and they're coming in as finished goods, which is a logistical challenge to put it politely. And Doug and the operations team have done a wonderful job of making sure we have just enough, not too much inventory to be able to support that growth, but also be super tight on the OpEx line as well. So, about 2 years ago, we completed an investment in staffing and education and support to be able to build the business to essentially the level we got to the net profit. And then that was bringing on people, but that OpEx line detached and our revenue is now growing at a much faster rate than our increase in costs.

Paul Hart  

Excellent. Margin is very healthy for the products. Overall, the average is running at about 61% for the half year. Where do you see this trending over the remainder of the Vision 27 strategic plan? And what's likely to be the major drivers of margin going forward?

Blair William Brabin Norfolk   MD, CEO & Director

Yes. Look, I think you love putting me in the hot seat. Thanks for that one, Paul. But look, I've got to be careful as a public company CEO on what statements I'll make that haven't happened yet. But personally, I'd love to see it get toward the mid-60s. That's a goal that I have and Doug has, and we're working towards that. While we can't guarantee that, the signals are all pointing in the right direction. The supply partners are working with us to constantly optimize and improve quality and pricing inputs for us. We're also the highest growth brand with our supply partners. So, they all love working with us. They see our business model is really high value and unique and unlike any of their other partners. So, we're getting increased investments from that side to help improve margin as well.

But at the end of the day, what really destroys margin is getting bigger and starting to employ a discount model to support growth. We believe we can sustain higher growth levels without giving that away by continually opening up new opportunities for existing products, as I alluded to earlier, by having more clinical evidence on buy and lift for depression versus just stress. Being able to do that allows us to continue ramping up growth without overinvesting in new product launches or a debt discount model. So that essentially underpins the margin going down and we keep chipping away on optimizing it by volume discounts and being very, very careful to make good decisions.

Paul Hart  

Yes. Okay. Your sales target for the 3 years is a cumulative $75 million to $85 million. How are you tracking against the strategic plan in terms of delivering on that target?

Blair William Brabin Norfolk   MD, CEO & Director

You said something earlier that I really appreciated. We beat every number that we put out to market and I certainly would not have signed off on this $75 million to $85 million if I didn't feel 100% confident. So, we're certainly not in the business of calling out a forecast and making a mistake on it because that would be obviously detrimental. I've also been told it's very unusual for Australian companies to give a 3-year guidance. It's much more like some of the Japanese companies that take much longer-term views. So, where we're at right now, we're well ahead on the distribution goal.

One of the key points, I'll put the slide back up. One of the key points was taking distribution from 5,000 distribution points to -- sorry, I got the wrong one, but that's fine, from 5,000 distribution points to 8,000 distribution points in 6 months or less. We've already done the first 1,000. So, we're well ahead on that metric. Sales, I can't give a forecast that I haven't given out to market anyway. But if we just use the numbers that everyone knows, the roughly $9 million for the first half, we are ahead of schedule. We're certainly on track. The best way to explain how we're tracking sales-wise is the 3-year cumulative target, I think to the top end is about 45% CAGR, compounded annual growth rate from $13 million last year up to scaling up equally percentage growth to the top end of that cumulative target. Currently, the last 3 years, we're running over 70% compounded annual growth rate. So, I believe we're well on track on all components, including international markets that we will be bringing an update out to the market soon.

Paul Hart  

Fantastic. Just on distribution, the slide on Chart 17, if Doug or you could bring it up, is very interesting regarding the growth of sales revenue. Obviously, it's going to be a key factor in delivering on the $75 million to $85 million. Could you just give us a bit of an interpretation, your interpretation on this chart, please?

Blair William Brabin Norfolk   MD, CEO & Director

Yes, with pleasure. Look, it is a very interesting chart, actually. It's something that we've never modeled on that before for investors. But essentially, I'll just -- let me zoom in a little bit so everyone can see it properly. But essentially, this is FY '21 to FY '24. We do have the data for FY '25, but being that we haven't put out a forecast for the last half year, I wasn't able to share that at this point. But you can see for FY '21, we had essentially close to no sales. I think by the end of the year, we did roughly $890,000. But we did -- FY '21, we had a couple of hundred accounts. And as you can see, yes, we've significantly grown our distribution base. So that's 2,000 accounts in FY '21. FY '20 was 100. So, we significantly increased our distribution base up to 6,000 accounts in the Australian market, but the rate of revenue growth has been dramatic and detached from that line.

And the way I explain that best is our sales growth is organic. It's business development. It's growing same-store sales as we frequently share with the market updates on our same-store sales, which tend to run fairly closely in line with our top line revenue growth because Biome's growth is not from signing up new accounts or launching products, which is quite common in the VMS market, the vitamin market. Our sales, the bulk of our sales and our growth is all the underlying business. So this just shows, I suppose, with this based on, I suppose, the 13 from last year, revenue is growing a lot faster than the accounts are signing up. And we will have obviously an update on that for this year, which will be even more dramatic. But it's really important to note that of the existing 6,000 accounts, they're only about 30% to 40% developed. So, there's a huge amount of opportunity still in our existing distribution before we need to add another 500,000, 2,000 accounts to that underlying distribution.

Paul Hart  

Okay. You mentioned, obviously, Biome Cholesterol was the last NPD, new product development launch by the company, and it's great to hear that sales is going well. What other new product development launches have you got -- are you expecting in the second half of the year and beyond during the year?

Blair William Brabin Norfolk   MD, CEO & Director

So, I can talk to the things that we have announced and we've announced, Activated Therapeutics, our new brand. We will be giving a meaningful update to the market on exactly what those products are. I was asked from the Board to hold off a little while on updating the market just because a lot of competitors are watching Biome. Everyone in the market is buying our scan data and watching what we're doing. They're most interested in figuring out how we keep managing to do it year after year and keep growing at such a rapid rate. So, we're holding our cards close to our chest. But the products, there will be at least 4 products initially launching in that new brand.

We have targeted this financial year, although it will be at the back end of Q4. And those products will be launched straight into our existing practitioner distribution market. We do have some new products coming for Activated Probiotics as well, our flagship brand. I'll be looking forward to getting an update out to market soon on those, but I can confirm there will be new products coming out for Activated Probiotics and several new products in the new Activated Therapeutics brand initially in Australia, but we do expect both of those to scale into our international markets very quickly thereafter.

Paul Hart  

Excellent. You talked a little bit before about selling probiotics alongside medicines. Now, Canary Capital sees this as a huge opportunity for the company, and it's given how effective the probiotics have been in proper double-blind, placebo-controlled clinical trials, the potential is amazing, obviously, in terms of growing the business over the next 5 to 10 years. Can you give us an update? You mentioned Biome Cholesterol before as being -- potentially being sold alongside statins. What other products in the range do you think have the potential to be sold alongside medicines? And what's -- can you tell us about the process for achieving this goal?

Blair William Brabin Norfolk   MD, CEO & Director

Yes. Look, it's not an easy task and I'm not going to sugarcoat it. It's something that no one's been able to achieve before, but also there's never been a brand in our industry with products with our safety profile and our level of clinical evidence. So, sorry that this is not in the proper slide deck. I've lost my other slides somewhere in the background, but these are the products that I'll highlight that were a core focus and then I'll talk through the process. So Biome Lift for mental health, this is able to be prescribed should a doctor or pharmacist decide to, it's at their discretion, alongside SSRIs, which are antidepressant medication, anti-anxiety medication, sleeping medication or even other complementary medicines for stress -- or stress or anxiety or sleep. So that's been a core one in our focus.

Biome Her, believe it or not, is one of the most successful products. Biome Her has got clinical trials to significantly reduce female health concerns, namely bacterial vaginosis and thrush. Not the easiest in a table topics. However, for women, they affect almost all women at different points in their life and their recurring problems. So, I suppose the days are gone now that the tube of Canesten cream, the antifungal in the medicine cabinet at home are going to be effective enough. Unfortunately, for a lot of women, there will be recurrent requirement to take antibiotics over and over and over to solve these problems. And that just leads to more recurrence, more recurrence and other issues from the antibiotics. So, Biome Her has been a very successful one, sold alongside antifungal, sold alongside some of the antibiotics, and that one is going quite well.

Biome Cholesterol, I've already spoken to. So Biome Lift, mental health, Biome Cholesterol alongside statins and other cholesterol-reducing medications, Biome Her, Biome Breathe alongside asthma medications, whether that be breathable steroids or Ventolin inhalers. And then one of the other ones that really stands out to us is Biome Osteo, which is one of our more exciting products, I didn't even mention earlier, which was studied shown to reduce bone loss by 78% in at-risk female population. So, this one could be used alongside either a bisphosphonate drug or a Prolia injection that women routinely take to improve their bone density or reduce the risk of osteoporosis.

So, how do we do it? We've developed a lot of very technical sales and education materials that I'm not going to give away all of our [indiscernible] competitors that could be listening at any point. But we have technical materials and resources that we detail with doctors and pharmacists. We set reminders and we set programs with pharmacy groups. For example, I'm not going to say too specifically, but TerryWhite Chemmart, Priceline, some of our bigger national groups, Blooms The Chemist. We work with them directly on different programs to set reminders and that recommendation pattern in the pharmacy dispensary for those dispensary staff.

So ideally, how it works is a patient will come in. They'll hand over a prescription to the dispensary staff in the pharmacy. Notably, this is called the script encounter. You'll then sit down and wait for them to prepare your prescription. I'm sure everyone has been through this experience, even the healthiest people. And while you're waiting, they'll prepare it. If we've done our job well, they'll grab a box of Biome Lift alongside, an antidepressant medication, maybe Prozac. The pharmacist will then detail the patient at the script out counter. They'll explain. Firstly, they'll ask, have you used this medication before? Do you know these are some of the side effects? You should take it with a glass of water before a meal or after a meal. And at that point, they'll say, we also have something really interesting we'd like to talk to you about.

We have this product Biome Lift, subject of 3 clinical trials, completely safe, can be taken alongside the medication and will significantly improve some of your feelings of depressed mood, anger, anxiety. Mental health is a difficult one to talk about, but it's a good example of one that can really support the medication. Unfortunately, for a lot of sufferers of depression, some people listening may have experienced this themselves or via a loved one. These medications for mental health are known to be roughly 30% to 35% effective. And there are different drugs that work for some and not for others. So, there is a window certainly with mental health of about 4 weeks before some of these antidepressant medications work, which is a perfect opportunity for Biome Lift to do some of the heavy lifting, make that person feel a lot better and then potentially prevents some pretty bad outcomes for people suffering with mental health.

So that's roughly the program. We do have formalized structures within it that I don't want to go into too much detail on. As I said, a lot of other people would like to be doing what we're doing in this space. But essentially, the goal of this is for us to be the #1 revenue driver in each pharmacy and we are constantly seeing results of us turning over significantly greater volume than the biggest vitamin companies at an individual pharmacy level.

Paul Hart  

The company recently or last year announced the development of its own -- wholly-owned probiotic strain BMB18 which has now been registered with the strain bank in, BNZ, strain bank in Germany. We see this as obviously being -- having the potential to become a significant asset on the balance sheet of Biome. You've got the initial in vitro, which means in the lab results from research. Can you talk us through the initial findings from the research, please? And also what's -- outline what the next pathway -- the pathway to commercialization for the strain is?

Blair William Brabin Norfolk   MD, CEO & Director

Absolutely. I mean this is a very exciting topic, and I hope people enjoy following along BMB18's development. So, so far, we're well ahead of schedule as this a component of Vision 27. So traditionally, in our space, brands -- I've mentioned -- I think I mentioned Blackmores before, so I'll say Blackmores. Blackmores was prior to being sold to the Japanese, a brilliant sales and marketing machine, but not really a science-based business. So, where Biome has found its niche, we're heavily involved in the science, the research, the development, which makes us an authority over any other brand or company to be able to talk about these topics to doctors. But what we wanted to do is to continue to develop that into owning more IP. We do own the rights to our top 5 products, which represent more than 70% of our sales, important to note. But actually owning probiotic strains ourselves is a new frontier.

Traditionally, you'd be spending upwards of $5 million to actually acquire this type of IP for a business or a start-up or a biotech and then you've got the development costs. So, Biome has been able to leverage some incredibly strong partnerships we've got in our R&D area of the business to be able to secure this incredible strain, BMB18. We also were able to, at cost price, fast track this development, the in vitro study you mentioned, and we saw some very strong applications in the strain demonstrating its ability to reduce, modulate, so reduce oxidative stress, modulate the immune system, which is core to the mechanism of action for any probiotic, reducing oxidative stress and maintaining intestinal barrier integrity. That's a really key one as well.

What does that mean, maintaining intestinal barrier integrity. Essentially, it's now noted by many doctors that a lot of diseases are coming from severe inflammation in the gut. How does that happen? Through use of use or overuse of medications, poor diet, bad lifestyle stress, over time, the tight junctions, which form the wall of the intestine. So essentially, they're a wall, they look like little fingers. And when they're healthy, they're together like this. Over time, they can start to break apart. And intentionally, it's called leaky gut in the nonmedical sense or intestinal hyperpermeability. What that leads to is things leaking into the body outside of the gut and the immune system activating causing systemic inflammation.

So, really strong probiotic strains have shown the ability to retighten those tight junctions in the gut and significantly reduce the potential for long-term disease impact. So, for a probiotic strain, you want to see that a really strong strain, you want to see it having strong anti-inflammatory effects. Part of that is by improving the tight junctions. But potentially more importantly, being a really strong candidate for reducing inflammation and/or general gastrointestinal health. So, the strain has shown really strong outcomes across immune and gut health targets, which is what we wanted it to do. And now that it's been deposited, it's ready for use.

Commercially, we've already had it scaled up to production. It's getting really good yields. Different probiotic strains have very different yields. Some will cost $3,000 to $4,000 a kilogram to manufacture because you get so little CFU per gram or per kilogram in fermentation. Others might be $300 or $400. So, understanding the nuances in the specialty of the space is critical to be successful and we've got a really strong strain in BMB18. So, we did release to the market that we do have a clinical development pipeline and we partnered with FaBA, which is the Food and Beverage Accelerator to help support with a 50% grant that ongoing clinical development pipeline.

So, the example that I have mentioned before and we're certainly not making any statements on what this will or won't be worth, but there's a famous strain Lactobacillus Rhamnosus, trademarked LGG that was sold by some Finnish researchers to Christian Hansen, one of the largest probiotic manufacturers, I think, back in 2018 for a small sum of EUR 70 million or EUR 80 million. So, these strains are very valuable. Once they commercialize, they can be used and sold and Biome does have the license or the ability to license out as well should we want to. But it gives us huge strategic protection from advances of any other companies by being able to put it in our products and really differentiate them across the next decade.

Paul Hart  

So, what's the time line to seeing the first product containing BMB18 Blair, do you think? Any rough guidance?

Blair William Brabin Norfolk   MD, CEO & Director

Technically, we could use it right now. To get a new product to market is a roughly 6-month lead time. We are reviewing right now where we want to see it. But right now, we haven't signed off on the exact plan. So, there's opportunities to add it as a high-value strain to some of our mainstream products like Biome Daily, Biome Daily Kids, which are knowing that it's such a good strain and it's now clinically backed by this in vitro research would be a value-add. But we're also looking to sign off on this clinical pipeline as well to get some more data on irritable bowel syndrome and inflammation because on the back of that, this product will be a great stand-alone strain as its own product. So, I know that's not the answer that you wanted, but I also have to respect the rules of being a public company on not sharing too much, but there will be material new product development coming and it will be coming within the next year or 2, absolutely.

Paul Hart  

Fantastic. One last discussion point from me, international expansion. As the Australian market matures over the next few years, it's going to become a more important driver of future growth for the company. You've obviously got -- you've launched into a couple of European markets, the U.K. and Ireland. You recently launched into the Canadian market with Ecotrend Ecologics in September 2024. Can you give us some background on the -- about Ecotrend and talk about some early indications that obviously have been released to the market for -- following the new market launches in international?

Blair William Brabin Norfolk   MD, CEO & Director

Yes. Look, I think most people are asking me more questions about North America and Canada than the European market that's been established now for a couple of years and is in growth on that briefly. So, we're seeing some really strong increases in the number of accounts signing up in both the U.K. and Ireland. We only launched into the retail market, i.e., pharmacies and health food shops in the last 10 to 12 months. So that development piece is coming along nicely. We're looking to add further distributors along that pathway just to do the last mile. We launched initially going direct to the pharmacies as well. So, once we have a few more distributors in place in U.K. and Ireland, that's going to be very helpful to keep maintaining this rapid growth we're seeing.

I think we've announced on the slide here that we grew 95% last year. I'd like the team to increase that growth next year. So, we'll see how they go by the end of FY '25. Canada, a very interesting piece. So, we got -- we brought the model that we developed in the U.K., which is our international scale model. We've learned from the mistakes from big brands before us. So, Blackmores having a famous failure in China and Swiss, a famous failure in the U.S. And while I'm certainly not bad mouthing competitors, they're both brilliant businesses that did incredibly well. They did have some bumps along the way. And most of those were with international markets and scale where a lot of Australian brands that are successful, sometimes struggle.

So, what we've done is we've built a very conservative model where we will leverage our Australian business, leverage our research and our focus on practitioner only. We will start off with health professionals, whether they're doctors, integrated doctors, natural medicine professionals like naturopaths and we spend time winning them over. They are the key opinion leaders. They're our marketing channel, but they're also very affordable to win over. We win them over with trust, with quality, with products, with research and with our technical ability to detail the products. Once we've got them, it's much lower risk for us to enter retail pharmacy instead of going guns blazing into Whole Foods into U.S.A. and then having to support the marketing cost with no rate of sale or customer -- existing customers. So essentially, that model, that traditional international scale model would be a recipe for risk and disaster.

So for Biome, we went into Canada. We launched with health professionals. We're rapidly every month seeing a huge growth in the number of naturopathic doctors, which is unique to Canada. They're medically qualified naturopaths using the product in their clinical practice and being that the feedback from Canada was so strong, so overwhelmingly strong on the type of product, the evidence and our approach, a lack of competition being that Health Canada does raise a very high bar for international brands to get in. We've launched now into health retail being pharmacies and health stores well ahead of schedule being that we didn't have a choice because it was going so well. So, I don't want to get ahead of myself and say too much. There will be a more official update coming on international markets. But I'm very pleased sitting in my chair with how North America is going early days. And hopefully, it's an indication as well that I'm sitting in the U.S.A. right now that the right conversations are going to set us up for the next few years as well without rushing into any new markets.

Paul Hart  

Well, that's it for me. As always, Blair, it's great to talk to you about the business, especially since it's been so successful in recent years and may the success continue for the rest of Vision 27 and beyond.

Blair William Brabin Norfolk   MD, CEO & Director

Thank you, Paul. We appreciate your support. Look, I've got a long list of questions that have been sent through. I'm going to rush through them as quickly as I can. I don't want to miss out on anyone's questions.

So, the first one was a straightforward one. Why was the webinar a little delayed?

I think having a new addition to my family was definitely the priority over the last 2 weeks. So, we welcome our second baby girl. I think I mentioned at the beginning on the 19th of February. So, I've been at home in the bubble and pleased to be now allowed back out by my wife to be doing my job and speaking to you all.

What percentage of your distribution would you consider fully penetrated?

I did speak to this earlier. So, we'd say roughly 30% -- 30%, 35% of our Australian distribution is fully penetrated. It doesn't mean it can't grow further, though, because as we continue activating those co-selling the drugs, that's a whole new market that I see is not limitless, but has huge scale in that there are 330 million prescriptions a year. And if you divide that by the 6,000 pharmacies, that's a lot of opportunities to build a business significantly larger than Blackmores just in that space.

Why did you stop breaking out international revenue?

As I mentioned, we will be putting that out. We've traditionally only done it at full year accounts, not half year, but we will be giving an update on international markets. I can't give an exact date on it because I'm not allowed to, but we're working on an update on that now. And as I said, I'm very bullish and quite excited about how things are tracking outside the Australian borders.

Update on the manufacturing process.

So yes, that was a component of Vision 27. Biome is reviewing opportunities to onshore manufacturing of finishing of our products, which is the last mile, it's the packaging component. Right now, the logistics, as I mentioned earlier, is bringing everything in finished from Italy because Italy has the highest quality manufacturers in our space and there's no one currently in the Australian market that we see can meet our quality standards. We're under a review currently. It's been 1.5 years project, looking at local partners, looking at potential for doing it ourselves as well. So, there's an ongoing process, but we do expect to have some material updates on that within this calendar year.

The general Canadian market.

So yes, look, I will dig into that slightly further. Can you tell us more about the general Canadian market is the question. So, as I started to talk about, the naturopath in Australia is a 3-year health qualification. And usually, they're very strong at their technical ability, but they don't come with the credibility of being a medical doctor. In the Canadian market, health -- sorry, medical professionals, doctors have the ability to specialize in natural medicine. So, you complete your medical degree over 7 or 8 years and then you go specialize in herbal medicine, natural medicine, probiotics, for example. So, we're talking about people that are very progressive that really understand updating themselves on the new research on things like probiotics, but they're also very integrated in their approach and they'll recommend a drug, but then also a probiotic to support that patient, potentially reduce the side effect or a symptom of that drug using something like a probiotic.

The market is also very interesting in that Health Canada has very high barriers to entry. So, it's based off the TGA system, which is seen as the global leader within complementary medicine for regulation and health claims. Health Canada is the same, except they're very strict on pharmaceutical GMP manufacturing as a baseline for anyone in the probiotic market. So that rules out the entire U.S., European and Asian markets that market these products as food supplements, not medicines. Under the TGA, we are a listed medicine and we manufacture under pharmaceutical GMP quality, the highest possible quality. And that is a huge barrier to entry for anyone coming and wanting to compete with us in Canada or the existing brands that exist in Canada.

The other thing -- the final thing that's very interesting about this market is there is a rebate scheme on the Canadian health care system in certain parts of Canada to get a rebate on a probiotic. So, our product can be dispensed or prescribed by a naturopathic doctor and then that patient can get a rebate either through the national system or the health care provider, which is quite incredible and certainly boost the opportunity to do much higher volume of our products through individual health professionals.

You've previously shared the 12-month rolling sales for TerryWhite Chemmart and Priceline. So, those are our 2 largest pharmacy chains. Any new info you can share on this?

Yes, I can actually. So, the first night I was allowed out of the house was last Wednesday and so a week ago. And Biome and Activated Probiotics, I'm very pleased to share just won Supplier of the Year with Retail Supplier of the Year with TerryWhite Chemmart. TerryWhite Chemmart is Australia's leading health and service-focused pharmacy. They support more patients with meaningful health concerns. And they're the largest group as well with 660-odd pharmacies, the next biggest Chemist Warehouse, about 450. So the most locations, the highest service and health care offering and to win Supplier of the Year with them is quite incredible. And I note that our scan sales with them continue to grow at a rapid rate, passing $4 million in scan sales, I think, last month.

Address a difficult one, the recent share price. So, the recent share price performance has been behind what I expect given how well the company has delivered operational and financially. Any idea why the market is not responding more positively?

Well, look, I can't comment to the exact reason of supply and demand on the ASX. But yes, it can be frustrating when you continually deliver incredible outcomes. And within a particular month, maybe we don't see the share price increase. We all know right now that the general market conditions are not great, certainly not for micro and small cap. There's a man over in the U.S. at the moment that's ruffling a few people's feathers on global financial markets. But I'm certainly not going to blame that for our share price performance. I think as Paul mentioned earlier, that we take a long view on this. The market often gets it wrong on the day, but long term, this old saying, the old adage is, it gets it right long term and we keep delivering. So, I do personally expect significant improvements or growth in our share price over the coming quarters, over the coming years. I don't have a crystal ball, but the one thing I can say is we're working very hard to underpin our share price and to support the opportunity of it increasing.

How do we do that? We're working hard to bring in new groups of investors, fresh eyes, exciting people that are getting their position now at $0.50, $0.60, $0.70 rather than $0.10 or $0.20. A lot of our investors have already made a lot of money. So, you need to constantly on the ASX, refresh and rebuild your register, which is something we're doing. And right now, at our current market cap, there's huge interest from institutional-grade investors. We have a number of funds now on the register and I have several handful of them asking for an opportunity to get into the business as well. So, as we continue to grow, bringing on more and more institutional funds, we believe, should underpin that share price and support us and continue to grow it. So, I'm always happy to address that topic.

How do you view your growth rates going forward?

So look, as we all know, growth works against you. You can't always be 80% growth every year because otherwise, you'd be bigger than the Australian economy in about 10 years. But we do believe we continue to grow our dollar value growth each year at a higher rate than the year before it and it is growing at a very good rate. So, how do we do this? We do a lot of things conservatively well. I mentioned that before. It's not about another 10 products or going into another 1,000 stores overnight. It's about doing small things really well. The best education, the best service, the best support leads to high levels of revenue at individual pharmacies, individual practitioner accounts.

We keep doubling down on what we do really well and we keep getting the results. So there's a long way to go before we tap out the Australian market, a bit of a benchmark, not a forecast, but similar brands in our space that are at the top end of the market are doing $100 million to $150 million turnover just in Australia, and those are practitioner-only brands like Activated Probiotics. That's before you look at that dispensary opportunity with co-selling with drugs. That's before you consider things like these different international markets that we're already penetrating and having success in. So, there's a lot to come, and I hope Vision 27 and the confidence we have to share those revenue guidance within that plan, people have trust that there's a lot more to come beyond Vision 27.

I've just been told we're well over time, so we need to wrap up. Last question is on inventory level. I'll squeeze in because that's an important one for people. So, what inventory level do you target in terms of dollars?

So traditionally, over the last year or 2, we've looked at a range between sort of $2.5 million to $3 million to be optimal inventory level with our current supply chain and current lead time on products. This allows us to really support our growth and to make sure that we have enough to dramatically scale. So, we don't see a massive increase in inventory holding because we're working to improve our lead time. So therefore, that scale of inventory can be turned over rather than twice a year, it can get turned over 4 or 5 times a year is our goal.

So, we'd like to think that at least for the next couple of years, we can maintain not requiring a lot more than $3 million revenue, sorry, $3 million at cost in inventory, which would support about $7 million or $8 million at wholesale price in revenue coming in. So, it's more about increasing the stock turn than having to increase more of our capital expenditure and cash flow into inventory. So right now, we feel pretty confident that we've got a good level. But we are also making sure that we've got certain things in place now that we're profitable, such as support from the big 4 banks, which is something that we are working on the background as well to support inventory funding.

So, thank you for all your support. Thank you for coming. I apologize again for the short delay in getting things started. But from my perspective, it was an absolutely exceptional first half of FY '25. Operationally, results and the amount of key strategic things that move forward in the quarter and the news flow, I'm very, very pleased with. I look forward to giving updates on many other things that I couldn't close the full response on at this meeting in the coming periods. But from the bottom of my heart, I do really appreciate all of your support. We've got a very supportive shareholder base and a top 50 that frankly, hasn't changed over the last year or 2. So, as we look forward to bringing on more and more institutional grade investors, I hope that we've still got something really special and important for our 708s and our retail investors as we continue to grow this business.

So thank you again. I look forward to speaking with you all soon.

@mikebrisy Perhaps naively, I had assumed that the onshoring of manufacturing would bring a more significant proportion of the whole process to Australian shores and/or diversify and bring at least some of the production of the probiotics out of Italy. I realise that this is an area of great specialisation and that Australia simply may not have the capacity. However there must be other places in the world that can do this. Having said that, the packaging move is a step in the right direction. As you point out @mikebrisy encapsulation in Australia or elsewhere, would be the next phase perhaps.

@Arizona making the active agent is capital intensive. The manufacturers who produce the strains for $BIO manufacture many products through their biofermenters. I think it would be prohibitive at $BIO’s current scale to invest in their own production.

And even the mico encapsulation likely involves specialist formulation and encapsulation operations. Again, Probi’s processes likely produce many products for many customers and benefit from scale economies. I’m not sure these economies are available to $BIO if they became fully vertically integrated upstream.

(I write as a former process engineer with 5 years experience in pharmaceutical manufacturing, speaking from my general knowledge rather than specific insights into $BIO’s supply chain.)

I am very happy with $BIO’s strategy - ,I.e., brand, customers, strains IP, sponsoring R&D.

There is little benefit to them becoming vertically integrated as long as they can manage their supply chain and reduce its concentration risk over time.

One thing that occurs to me while reading the transcript, is that it may well be very handy that BIO's Nth American focus centres around Canada and not the USA. There is no direct threat from tariffs, that I can see.

BVN always drawing parallels to Blackmore's and Swiss and learning from their mistakes, when breaking into new markets. Optimistic, but you gotta aim high.

Thank again @mikebrisy Great discussion

Concentration risk is an issue raised by others here on SM in the past and indeed by BVN himself. Any developments in this area can only be a positive.

I guess there is only so much that can be done, within the confines of the real world.

It strikes me that they may want to be leaving a certain amount of packaging in Europe for the European and Nth American markets, rather than shipping out of Australia.

I am sure they have thought all that through.

@Arizona, there are two aspects to the Canada entry strategy.

First, Canada has many similarities to Australia, with highly qualified pharmacists and relevant practitioners (like nutritionists and naturopaths) who are likely to recommend probiotics to their customers (patients). Market size and customer willingness-to-pay is also comparable ro Australia. Blair considers the healthcare professionals in Canada well suited to the education-based marketing strategy, that seeks to gain practitioner recommendation, rather than DTC.

But secondly, as I understand it according to what Blair has said, the regulatory approval granted by Health Canada for health supplements is recognised as a gold standard and generally once approved in Canada it is considered straightforward to get approval to sell in the US. So Blair intends market entry into Canada as a stepping stone into the US. Given that all $BIOs products are manufactured to cGMP, it means they should meet the standards.

Now, I don’t take all that at face value, as the FDA does have to approve certain ingredients and label claims. Also, many facilities claim cGMP status, but unless they already supply the US and are FDA approved, it doesn’t follow that they can automatically supply the US.

So there may be more devil in the details here. However, at the headline level BVN is on the record as saying Canada is a stepping stone towards the US.

In any event, I think the US is a few years away, and all the current noise around US tariffs will have hopefully settled down by then (even if Canada hasn’t been annexed as the 51st State!)

When Trump annexes Canada, BIO will then be in the USA. Brilliant strategy.

When Trump annexes Canada, BIO will then be in the USA. Brilliant strategy.