It's interesting,

I think it's more people because Either..

- Can't generate enough sales due to staff being spread thin, although previously they said the majority of high prescribing derms can be met with a small team ( think from memory roughly 4500 total derms in the US) with a large % congregated in their target areas.

- Churn of employees due to poor start. I did a LinkedIn trawl early on but didn't make a list so it's hard to tell if any have fallen off.

- great demand therefore adding more sales people is excellent ROI. I'm leaning towards this because looking at the cash burn and forecast I did for the next few quarters it looked like they started with a team size that would get the job done and hopefully limit the need to raise again.

I grabbed a few more shares on the dip, didn't think there would be more opportunities in the 30's but here we are..

I still look at them doing Kaken rate of sales adjusted for pop and conservative refill rate, sales for their full first year which would be around the $200m mark from jul 25 - jun 26. Sounds high but all going well I think they can beat that. The cornerstone of my thesis.

@mikebrisy have you had a chance to update your numbers or any sales range expectations yet?

Hanging out to hear from Matt at the end of the month. Hope it's point 3..

@Schwerms You make some good points there.

And I think a bit scepticism is healthy, I like your style.

At the same time, they do indicate that they are "increasing" and "expanding" the sales team by "more than 20%".

Whatever the reasoning, it seems to me they are moving fast. I feel like the sales team hired earlier in the year hasn't had time to bed in yet.

@Arizona I've got full conviction on where this will end up but I'm a bit sceptical of some things they do after the launch delay vs their gantt chart they kept presenting prior to launch regarding the IHHS 18000 targets and the 1million priority list that was supposed to be started November / December that was never talked about again.

While those are disappointing to me I still think that vs Japan we have,

Potential for 11 refills per person, vs 1.5-2 in Japan.

Team of well incentivised sales people with some pretty stellar LinkedIn profiles

Proven launch data from Japan.

Management with a log history of launches and pretty good exit prices for precious companies.

Also the X factor of what growth the platform drives itself and also whether we can add another product to this through a partnership.

I feel like only a US recession disaster could really hurt this now where big job losses lead to lower insurance coverage due to them being employer based policies. In saying that if the tariff saga looks too bad I think there's enough of a handbrake mechanism to bring Trump to heel.. his own part or the public.

With regard to the sales team,

If they managed to hire existing dermatology reps to work in areas they are already covering it would be a pretty smooth start as they are already calling on known dermatologists vs a cold call all new sales people type approach. Looking again at the LinkedIn profiles a lot of these people seemed to have been for a while and with the number of president club wins they brag we should have some pretty driven people.

Sorry for a bit of off topic, have to keep kicking the positives of the thesis around while Donny is giving me a kick in the nuts. Welcome any other negatives people can see with this as always.

@Schwerms - thanks for reminding me. Yes, I've done a large piece of analysis and even drafted a long Straw a couple of weeks ago which I didn't post - but in my mind I thought I had!!

I'll address some of the key points here, and pull some analysis from my unpublished work. (Soz)

On Sales Force Expansion

First, on sales force, i'm pretty confident they won't be replacements yet, as they've only been in a few months. $BOT hired 27 handpicked, seasoned, dermatology reps., and they will probably be incentivised with a modest base salary, anything from 5% to 30% commission, and then a quarertly,semi-annual or annual bonus of anywhere from 10% to 30% if they beat sales targets. I think they'd only move on quickly if the product has completely flopped. But then I think management are hardly going be talking up that they are seeing performace in line with analyst expectations if that were the case.

Sales Expectations

In Howie's and Matt's most recent "promotional" interviews, they believe they are on track to "meet or beat" analyst expectations.

If you look at all the videos, there is incredible consistency in what Matt and Howie say, and from this I expect management is confident of beating the numbers for 2025F. (It is also clear that these interviews are paid promotions, with scripted questions!)

Prior to the interviews, the analysts had numbers closer to $100m for FY26, and both Matt and Howie expressed a lot of confidence in those numbers. So, in response, it look like the analysts - or at least one of them - have nudged their numbers up in the last week or two.

So what are those analyst expectations. I don't have the latest reports so I am just backing out what I think the number of Evans & Partners and Euroz Hartley are from my two sources Marketscreener.com and Tradingview.com

Given that we only had full commercial launch at the start of March, for management to be expressing confidence about FY26 numbers - from my perspective - is remarkable. Perhaps even foolhardy, unless they were seeing very strong sales. These guys are highly experienced at launching dermatology products in the US. So I am not qualified to doubt them.

On the contrary, if they can be so bullish after a few week's sales began, then given the required margin of safety maybe we have a major commercial success here(?)

But @Schwerms $200m for FY26 - now that would be a BIG DEAL, and if I believed that, I'd be mortgaging my house to buy more at these levels. I don't think they'll do that, by the way.

My Modelling

(IMPORTANT: Please note these are not forecasts - they are simply illustrative scenarios.)

I've developed several scenarios, based off ECCLOCK in Japan, and adjusted for market pricing and size. Here's what I get. Note: these are without reference to anyone else's modelling. It is my own modelling from first principles using the KAKKEN fiancial reports.

In this model, which is based on the US only, I look at the revenue build to Peak Revenue in Year 4 (I count FY25 as Year 0 as it is only a few months). I consider three scenarios for peak sales in FY29 that bracket the Japanese experience. I calculate scenarios of US$200m, US$400m, and US$600m. All are plausible given the Japanese experience.

In one of the interviews, Matt explains that derma products usually get to peak sales in Year 4, and that seems to be borne out by what's happening with ECCLOCK in Japan. Of course, in the US we have the whole DTC and telehealth model, so they could arguably penetrate the market earlier.

Note that my Low Case revenue in FY29 of $US200m compares with Euroz Hartley's value of US$234m in FY29 in their research note dated 1 July 2024. So my scenarios are very bullish in the mid and high cases.

If we assume a net margins of 20% in FY29, and SOI grown to 2 billion, then with P/E scenarios of 35, 40 and 45, and discounted back to FY25 at 10%, then we get a ranges of valuations as shown in the table below.

Note that in my Stale SM valuation, I have range of $1.12 ($0.81 - $1.43), but that was based off a different and simpler set of assumptions, and it almost a year old. I'm not going to change it, because the ranges of uncertainty are still so wide. BUT, the execution risk seems to be falling significantly.To reflect the significantly reduced execution risk, I have lowered my discount rate from the 12% I applied then back to a more normal 10%.

As well as the revenue uncertainties, I've assumed a 20% NPAT Margin in FY29. Who knows if this is reasonable? In their July research note last year, EH had a FY29 Operating Margin of about 32%, so a NM% of 20% isn't crazy.

The margin they ultimately achieve will come back to how much sales and marketing they need to throw at the product, which brings us back to today's post.

Why Hire Additional Sales Reps So Early in the Game?

First, we can take Howie at his word. They are kicking goals with their starter pack of 27 handpicked territory managers, and now they are expanding. Potentially to either expand the territory reach or to intensify visits to existing accounts.

With 4,500 prescribing dermatologists, 27 staff are a ratio of 1 to 166. Ratios in pharam can typically range from 100 to 300,

So the 6 new reps could either be existing territory infill, to increase the frequency between visit to HCPs or they could be territory expansion, or a combination of both.

What Can we Tall from the Recruiter's Advertisements?

The good news is that the hiring agency has given the locations for where the staff will be located. We can overlay that (little green people) on the initial market focus from Commercial Day. (see below).

That tells us that the sales force expansion is a combination of infill within the initial target areas, and a rollout to wider areas.

$BOT targeted their initial reps in locations where they believed they would see the highest uptake. These were areas of high population density and expected high relative incidence of Hh.

We can see from the 3 staff to be located in Kansas City, Upper State NY and St Louis, MO that $BOT are expanding out from the inital markets.

This is common practice. Usually, the roll out of sales and marketing of a pharmcaeutical lanch follows a series of "Waves", with each "wave" often being 2-3 months apart.

This is done for many reasons, including speed to market, managing the rate of onboarding of new starters, managing G&A/working capital impact, but also allowing learning to be accummulated as to how the product is gaining traction in the market and applying that learning to successive "waves".

Conclusion

My overall conclusion is positive. If the product weren't gaining traction, I'd expect to see a period of consolidation, of analysis, or further research to understand what the issues are and how to solve them.

The fact that we are seeing a +20% expansion of the sales and marketing workforce less than 2 months after launch, indicates to me that things are going according to plan.

Investment Decision

Earlier this year, when the Chair sold some of his stock, I did a knee-jerk sell down of 25% of my holding at $0.465. To be honest, it was just an excuse to take out the lion's share of my capital and be free-carried on the rest.

However, given the bullish market briefings and promotions of a few weeks ago, and the clear indication that the sales and market rollout is pushing ahead, these are both signs to me that the initial product rollout is going well.

So today, via two orders at $0.36 and $0.35, I have purchased back my full position in RL.

Who knows what the 1Q trading update figure will be. After all, it will represent only a few weeks sales from the commercial launch.

So I expect $BOT management are continuing to hold back a few weeks, so that they can give an up to the minute number, and from that give more robust guidance for FY25 - because they dont want to give guidance they'll miss and equally they wont want to give soft guidance.

Whatever the tactics, I think this is looking good, so I am leaning in to it.

This is continuing to look like a fat pitch as the ball speeds towards me,

Disc: Held in RL and SM

---------------------------------------------------------------------

EDITED: I've updated the valuation table, having realised that I have just done "a @Strawman " (i.e. re: $CAT last week) and not converted from a $US to $A. Sorry, Andrew, somehow it makes me feel like less of a Wally owning up to my mistake if others have gone before me.

Corrected table is now inserted with the USD:AUD correction applied at the NPAT line. It strongly reinforces the "fat ptich" message. Seldom do I run scenarios and find the market price is less than 50% of my lowest valuation scenario. Minor adjustments also in some of the text relating to the revenue scenarios.

@mikebrisy thanks for that excellent analysis,

With regard to adjusting for population size, what multiplier did you use between the Japan market and USA?

What multiplier did you use as far as refills go?

My NPAT% is a lot higher than yours as they build some scale, still unclear to me how much the platform / marketing strategy will add to the total costs.

That $200m revenue was USD as well, I have detailed out some theoretical numbers on patients acquired per month, I have strung it out a few different ways and when you look at the size of the sales team and what it equates to in patients per sales rep it doesn't look impossible.

Of course shifting the increase in patients per month up or down even a fraction with the refills really drives the annual revenue up or down a long way

I posted a brief straw a while back but I'll take the time to fully detail it out to see where I differ so much from yours. Probably should wait until the quarterly but good to develop a couple of scenarios and see where I land vs the actual, even though its more the June quarterly that will count for something.

Interesting to see that those market screen forecasts have increased, I didn't pick up on that.

Disc: Held IRL and Strawman (swinging at this one with the kitchen sink)

First up, if anyone has read my longer post on $BOT today please note that I have edited it, describing at the bottom the edits I made. (They lead to a material upwards revision to the $/share. I'll leave it at that, and allow you to enjoy the fuller explanation at your leisure!)

@Schwerms I used a market size multiple of 3X and a ECCLOCK to USA and a pricing multiple of 10X. (Yes, US customers really do get ripped off by big pharma!)

I simply used US$450 monthly net revenue per patient at 12 scripts p.a. to give US$5400 per year. I know that leads to an over-estimate, but I have in compensation been modest in the market penetration assumptions.

On you're US$200m FY26, I agree that it doesn't look impossible theoretically. But I've spent quite a lot of time in online forums, and sufferers out there are trying a lot of different things. I'm being careful in assuming how many will get to a dermatologist, how many will be recommended SOFDRA and how many give it a go. There is still a relatively limited "genuine" evidence online of patient expeerience and share of market. But I agree with you, $200m is not impossible. But I am not investing against it. That said, I really, really, really hope you are right and I am wrong!

Yes, I didn't see that one of the analysts had upgraded until I did today's post. Clearly the analyst is in close contact with Howie (I'd speculate) because they nudged FY25 down a bit and nudged FY26 up. The FY25 nudge is to be expected given that the launch timeline is a little later that I think we all assumed in mid-2024. (Is Howie managing things so make sure there isn't an early revenue miss? I wonder.)

On NPAT, I agree with you. I have been pretty conservative. My thinking was to give them lots of headroom to push into sales and marketing, including digital ads. The reason why I have a scenario way above Japanese experience, is that in the US I think DTC, 12-months scripts and telehealth could make a material improvement over the Japanese experience.

We'll see of course.

@Schwerms one more point about my conservative NPAT%.

20% is probably safe for FY29 in the low scenario of US$200m peak sales. But it is probably a very significant underestimate in the higher two scenarios. (So, given your assumptions, I believe your higher margin is internally consistent.)

I didn’t want to further complicate the analysis, so I just kept the margin constant and conservative for the low case. This means the implied discounted valuation in the higher two scenarios is understated in direct proportion to whatever you think the actual margin will be.

Of course there is the secondary factor, then, that with expanding margins, EPS growth rate will be high, and that will push the SP to higher P/E ratios, so I partially covered it with my P/E scenarios.

And by FY29, they will almost without any doubt have licensed more products to put on the platform, so the market won’t be seeing a plateau, but ongoing growth.

So if you think about all these factors you can start to get into 10-bagger territory, which was in fact the “super bull” case I posted last year.

But I will want to see at least a full year of sales before looking further into scenarios like that. No one wants to have that much egg on their face when we haven’t even seen our first sales report!

I hope they issue a trading update before the SM meeting, because it would be good to have some hard facts to ground all of this on. Based on history, their quarterly activities report comes out on the last Tuesday of April, which is the day of the scheduled SM meeting with Matt. Hopefully we’ll have the report just before the meeting! Now wouldn’t that be a fine thing.