REG - SkinBioTherapeutics - Acquisition of Dermatonics

SkinbiotherapeuticsAnnouncement

25/01/2024 07:00

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RNS Number : 8967A  SkinBioTherapeutics PLC  25 January 2024

 

 SkinBioTherapeutics plc

("SkinBioTherapeutics" or "the Company")

Acquisition of Dermatonics Limited for initial consideration of £1.68 million

 

·      Established topical dermatological player in skincare/woundcare
space

·      Provides access to new sales channels for AxisBiotix products and
platform for SkinBiotix technology with focus in woundcare

·      Immediately revenue and profit accretive, as well as cash flow
positive, with additional potential cost synergies

·      Revenues of c.£1.8 million and adjusted EBITDA of c.£0.23
million in FY23

·      Brings on board additional operational, sales and regulatory
affairs expertise

·     Consideration of up to £2.93 million comprising £1.68 million
initial cash consideration and £1.25 million earn-out over the next three
years

·      Acquisition financed through £1.6 million drawdown from new
£5.0 million convertible bond facility (see separate announcement)

 

25 January 2024 - SkinBioTherapeutics plc (AIM: SBTX, or the "Company"), the
life science business focused on skin health, announces that it has entered
into an agreement to acquire the issued share capital of Dermatonics Limited,
a specialist in innovative topical and dermatological products in the
skincare/woundcare space.

The initial consideration is £1.68 million plus £1.25 million earn-out over
three years, in a cash-free and debt-free acquisition. Completion will take
place upon clearance of funds being drawn down from the CLN facility which is
expected to take place no later than 25 January 2024.

This acquisition aligns directly with SkinBioTherapeutic's stated strategy to
seek accretive inorganic opportunities that provide immediate synergies and
accelerated routes to market. In addition, the acquisition provides inorganic
revenue growth and reduces losses at a Group level.

Operational and commercial highlights

·      Expands SkinBioTherapeutics' product range and customer base

o  Established and reputable topical and dermatological company in the
skincare/woundcare space

o  Products range from heal balm, treatments for warts & verrucas, to dry
skin relief

o  Dermatonics is ISO13285 registered and products are either Class1 Medical
Devices or Cosmetics

o  Strong retail customer following and testimonials [Trustpilot 4.9]

·      Provides sales platform and new sales channels for SkinBiotix
technology and products

o  Access to mainstream retailers including Boots and Superdrug, ecommerce
(Amazon) and also into specialist podiatry clinics

o  Access to new geographies in Europe and Asia

o  Opportunity for product development in the MediBiotix pillar in woundcare

·      Immediately accretive - Dermatonics is currently revenue
generating, profitable and cash flow positive, with the additional potential
for cost synergies

Further details of Dermatonics are set out below.

Financial highlights

·      SkinBioTherapeutics is acquiring 100% of the share capital for up
to £2.93 million

o  Initial cash consideration of £1.68 million

o  Further contingent consideration of up to £1.25 million in cash, payable
upon achievement of financial performance targets over 2024, 2025 and 2026

·      Initial acquisition funding provided through £1.6 million draw
down of £5.0 million convertible bond facility ('new Facility', see separate
announcement)

 

Further acquisition

The Company is in advanced negotiations and diligence to acquire a second
company in a similar sector, with total consideration of less than £2
million, where cash flow is positive and there are business synergies; this
acquisition is currently expected to be completed in Q1 2024.

 

Stuart Ashman, CEO of SkinBioTherapeutics, said:

"We are delighted to announce our first acquisition as part of our ongoing
consolidation strategy in the skincare and hygiene sectors.

"As we have said repeatedly, we have steered a careful course of finding
revenue generating and profitable companies that also provide operational
synergies to our underlying business. Dermatonics ticks all of these boxes.

"We also gain access to a great customer base including high street retail
brands like Boots and Superdrug, plus e-commerce, including Amazon, and more
specialist healthcare outlets. Importantly, for the longer term, we gain a
platform to back our SkinBiotix™ technology into for our MediBiotix
woundcare and skin healing pillar.

"We believe SkinBioTherapeutics and Dermatonics are very complementary as
businesses, and we are looking forward to working with the Dermatonics team."

 

Greg Andrell, CEO of Dermatonics, said:

"We have grown Dermatonics over the past 16 years to become a well known and
trusted set of brands in the specialist skincare / woundcare market. It makes
total sense to us to combine forces with SkinBioTherapeutics who looks at skin
care in a similar way to us; we focus on natural ingredients and SBTX focuses
on the microbiome. Together, we are stronger, with a broader range of products
and an exciting SkinBio technology platform behind them, solid financial
resources and scale to enjoy cost efficiencies and synergies. We are excited
about the opportunity to become part of the SkinBioTherapeutics team."

-Ends-

Shareholder presentation and Q&A

CEO, Stuart Ashman, and CFO, Manprit Randhawa, will provide a live
presentation about the terms and rationale of the acquisition of Dermatonics
and the financing details via the Investor Meet platform Friday 26 January at
10:00 am GMT.

The presentation is open to all existing and potential shareholders. Questions
can be submitted pre-event via your Investor Meet Company dashboard at any
time during the live presentation.

Investors can sign up to Investor Meet Company for free and add to meet
SkinBioTherapeutics at the link HERE
(https://www.investormeetcompany.com/skinbiotherapeutics-plc/register-investor)
.

Investors who already follow SkinBioTherapeutics on the Investor Meet Company
platform will automatically be invited.

A recording of the presentation will be available shortly afterwards on the
SkinBiotherapeutics investor relations section of the website HERE
(https://www.skinbiotherapeutics.com/?s=investor+meet) .

 

The information communicated in this announcement contains inside information
for the purposes of Article 7 of the Market Abuse Regulation (EU) No.
596/2014.

 

For more information please contact:

 SkinBioTherapeutics plc                            Tel: +44 (0) 191 495 7325

 Stuart J. Ashman, CEO

 Manprit Randhawa, CFO

 Cavendish Capital Markets Limited                  Tel: +44 (0) 20 7397 8900
 (Nominated Adviser & Broker)

 Giles Balleny, Dan Hodkinson (Corporate Finance)

 Charlie Combe (Broking)

 Dale Bellis, Tamar Cranford-Smith (Sales)

 Instinctif Partners (financial press)              Tel: +44 (0) 20 7457 2020

 Melanie Toyne-Sewell / Jack Kincade                SkinBioT (mailto:SkinBio@instinctif.com) herapeutics @instinctif.com
                                                    (mailto:SkinBio@instinctif.com)

 

 

Additional details about the acquisition of Dermatonics

Overview

As stated in the FY results on 30 November 2023, the Group put in place a
strategy to accelerate growth through a dual track of organic growth of its
own portfolio and inorganic growth through the acquisition of companies that
either manufacture or sell a variety of branded topical products for common
dermatological conditions to NHS hospitals, dispensing practices and national
pharmacy chains.

Management was clear that any targets which the Group was interested in
purchasing would have to be accretive from a revenue and earnings perspective
from day one, and thus reduce the operating cash burn. The overall goal of the
Group was to become a cash generating entity within 12-18 months of each
acquisition.

The Directors believe that Dermatonics' business and financial performance
fulfils all the criteria set by SkinBioTherapeutics, and provides an accretive
and synergistic growth opportunity for the Company.

 

Introduction to Dermatonics

Dermatonics was established in 2008 and specialises in the production of
innovative topical and dermatological products in the skincare/woundcare
space, with the aim of using natural ingredients wherever possible.

The company's strategy has been to focus its development activities in areas
where it identifies room for improvement in products currently available on
the market, producing more effective treatments that provide faster results
and/or less application.

The business is based in St Ives, Cambridgeshire, employing six staff, mainly
made up of sales and operations / back office staff.

The business is being sold by its sole owner, Greg Andrell, who also runs the
business, supported by his Operations Manager, Tom Waughman. Mr Andrell will
remain involved post-completion in a position to ensure performance targets
are achieved as agreed in the terms of the deferred consideration.

Within the sales and operations team, there are Regulatory Affairs and
accounts roles which will be added to in-house capabilities at
SkinBioTherapeutics (currently regulatory affairs is outsourced).

Sales roles will remain in place, and there is the potential to push
AxisBiotix-Ps through these individuals and channels in time.

 

Financial performance

For the financial year ended 31 January 2023, Dermatonics reported unaudited
revenues of £1.82 million and an adjusted EBITDA of £230k adjusting for one
off items (£150k stock write off and £123k bad debt). Financial year to date
revenues and profits reflect upward momentum with higher revenue and improved
margins. As at 31 August 2023, Dermatonics had total assets of £558k.

The acquisition of Dermatonics is expected to be immediately financially
accretive through additional revenues and profits.

 

Product range

The range of products is available at https://www.dermatonics.co.uk
(https://www.dermatonics.co.uk/) .

The business is ISO 13485 registered, and products are either Class 1 Medical
Devices or Cosmetics. The products are well proven in the UK market with
excellent customer following and reviews, including a 4.9 rating on
Trustpilot.

The prescription range products are also well established and four products
are currently listed on the UK Drug Tariff set by the NHS.

All manufacturing is outsourced to UK third parties.

 

Diversified sales routes

Dermatonics has developed five routes to market (channel or distributor) for
its products, resulting in diversified revenue streams:

·      Prescription (UK Drug Tariff) sales (e.g. Boots, SuperDrug,
+well, Cohens chemist

·      Export (e.g.) Alliance Health, AAH, Citysuper,)

·      OTC Pharmacy (e.g. Boots, SuperDrug, +well, Cohens chemist, PSUK)

·      E-commerce direct to consumer (e.g. Douylin e-commerce, Amazon,
Aster DM Healthcare

·      Podiatry clinics (e.g. Shuropody)

Geographically, Dermatonics' products are available in the UK, Europe
(Portugal, Spain), Baltics, and Vietnam.

 

Academic links

Besides a positive customer following, Dermatonics has strong links with key
opinion leaders in the podiatry space who have been long term users and /or
have consulted on the creation of new products:

·    Professor Stuart Baird, Emeritus professor of Podiatry, Glasglow
Caledonian University and former Chair of Royal College of Podiatry. He is an
international leader in the implementation of diabetic footcare services

·      Michelle Scott, Chair of The Royal College of Podiatry

·  Rebecca Penzer, Editorial Board Member of Dermatological Nursing and
Senior lecturer in Dermatology.

Within the academic and clinical environment, there have been four published
studies in connection with Dermatonics's products and technology.

 

Rationale for acquisition

SkinBioTherapeutics, through its AxisBiotix pillar, aims to develop and market
systems of products which aim to heal skin from within (Gut-Skin Axis) and
heal from outside (using a range of topicals).

Within the R&D pipeline in SkinBioTherapeutics, are a range of programmes
and cost centres which aim to develop topicals using the SkinBioTherapeutics
technologies over the coming years as new products / applications are
launched, as well as for the current product AxisBiotix-Ps.

SkinBioTherapeutics believes this accretive acquisition fulfils a number of
strategic, commercial and operational goals, and is in line with the Company's
stated growth strategy.

·      Diversifies SkinBioTherapeutics' product portfolio, and sales and
distribution channels

Dermatonics is an established and reputable topical and dermatological company
in the skincare/woundcaremarket with products classed as either Class 1
Medical Devices or Cosmetics. It markets its products through various sales
channels globally and its products are trusted by healthcare professionals,
podiatrists and customers.

As well as generating additional revenues from these new products, Dermatonics
presents an opportunity to capitalise on these sales channels for existing and
new SkinBioTherapeutics products. There is also the opportunity for product
development in the MediBiotix Pillar as Dermatonics's creams are also proven
to be effective in hard to heal skin/wounds.

·      Immediately accretive through revenues generated and cost
synergies:

Dermatonics is revenue and profit making, and cash generative, and therefore,
would immediately add to SkinBioTherapeutics' financial position.

The acquisition is cash-free and debt-free.

The earn-out has been structured to ensure Dermatonics continues to perform as
anticipated. Senior director experience is being retained to ensure a smooth
transition as well as performance alignment on deferred consideration.

·      Additional senior, regulatory and sales expertise

Dermatonics has a small staff of six including regulatory affairs and
bookkeeping. These roles will add to SkinBioTherapeutics' in-house
capabilities, in particular, regulatory affairs which is currently outsourced.

The sales staff will be incorporated into the SkinBioTherapeutics team, and as
well as being responsible for Dermatonics products, will also be able to take
on SkinBioTherapeutics' own products and channels, such as for AxisBiotix-Ps.

At the senior level, the operations manager, Tom Waughman, will report into
Stuart Ashman, CEO of SkinBioTherapeutics. He is responsible for day-to-day
management of overall operations.

In summary, the Directors of SkinBioTherapeutics anticipate that this
acquisition provides the platform for SkinBioTherapeutics to gain access to
reputable brands within the skincare/woundcare market in the UK, access to
various sales channels and revenue and profitability with scope for future
growth.

 

Notes to Editors

About SkinBioTherapeutics plc

SkinBioTherapeutics is a life science company focused on skin health. The
Company's proprietary platform technology, SkinBiotix®, is based upon
discoveries made by Professor Catherine O'Neill and Professor Andrew McBain.

The Company is targeting a number of skin healthcare sectors, the most
advanced of which are cosmetic skincare and food supplements to modulate the
immune system by harnessing the gut-skin axis. In each area
SkinBioTherapeutics plans to exemplify its technology through human studies.
The Company's first product, AxisBiotix-Ps™, a food supplement to address
the symptoms of mild to moderate psoriasis.

The Company listed on AIM in April 2017 and is based in Newcastle, UK. For
more information, visit: www.skinbiotherapeutics.com
(http://www.skinbiotherapeutics.com) and www.axisbiotix.com
(http://www.axisbiotix.com) .

 

Caution regarding forward looking statements

Certain statements in this announcement, are, or may be deemed to be, forward
looking statements. Forward looking statements are identified by their use of
terms and phrases such as ''believe'', ''could'', "should" ''envisage'',
''estimate'', ''intend'', ''may'', ''plan'', ''potentially'', "expect",
''will'' or the negative of those, variations or comparable expressions,
including references to assumptions. These forward-looking statements are not
based on historical facts but rather on the Directors' current expectations
and assumptions regarding the Group's future growth, results of operations,
performance, future capital and other expenditures (including the amount,
nature and sources of funding thereof), competitive advantages, business
prospects and opportunities. Such forward looking statements reflect the
Directors' current beliefs and assumptions and are based on information
currently available to the Directors.

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