Biome Australia Limited

Good morning, everyone. Again, sorry for the delay. Thank you, Douglas, for giving everyone a heads up and Eloise for emailing out to our attendees. We will be starting immediately, 10.15, 3.15 US time for me in California. Thank you to Paul Hart for joining. I'll give you a quick introduction. So Paul Hart is head of Canary Capital, who have been our corporate advisors for the last two years. I asked Paul to join the webinar so he could give a bit of an overview on how they work with biome and also ask some questions as well, a bit more interactive Q&A as well. So Without further ado, we will jump in because I know I've held everyone up with our tech challenges this morning, resulting from myself being dialing in from the US. So I'll start off with a really quick overview of Biome Australia, who we are and what we do. There may be some new people that are fresh to the story. Biome is one of the first global movers in the targeted or live biotherapeutic probiotic space. So back in 2016, we got involved in our first clinical trial prior to founding Biome, which wasn't founded in 2018. And we've already been in the nutraceutical space for several years, which is, I suppose, more commonly known as the vitamin industry. And we changed our philosophy and our process and our business model as well to really look at probiotics as the next generation in healthcare and preventative medicine. And this all started with a clinical trial that we got involved in in 2016 in pediatric allergic asthma. This clinical trial was looking at 440 children with asthma. It was placebo-controlled randomized double-blind study on a very specialized specific strain of bacteria that Biome now use in our product, Biome Breathe. Over six months in the study population, we found a 64% reduction in asthma attacks, asthma events. And that just changed the game for Viome. So from that point onward, on surveying the global market, probiotics are a really nice commercial place to play, being they're the highest growth segment of the entire complementary medicine, vitamin, natural medicine market, whatever you like to call it. However, what's so unique about them is they are really specialised, they're very targeted, and the level of clinical backing around some of the probiotic strains that exist... many of which are our biomes, is something quite unique. And it really gives doctors confidence, pharmacists confidence and naturopaths confidence to be able to recommend these products, not just in a retail setting, but in clinical practice with their patients. So buy-in listed on the ASX in November 2021. The corporate journey has been a really exciting one for us after a tough first year on the ASX in 2022. We've been able to grow and build, I suppose, the understanding of the business in the wider investment community, but also take some meaningful steps forward with the growth of the revenue, but also the growth of the market cap of the company. What's really important to Biome is to understand our mission and why we do what we do. It's not just for profit. That is our main goal to support generating shareholder wealth. But we really are motivated as a B Corp, B Corp certified organization to prevent disease, improve health outcomes and quality of life. but making our products accessible to all. What's so interesting about this statement is if we do improve health outcomes and prevent disease, we will sell more products and our patients and customers will come back. We will make more money for our pharmacy partners, our practitioner partners. So by having the most effective product, the best in-class product, that is the most powerful marketing. And as our Activated Probiotics brand has shown, The repeat purchase levels and the sales levels have been incredibly strong, certainly in the first half of FY25. Very quick snapshot, the overview of the journey. So I started my background in the business back in 2013 in a former company that we rolled into Biome. But starting in 2019, we launched Activated Probiotics over here. So being our most customers know us as Activated Probiotics, not Biome Australia, that is our flagship brand in the market that is one of the most widely used probiotic ranges in Australia now. We launched in 2019 from Melbourne, Australia into only 100 pharmacies. As most people have seen, we gave an update to the ASX and to investors only a couple of weeks ago saying we've now passed 6,000 distribution points in the Australian market since launching essentially at the beginning of 2020. It was the end of 19 into the COVID market from Melbourne, Australia. So a really strong achievement in getting mass national distribution. It's not an easy thing to do. You've got big groups in Australia like Terry White Chem Mart, the largest with 650 pharmacies. You have the Chemist Warehouse in the more retail discount end of the market. You have Priceline Pharmacy that are somewhere in between with the full service focused more on beauty and health. So for these type of retailers to take on a brand, they're only going to do that once it's de-risked. So it is an ongoing trend. development process for anyone in this space to be able to prove themselves gain scale and volume in Australia before you can get on those shelves. So to get to 6,000 is a huge milestone for biome, which represents roughly 50% of that addressable market. In Australia now, activated probiotics is in more than 3000 pharmacies. So it's about a touch over 50% of the addressable distribution market of pharmacies. We have 18 products, many of which are clinically proven products. So the activated probiotics brand is positioned as practitioner only. We sit the product as a very high value proposition that is sold based on outcomes and solutions rather than a product or a price. It's not a push model like the vitamin industry, being that we are actually solving problems with clinically backed products on conditions. We're pulling patients in via the recommendation of a doctor, a pharmacist, a natural medicine professional. or a staff member, retail staff member in a community pharmacy. So across the range, I'll call out a couple of hero products. So part of the first launch back in 2019 was Buy and Breed that I already mentioned the clinical trials. So this one is indicated for allergic asthma. Being that that's a disease or a protected condition, we can't talk about asthma, which also leads into the reason of why we are a professional or a practitioner leaning brand. So our team of health qualified sales and education staff will detail doctors at their clinic or retail pharmacies in their pharmacy on the clinical trial, how the product works and then how they can use that to really grow revenue in their dispensary and their pharmacy in general. Most recent product launch, Bime Cholesterol. This has had a lot of incredibly strong feedback, certainly from our investor community as well, many of which have started taking this product. The name speaks for itself. So the product was studied in five randomized placebo-controlled double-blind studies over the last five years. And it's shown to significantly reduce cholesterol in an at-risk population. Two of the studies, the biome cholesterol was used alongside statins. Statins are a fairly common medication. Many of you will be aware of what a statin is. A statin is the number one... and two medication on the australian pbs by volume and those medications are in a class of medicines that reduce cholesterol and doctors obviously are very concerned about this in the wider australian population with the high instances of death from heart related conditions so Biome Cholesterol is a really, really interesting proposition. We've only had it on market for six months. It's selling quite well. It's definitely in the top half of the ATN products within six months. So we expect it to be a top seller. What's most interesting about this product, not just its uniqueness, it's the perfect product to tell the story and explain to health professionals and patients alike that this product can be used alongside a medication. This market, this we call it the adjunct or complement to medication market, is something that Biome has an opportunity to essentially own, being that there's no one else in the complementary medicine market able to recommend or sell a product alongside a drug. There's a couple of key reasons to this. Number one, most natural medicines, essentially anything that's not a probiotic will have drug interactions or contraindications. So pharmacists will not in any circumstances recommend various vitamin products alongside drugs. Probiotics as a category never leave the digestive tract, so they do not have any interaction with drug metabolization of drugs. 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 a Resuvastatin, 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 as 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, Biomexma and Biomecne. These are our dermatology section. As you might imagine, they're going very well in Priceline Pharmacy, being that it has a strong emphasis in skin within their wider group and their younger female demographic. Biomexma is clinically proven in two 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 seen 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 don't have any material competition in the market on conditions or diseases. Biome Lift, a mental health concept. So this has now got three 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 sub-threshold 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 BiomeLift 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 two, 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 symptoms. uh last but not least by dental this one also launched in 2024 i think in the in this uh second half of fy24 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 um product and topic in the future of healthcare The exploding research around the oral microbiome is continuing, and the downstream effect of managing oral dysbiosis or, you know, not having the appropriate bugs in your oral cavity is significant links to other downstream effects and diseases that are starting to be discovered, a link, whether they're neurological breakdowns like cancer, 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 caries, 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 integrative 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 Terawight came up very kindly shared with us a little while ago, some of their 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 two and a half monthly boxes per transaction. And they're returning at least six times 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 buy them. If you're seeing a three... Three purchases of a monthly product in 12 months, that's typically seen as 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 number one growth spot in our category. That's in vitamins and practitioner only in pharmacy. So for the last four 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 number two to one other brand in terms of total revenue. Number one in growth as well at Terry White and Priceline, our two largest customers for the full service community pharmacies and our wholesalers Symbian 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 UK practitioner market for two years now and recently launched into the health retail market about 12 months ago. Sales for half one, 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 FY24. We've reached EBITDA now for four 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 100K, excluding our R&D rebate, or roughly 400,000, including our R&D rebate for H1 FY24. Gross margin continues to improve. Pre-IPO, when the business was founded, 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're able to convince our retail partners to manage the full retail price, supporting everyone's margin. I think that's probably enough till I can hand over to Paul to join the conversation. Welcome, Paul.

G'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 two 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 our job is to find these companies very early before the market has awoken up and realised the real potential value that these companies can have. So we were, We were investing in biome and seed. We also invested at the IPO. It obviously dropped after the IPO. And if we liked it at 20 cents, I'll tell you what, we really loved it at six and between sort of six and 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 yeah, It's been outstanding in terms of delivering six times, 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 onto some discussion about the half year and the company. I'm just gonna say firstly, a big congratulations to Blair on the arrival of your second baby girl. It's obviously an exciting time for you, hopefully you're getting some sleep. 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

growing the overseas markets look uh i suppose at the end of the day it's life isn't it but it's uh very very excited to have my second little girl join the family and uh all the aunties and uncles in the office will be thrilled with their extra babysitting duties as well but uh look i mean we released our i've got the slide up here vision 27 we released our vision 27 to the asx uh back in september and a key component of that is not just the revenue target of 75 to 85 million over the next three 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, you know, I'll check in with them every week, but they don't need to be micromanaged. And, you know, long, long gone are the days that were a startup run by one guy who, you know, 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, over the coming periods. But because of that, I've been able to spend a lot of time outside the office, uh, Also due to the fact of having a very supportive wife who's at home in Australia with my 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.