Botanix Pharmaceuticals Limited

ASX:BOT

Botanix Pharmaceuticals Limited

ASX:BOT
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$0.120 (-4%)
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#29
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Reports (2) My Report Forum Investors
Forum Topics BOT BOT 4C

Pinned straw:
mikebrisy
Added 4 months ago

$BOT held a short 4C-focused webinar, keeping strictly to reporting on the quarter.

There were really four big takeaways for me:

Sales and Marketing

The expansion of the Sales Force from 27 to 33 and then 50 (+17 training in 1Q FY26, selling from 2Q FY26), reps is being funded through a reallocation of the overall sales and marketing budget (whatever that was). So management are saying that it isn't leading to a net cost increase.

As I have commented earlier, Howie reiterated that this is rational resource allocation, given how easy it is proving to "activate" physicans. He said that adding more reps is going to be the fastest way to get to breakeven, so they're doing that.

We also said that the digital channel is working, but by inference, achieves a low ROI.

So, they are working as fast as they can to reach all (or 90%) of the 4,000 - 5,000 prescribinbg Derms.

In terms of my valuation, that a positive, as it means I might be able to dial back the high-cost sensitivities I ran. (I will look at that later today, once I've gone through the 4C).

Cash Burn Will Stablise Quickly

In addition to reallocating funds within the sales and marketing budget, the made a big splash in 4Q on buying enought active agent (API) to support iunventory for 1H FY26. In fact, I think they said they won't be buying an more API in 1K FY26. That will help stablise cash outflows for the next two quarters, all the while we'll see cash receipts ramping quickly.

They have the Cash to Get to Breakeven and Won't need to Raise Capital

Vince put the CFO on the spot to answer that question. The CFO was careful with his words and didn't say they won't raise capital, but implied they wouldn't "if they hit their revenue targets".

I mean, what else can a CFO say. He's the numbers guy and clearly they have a set of revenue and cost budgets that get them to profitability without further capital. But he doesn't control the operation or the revenue, so I guess a cautious CFO would only be able to say what he said. That's as good as we can hope for.

100% Focus on Sofdra

There were clearly questions about development of other products and licensing. Vince made it clear that spending on other product development is on ice, and that there is some BD on prospecting for products to license in. But he made it clear that management's sole focus is making a success of Sofdra and getting to profitability. Good.

Conclusion

Happy with my analysis last week and over the weekend on this one, and I think this investment now just needs patience so that over each quarter we can see how scripts and GTN trend. These guys seem to have the cost side of the equation under control, and they are clearly focused on wanting to get to profitability as soon as possible.

Reaffirming my HOLD decision from last week.

Disc: Held in RL and SM
pubenvelope
Added 4 months ago

Hi @mikebrisy , thanks for the update. Curious about your HOLD position for now - is it because you are already overweight in BOT, or because things are a little uncertain? Your recent post indicates that this stock is now at a significant discount (in your opinion) even with an updated valuation that is lower than previously indicated. Would that not make it a BUY?

Many thanks,

Pub.

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mikebrisy
Added 4 months ago

Hi @pubenvelope - it's a great question.

Yes, it is a HOLD for me, because I already have as large a position in RL as I want (c. 4%). If I didn't hold or had a smaller position, then it would be a BUY for me.

Whenver I express a BUY/HOLD/SELL decision, it is always in relation to my Real LIfe (RL) ASX portfolio. This is important to understand because anything I write here is simply my notes about my portfolio. It is never advice for anyone else, because I am not qualified to give it, and this is not a platform to do that.

Secondly, while everything I hold on SM I also hold in RL, the converse is not true. There are companies I hold in RL that I do not hold on SM. These are usually larger, more well establised companies. At the moment these are (in weight order): RMD, WTC, XRO, TNE, BRG. (I always list these on my SM Profile, and I update the list monthly - it doesn't change that much!) As a result, my SM position sizes are often significantly larger than my RL ones.

Coming back to $BOT: I continue to hold a much more bullish view than the market. That said, I totally understand why the market has a more cautious view. It is very early days for SOFDRA in the US, and no-one knows how any of the following questions are going to play out over the next 6 months to 18 months:

  • Given the promising start, how far into the prescriber base will $BOT penetrate?
  • How often on average will each prescriber write a script?
  • How will adherence evolve after the intial months? (It is reportedly holding up well for the majority who are on the autorefill program)
  • How many reimbursed patients on the auto-refill will come back for a new script after 12 months? (This is a huge value-driver)
  • How does GTN evolve? (Actually, I am less concerned about this now, even though I over-estimated it initially, and my error was a significant component of my reducing valuation.)


The 4C and the webinar discussion have eased my concerns about costs and sales & marketing, for now. I've modelled all the above questions, history-matchd to the first 6 months, and have found that you can get a very wide range of valuations. No-one can know more at this stage I'd assert. The uncertainty is unresovable.

I've done a bunch more modelling since the 4C. It doesn't change the message in my Valuation Straw from last week (other than, I have confirmed my suspicion that I was being a bit conservative in the scenarios I presented.)

I remain at least 90% confident that this business is worth more and $0.20, and I expect it is worth more than $0.35 ... and potentially a LOT more.

So, I view it as having a risk-reward profile I am very happy to have in my portfolio.

(Note: It is not uncommon for early stage, first product, pharma companies to suffer a significant share price "pull back" of disillusionment after early sales reports. So, today's $0.15 SP doesn't bother me at all. Personally, I feel very comfortable with where the business is, and my level of understanding of the risk and potential reward.)

33
Nnyck777
Added 4 months ago

Thanks @mikebrisy for your analysis this weekend. This really is your skill, much appreciated.

What a shame the earlier presentation happened in July. This was much more positive. The GTN was complicated to get your head around and certainly spooked the market.

The fast uptake by prescribers and the increase in derms is a key takeaway and perhaps what the market didn’t appreciate first time around.

Very happy with the news regarding additional $11mill worth of inventory (total inventory $27mill +$64.9 million cash on hand) a nicer safety buffer than I was anticipating.

Chris also re-iterated $15.3 million still available for draw down from Blackrock funds.

Nice to have reassurance again about minimal tariff impacts for the company.

Very good to hear the platform is working well as this is a key asset as the team keeps reiterating.

A continued hold for me.

27
Schwerms
Added 4 months ago

Good takeaways from that webinar, hopefully we get a sales update with the half year and or AGM.

GTN will trend higher as discussed

Big inventory build I'm assuming to dodge tariff.

From memory they have spent around 30m AUD including this quarter now at something like 90Aud / unit cost if you use the theoretical 50USD / unit floated around the Kaken stuff.

At least it dodges any minimal tariff impact if there is any. Maybe they just did it to load up so the lack of spend makes the next 2 4C reports look good.

Nice to see nearly 4m of net revenue flow through.

Is the timeline for reps in the field more the timing to hire all and deploy them? Surely they don't need 1-2 months training..


23
mikebrisy
Added 4 months ago

"Is the timeline for reps in the field more the timing to hire all and deploy them? Surely they don't need 1-2 months training.."

Yes, @Schwerms - and to make reporting simple. "We achieved X sales with Y reps."

It also depends how experienced the reps are. The first 27 were industry veterans, so maybe they are now building a more balanced workforce. In that case, you might allow more time for newbies to be trained and shadow the high performers.

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