@Matai, welcome and great job on your first post! I really appreciate your insights, particularly on the science aspect.

I think I agree with your sentiments. My main concern is whether my personal views on certain scientific questions should influence my decision-making, especially when it comes to running an otherwise well-managed business.

@Matai welcome to the SM community and it's great to get your medical expertise on the clinical studies in addition to @Shapeshifter's perspectives.

For those of us more accustomed to trawling through pharma and biotech clinical reports, I agree with you that the $BIO evidence is lightweight and limited (being generous). However, I don't see that as problematic and will expand on this.

First, probiotics while subject to medicines controls in Australia only need to pass a much lower bar, given that their mode of action is on the microbiome and they don't bring nearly the same level of risk (toxicity / side effects) as pharmaceuticals. Pharma companies and bioetchs do the larger and more rigorous studies because they are compelled to by regulators, both to prove safety and efficiacy, as well as to justify the public and private monies needed to give access for patients. The investment in large clinical programs which cost many tens of millions to hundreds of millions of $ can be recouped through the occasional multi-billion $ peak annual revenue blockbuster.

Probiotics is a different game. $BIO with annual sales approaching $15m across its entire product range (so on average c. $1m annual sales per product p.a.) simply cannot justify the investment in clinical research to get the quality (size of population, control of variables, etc.) of clinical data. I also expect that, with the lower grade of research, they are relegated to a lower grade of publication, as you've highlighted. Even a larger propiotics specialist Probi with annual sales of c. $100m across its entire portfolio would have a limited financial capacity for "serious" clinical research.

Inevitably, given the economics and safety implications, the investment in clinical research in probiotics is going to be two or three orders of magnitude less than big pharma.

So, given the requirement for a shoe-string budget approach, $BIO is clearly scanning for pre-existing research which often appears to be sponsored by its licencing partner AB-Biotics, and then commissioning targeted low-cost additional studies to support their label claims, to pull together a package of studies of supporting information for their marketing and practitioner education.

Nothwithstanding the question-marks about control and independence, the claims are statistically significant and have reasonable p-values. The evidence supports the claims, but it doesn't prove them. So, strictly speaking, I believe that the headline "clinically proven" is a step too far.

As to the independence, the same can be said about clinical studies in the pharmaceutical industry, although the stakes are much hgher here, so registration of labs and auditing of Good Clinical Practice means there is greater scruitiny in big pharma.

The other question about limited population control and population size is a function of the shoe-string approach. Perhaps, as $BIO scales it would make sense for it to allocate some development spend to shore up the claims with larger and more rigorous studies. It would be interesting to discuss this with Blair at a future Strawman meeting.

So What? Does it matter?

Compared with most other probotics brands that don't even assemble the available data package, let along commission specific research to test defined benefits for strain-specific formulations, $BIO does appear to have some degree of differentiation from the majority of the industry.

Being pragmatic, the claim "clinically proven" needs to be considered relative to the industry of wellness, health and beauty rather than prescription medicinces.

The marketing sleight of hand, is positioning $BIO's products between the broader wellness supplements sectors and prescription medicines by 1) emphasising the clinical data and 2) making these practitoner-recommended products (delivering value to these customer by pricing discipline to provide larger margins).

It can indeed be argued to be marketing and not science; however, I believe there is every chance that it can be effective as a business.

For more serious and skeptical practitioners who dig deeper into the research, I expect some will not be convinced. I cite here as evidence a naturopath contact of mine who takes the science quite seriously, and who originally prescribed ActivatedProbiotics. Then, after "looking into the science" concluded that it "doesn't stack up" they now choose instead to offer different products (which perhaps even have less science behind them, so I am not convinced about what I was told stacks up entirely either!).

What says the TGA?

Of course, it is very easy for a HCP to do a 2-minute check. All they need to do is look up the TGA licence (ARTG 445776). Importantly this places the following restrictions on the label claim:

• Product presentation must not imply or refer to lowering or raising blood cholesterol levels from outside of the normal healthy range
• Product presentation must not imply or refer to serious cardiovascular conditions.
• Product presentation must not imply or refer to lowering blood lipids, blood fats and triglycerides.
• Product presentation must not imply or refer to circulatory disorders/diseases/conditions e.g. thrombosis

The following are permitted indications:

• Helps in the maintenance of healthy blood lipids/blood fats
• Helps reduce intestinal absorption of cholesterol from dietary sources
• Helps maintain/support healthy cholesterol in healthy adults
• Maintain/support cardiovascular system health
• Maintain/support artery health
• Maintain/support blood vessel health
• Maintain/support intestinal good/beneficial/friendly flora

Conclusion

On one hand I wish the $BIO headline wasn't "clinically proven" - because it opens $BIO to easy criticism and, objectively, it begs the question "what is the standard of proof"? However, being realistic, there are so many products that are marketed as "clinically proven" in health, wellness and beauty that the language has to be considered given the target market and competitive landscape.

The TGA have clearly decided that the standard of proof supports language like "helps" and "maintains/supports", indicating that this is a product to be used with healthly individuals seeking to reduce their individual risk factors and promote health.

The probiotics and supplements market is huge and, while not uniquely differentiated, $BIO's approach marks them out from the crowd. These are products for which there is demand, and $BIO have packaged an offering that appears to work for its pharmacy and practitioner customers. $BIO is profitable and has an ambitous growth strategy. It appears to be well managed.

So I have concluded that it is investible, and my current RL positon is now 1.2%. I am willing to build a larger position over time subject to: 1) understanding the 3-year growth strategy details and 2) their continued success in execution.

Disc: Held in RL and SM

@Matai Welcome aboard and great input.

@Colflan @mikebrisy @Shapeshifter @Matai These are great discussions.

Really valuable to be getting the take of some science "insiders".

Fascinating that the conversation has gone from:

Is the science robust enough?

To:

Does the science matter so much? in terms of an investment thesis.

Ah investing.

Thank you all, this is invaluable

Great points @mikebrisy . I think you've perfectly highlighted why I want to begin building a position in $BIO soon - it seems to be a well run business that has previously executed on realistic growth strategies that also has a long runway ahead of it.

I'm also arriving at the idea that it probably won't actually matter whether or not $BIO can crack the medical fraternity as there is huge demand for these products in Australia (and worldwide) already. In this I agree that the $BIO product seems to be superior when compared to their competitors. I can see myself missing out on this one purely because of my biases so I've actually subscribed to Blair's advice from the SM interview and bought myself a two month supply of Activated Probiotics.

Is this rigorous empirical enquiry? - absolutely not. But will it help convince me to buy? - hopefully.

@Matai We'll expect a full report on the impending two month study.

@Matai @Arizona My own personal one person definitely not rigorous test study into Biome Activated Probiotics products didn't prove to be positive experience for me

I mentioned in a previous post about a month ago, that I've had a constant gut issue for over a decade and have tried so many "therapies" over the years (everything from dietary supplements like these, pharmacy over the counter products and so on through to doctor and specialist prescribed tests and medicines) with little (no) success. I have tried a number of probiotics over the years but can't remember if I'd tried a Lactobacillus Plantarum (HK-137) based product. So as the Activated Probiotics Biome IBS capsules were available on Amazon I'd ordered one for a little of my own "market research"

I ended up taking twenty days worth of the (30 day course) capsules before giving up. Not only did things not noticeably improve, even after the first day I felt like it was making my gut issues worse but I persevered, but this continued to be the case throughout the 20 days (no improvement and if anything there was disimprovement (i.e. it made the overall condition worse))

I personally wouldn't read much if anything into this - I've taken other probiotics before with zero success so presumably whatever afflicts me probably isn't related to my gut biome

Just in addition to my previous comment @mikebrisy

From what I have seen of the trials probiotics do not reach the burden of proof that would be required for GP's or medical specialists to adopt them as a mode of care. I say this as a medical specialist myself. To be clear I am not saying BIO will not be a successful company because of this. The CEO seems smart, is well spoken, has a clear vision for the company and they seem to be on a pathway to profitability.

What I am saying is, as things stand at the moment, there is not likely to be significant adoption of these products from the medical practitioners. It may be that BIO does not need doctors to be successful however it does explain why GP's are "slow" to take up probiotics as the CEO mention on the recent call.

It does look like to me that part of BIO's strategy is to leverage legitimacy of it's products by having them recommended by practitioners.

I have two questions that are in the way of me investing in this business:

Is this just a fad based on pseudo-science?

Is this really a unique product from BIO that is difficult for others to copy?

@Remorhaz Sorry to hear you've been suffering some gut issues. From my own experience I know gut problems can be debilitating.

I am no MD or scientist and so would have nothing of value to add to this great debate on the science and the affectiveness or otherwise of probiotics.

I am finding the discussion we are having here on Strawman to be really valuable.

Its amazing to be able to have all this knowledge and healthy scepticism in the "room".

That's just magic.

Keep on truckin

@Shapeshifter

Fair questions.

In fact, these are the very questions I have been examining in my "deep dive". So let me bring forward some of my findings (which I was going to publish after earnings season, but there's nothing like a Community Question to accelerate the process!)

1. Is this just a fad based on pseudo-science?

Two parts to the answer: Part A: A fad? and Part B: Pseudo Science?

Part A) Is it a Fad?

The market for probiotic supplements started to become significant in the early 2000's. As shown in the figure below, by 2019 the global market was estimated to be worth $1.5bn, and forecast to grow to double that by 2026. (OK, the second bit is just a forecast.) This looks to me to be more of a trend and a sustainable industry than a fad. Fads tend to arise quickly, and then as quickly dissipate when the fad passed.

So, my view is, no, I don't believe it is a fad, however I remain alert to monitoring how the industry evolves year by year against the forecasts.

Figure 1: Forecast of the worldwide probiotic supplements market value from 2017 to 2027 (in million U.S. dollars)

Part B: Is it founded on Pseudo Science?

Since around 2000 there has been significant growth in research into the microbiome and probiotics. In a now already dated review of overall research into the sector, Peubla-Barrgan and Reid (2019) (see graph below for source) reviewed the previous 45 years of research into probiotic therapy. Included in their review article was the follow graph showing the volume of research outputs into probiotic therapies, both total publications and reported randomised controlled trials. This looks like a trend, with a very large number of research teams globally investigating the role of probiotics in human health.

Figure 2: Total number of publications about probiotics on the scientific database PubMed. Gray corresponds to the total number of publications, while those corresponding to randomized controlled trials are shown in black. The Y axis was divided in two segments for ease of visualization.

(2018 data reflects a partial year.)

Source: Peubla-Barragan, S. and Reid, G. "Forty-five-year evolution of probiotic therapy. Microb Cell. 2019 Apr 1; 6(4): 184–196.

Of course, the volume of publications and number of human trials does not say anything about the value or quality of the findings. For this I turn to the Cochrane database, which is considered a global standard for systematic reviews on clinical research. My assessment of the state of the science is that it is emerging, with mixed results. I've evidenced this by calling out a selection of studies:

Case Study 1: "Probiotics for the treatment of active ulcerative colitis" (2019) This review analyzed 14 studies to assess the effectiveness of probiotics for inducing remission in people with active ulcerative colitis. It found low-certainty evidence suggesting probiotics may be better than placebo at inducing clinical remission, but more well-designed studies are needed.

Case Study 2: "Probiotics for preventing acute upper respiratory tract infections" (latest version 2020). This review examined 16 trials on using probiotics to prevent upper respiratory tract infections (URTIs). It found some evidence that probiotics may help prevent URTIs compared to placebo, but the certainty of evidence was low due to study limitations and potential publication bias.

Case Study 3: "What do Cochrane systematic reviews say about probiotics as preventive interventions?" (2019) This was an overview of 17 Cochrane systematic reviews on the preventive effects of probiotics for various conditions. It found some potential benefits for certain outcomes, but noted that none of the reviews provided high-quality evidence supporting probiotic use for prevention.

If I bring this back to the $BIO Cholesterol product announced this week, where the quality of the findings is also mixed and the level of evidence is modest. Words abound like "some evidence", "low-certainty evidence", and "some potential benefits". This is consistent with the label claims approved by the TGA.

I'm no expert, and this was an investment in time of a few hours. However, I consider that characterising probiotics as "pseudo-science" is not consistent with the evidence. In general. there appear to be some positive signals, albeit for the most part these signals appear to be weak.

However, serious investment in rigorous R&D by innumerable teams around the world is seeking to elucidate the signal from the noise. To me, this looks like a serious, global scientific pursuit. And yes, of course, within that body of work there will be variable quality and - no doubt - a fair share of fraudsters, for which there is ample evidence across science generally, as in all areas of human endeavour.

Rather than characterising the science behind therapeutic benefits of probiotics as "pseudoscience", I would prefer to characterise the much of the science as serious and systematic, however, the evidence from this effort as "weak" and "inconclusive".

2. Is this really a unique product from BIO that is difficult for others to copy?

No, I don't believe it is. In the Strawman Meeting, CEO Blair explained the intellectual property around $BIO's products. But I am not convinced it is bullet-proof, like the patent on a pharmaceutical molecule.

However, there are several things $BIO can do to create protection around its products, and Blair gave examples of some of these actions.

a) Strain Designation and Deposit:The first step is to deposit the strain in a recognized culture collection like the American Type Culture Collection (ATCC) and assign it a unique strain ID. This strain ID becomes the primary identifier for all documentation and research related to that specific strain.

b) Trademark Protection: Companies can file for trademark protection on the strain name or designation. This allows them to build brand recognition around their specific probiotic strain.

c) Patents: While patenting organisms themselves is no longer possible due to a U.S. Supreme Court ruling, companies can still patent novel methods of producing or using the probiotic strain.

d) Trade Secrets:Some aspects of strain production, cultivation, or formulation may be kept as trade secrets.

e) Data Exclusivity: For probiotics intended as treatments for specific conditions, there may be possibilities for data exclusivity through the FDA regulatory process, though the application to live biotherapeutics is still unclear.

f) Licensing Agreements: Companies can create exclusive licensing agreements for their proprietary strains with consumer packaged goods companies. This is clearly what AB-Biotics is doing in their agreements with $BIO.

g) Documentation and Research: Conducting and publishing research on the specific benefits of a strain helps establish its uniqueness and supports IP claims

This broader IP strategy is also used in more traditional healthcare (pharma and medical devices) to extend intellectual protection after core patents expire.

However, in a practical sense, with a market cap of only $100m, $BIO has limited resources to defend its IP, so my thesis is not reliant on that.

Can $BIO create a valuable business over the next 10 years?

This is an additional question I am most interested in. And I believe that - having considered the two earlier questions - the answer is "yes" or at least "maybe".

First, a serious, global scientific effort is underway to understand the role of the microbiome on human health. So far, the results are mixed and the evidence is weak. But there is enough promise in the work that it continues to grow.

Importantly, awareness of this effort has entered public consciousness. Sure, there is a sizeable proprtion who will dismiss it all as "pseudo science" and no doubt will continue to do so until such time as more compelling evidence emerges. However, there is also a sizeable segment of customers and healthcare and wellness practitioners that are open to and - more importantly - willing to pay for products founded on the emerging and indeed quesiontable science. In business, you don't require a consensus. All you need is a material market segment that is willing to pay.

Probiotics are essentially a fast-moving consumer good within the broader area of wellness supplements. It is about building a brand, and leveraging that brand to generate profits for the brand owner. There are plenty of brands in wellness, health and beauty that are not underpinned by strong clinical evidence. And there are many valuable businesses built off these brands.

In probiotics there are already several precendents. One example would be BioGaia (I've put a graph of the evolulton of their financials below).

Judging by the evidence of what I can see in pharmacies, and engaging other wellness practitioners, as well as assessing the online presence, $BIO had made a good start in establishing a leading Australian probiotics brand. That brand has brand value. My bull thesis is that they are going to take that brand into UK, Europre and North America and, over the next 5-10 years, create a business worth $0.5-$1.0bn. This is not without precedent.

Figure 3; Financial Historical Performance of Bio Gaia

Market Cap: 12.9bn SEK (A$1.86bn)

@mikebrisy You are getting into the weeds now on BIO.

Nice work.

As you say "In business, you don't require a consensus. All you need is a material market segment that is willing to pay."

I believe there is a market there.

How much of the market can BIO capture? That is the question.

This may have been covered already and possibly even by BVN, but....

By way of industry comparison, is it fair to liken Probiotics to Vitamins? I imagine that the scientific research filtered through regulators, would be throwing up similar terms like "may assist", "may be better than placebo" etc.

Can BIO be viewed in a similar way to say a Blackmores and the like?

@Arizona yes, I think the comparison can be made.

And if Blair is smart, which I think he is, he will learn the lessons from Blackmores and be careful to keep control of the brand, as the business grows. In fact, in the SM meeting, I think he demonstrated an awareness of the dangers of losing control and devaluing a brand.

I hope ActivateProbiotics over time becomes an even more valuable brand.

What the valuable exchange and challenge here on SM highlights, is that holders should be alert to the possibility that - over time - an adverse scientific consensus could emerge. We'd be foolish to rule it out, and I aim to manage this risk via position size. But I am a long way away from position size becoming an issue for me!

Excellent analysis, as always, @mikebrisy

It's still an emerging science but from what I can see there is a growing body of good research that suggests there is at least some legitimacy to many of the claims made, and a growing (albeit nascent) awareness.

Still, it's right to be cautious. It takes a looong time for things to change in medicine (which is a good thing in many ways). I'm reminded of Ignaz Semmelweis, who in the mid 19th century proposed that washing hands before surgery would limit infections. Despite a lot of good evidence, it took over 20 years before the practice became widely accepted.

We tend to think we are more enlightened these days, but there are plenty of examples of inertia in medical practices and thinking. For example, it took several decades of rising evidence and horrible societal impact for the medical community to widely recognize that the reliance on opioids for chronic pain was flawed. 

@mikebrisy I suspect one of the reasons the scientific evidence is weak is the effect from probiotics is modest at best. However I think the science is probably irrelevant for a wellness brand like this and probiotics have certainly been gathering momentum in the market over a pretty long period of time.

It does remind me a little of a fashion retail brand but perhaps that is my biased scientific way of thinking.

It was actually another medical specialist who pointed me in the direction of this one so I can tell you there is some interest in the medical world, at least as an investment, in this one.

On the watch list.

Such a good point @Shapeshifter

Just look at A2 Milk, Blackmores and all the pot-stocks. There is some evidence for efficacy, but far from rock solid at this stage.

I find it amazing that gluten free is still a thing -- almost every cafe and restaurant in the country accounts for it, but less than 1% of the population has Celiac disease. Don't get me started on chiropractory! [runs for cover before the advocates pile on..]

I agree @Shapeshifter. Treat this as an FMCG with a bit of " social media science" layered over the top in the same way anti-ageing creams are clinically proven etc.

The issue I have primarily is they are trying to convince the market (the stock market not the gut health market) that they have IP that gives them a competitive advantage – which in turn justifies the valuation – when they really don't. If they ever get big enough to become a thorn in the side of the incumbents there will be a response. Their method of paying higher commissions to pharmacists is quite clever, but dressing up their products as "practitioner only" while selling them on Amazon really does reek of marketing spin. And that is fine. But just understand what it is they're doing.

@Strawman Note that whilst "almost every cafe and restaurant in the country" says they have gluten free options - these are not for people with Coeliac disease (they are just for people who want to eat less gluten in their diet - potentially because they "believe" they have some sort of mild intolerance to it)

Requirements for Coeliacs are MUCH more stringent than just claiming not to include (extra or any) gluten into meals - for Coeliacs even the most minute gluten particle is poison and effectively permanently damaging - so they need kitchens to cater to very stringent cross contamination protocols - basically GF food for Coeliacs has to be prepared in completely separate and isolated areas (or thoroughly cleaned before being used) and prepared with separate kitchen equipment (knives, boards, pots and pans, cooked in separate ovens, toasters or deep fryers and so on)

Basically this is too high a bar for "almost every cafe and restaurant in the country" to cater to - so most Coeliacs will only eat in places that are recognised as meeting these needs (which is frankly pretty few)

No I agree, and well said. My point just being that a lot of people avoid gluten not for any sound medical reason, but because they believe it to be bad. For the vast majority of people, it's not.

I had a quick look through the studies that were easily available. Two were from 2021. The meta-analysis they reference was from 2017. Clearly the timing was more about the product launch.

My overall feeling is, it is science but not great science. The subject numbers were small. One study had 39 people in it and the other had 91. These are very small studies when you consider that statin studies have hundreds of thousands of people in them. Is there a real effect from Biome Cholesterol Probiotic?  Probably but the effect is relatively small and at a similar magnitude to what can be achieved with cheap plant phytosterols and insoluble oat beta-glucan.

Does this even matter? Probably not as the market seems entranced by probiotics ....... for now.