Skinbiotherapeutics (LSE:SBTX) — Investor Presentation

0:01 Good morning, and welcome to the SKINBIOTHERAPEUTICS PLC Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and they can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Just simply type in your questions and press send. Before we begin, I would like to submit the following poll. And I would now like to hand you over to Acting Chair, Alison Levitt. Good morning to you. Good morning. Welcome, everybody, to this morning's presentation from SKINBIOTHERAPEUTICS. I'm Alison Levitt, and I'm the Acting Chair of the company, and I joined the Board at the beginning of January twenty twenty six. I'm accompanied this morning by Rachel Parsonage, Interim CEO, who was appointed in March of this year. Morning, everyone.

0:46 As a reminder to those of you who might not know the company, SKINBIOTHERAPEUTICS is a life sciences company focused on skin health. Next slide. Please see our disclaimer. So this slide is an overview of what we will be covering today. The normal half year results process was significantly disrupted. So before we talk about half year twenty six results, I want to cover what happened post period end and the chain of events that ensued. We will then talk through the adjustments that have been made to the last year's restated FY 2025 accounts. And then Rachel will take us through the operational and financial highlights of the first half of FY 2026. She will also cover how the business has traded in the second half of the financial year.

1:38 As we said in the recently published results, we started the new financial year with optimism. But in February 2026, there was significant disruption to the business, which I'll go through now. This slide reflects how the last six months have panned out since the year end. I'm going to pause there for a moment for you to look at this. Matters of concern were flagged in February by our former CFO, Emily Bertram. This triggered a series of events including the full suspension then resignation of the CEO. All the events marked here represent an RNS statement. We have deliberately split the timeline of events into three sections, governance, investigation, and reporting to demonstrate the distinct multiple lanes of actions that were taken.

2:33 Our fundamental aim and responsibility to shareholders was to ensure that we had the clarity of the f y twenty five results, a clear view of operational performance and prospects, and also clear guidance on what improvements are needed to be made in our governance processes going forward. We have said repeatedly, we wanted to be able to draw a line and then move on positively and strongly. The whole process took time and understandably, there were many questions about how long the time that it was taking. Both Rachel and I were on the investigation panel, and we can assure you that the time taken matched what needed to be done. No one dragged their feet. No one overstepped the scope of the investigation.

3:20 So let's take you through the key steps we took. We recognize that there were three areas where we needed to set a firm strategy to mitigate the impact to the business. Firstly, we needed to recruit an interim CEO with operational and commercial experience relevant as soon as possible, and we were fortunate to find Rachel for that role. Secondly, we needed to stabilize the business and make sure that the team maintained a business as usual mindset. And we believe that was achieved, and we really appreciate all the work that was done by our team in order to do that. Finally, our partnerships, clearly very important to us. So communications with our lead contacts were essential to reassure and reset when necessary.

4:10 These were essential steps before taking a more strategic sense around delivery and considering what the company could do more of with respect to opportunities around its assets and partnerships. Before I go through the disclosable points from the FRP report, I want to stress that any reference to the investigation and FRP's report is not intended to waive and should not be taken as waiving legal professional privilege. This is still an active legal situation, which is why we have to be careful what is said publicly. The wording is largely taken from what we said in the results statement, and we cannot really say anymore. However, the important points to draw out are the originally identified item referenced in the statement was the accrued royalty income of 770,000, where the supporting documentation was identified as fabricated by the former CEO alone.

5:11 No other matters relating to f y twenty five revenue were found. There were no issues around the cash balance. There were, however, weaknesses identified around corporate governance and certain processes. Prior to these findings, the board had already implemented some changes and now has a comprehensive list of actions that are being tackled by Rachel and I as quickly as we can. You will see very clear evidence of these in our f y twenty five twenty six, apologies, annual report and accounts. On the next slides, I'm going to go into more detail about the board's takeaways. Our following takeaways are really aimed to address the key questions that have been raised by shareholders in the period.

5:59 So I will spend some time going through them. Firstly, I can assure you that the Croda relationship is good. It's a robust commercial agreement with a high quality partner, and it remains one of the company's most strategic important assets. Understandably, there has been significant discussion regarding individual license arrangements. In line with financial reporting best practice, we have reviewed our reporting segments. These were clearly identified in our half year results r and s earlier this month. It is our intention to report all license revenues consistently through our product segment along with other revenues derived from IP and product related activities.

6:46 Rachel will explain in more detail how this segment is made up later. We do not intend to provide ongoing commentary on individual license arrangements unless disclosure obligations require us to do so. There have been questions and speculation around our cash position position and future funding requirements. Our pathway towards cash breakeven is centered on growing the two operating businesses whilst maintaining strict financial discipline. Underlying cash burn is coming down. Rachel will talk later on what we've been doing around cost control. It is important to note that we will be preparing our f y twenty six results on a going concern basis.

7:32 And in accounting terms, this means being able to evidence cash runway for at least twelve months from the date of audit sign off. Around regulatory matters and recovery actions, there are still some matters ongoing, and we will be cooperating fully with all relevant parties. We are considering whether opportunities exist to recover costs and losses incurred by the company. Any action we take will be assessed through a straightforward shareholder lens. What's the likelihood of success? What's the cost, the timing, and importantly, the overall value that will be created by pursuing that? We will be commercial and pragmatic in our approach. The board has changed considerably, and we have commenced the search for an additional non executive director who will bring relevant sector and commercial expertise to complement my financial and governance expertise and also support Rachel's industry and operational experience.

8:34 I have taken on the acting chair role as I evaluate how being the permanent chair might work within my other portfolio commitments. However, I just wanna say from my point of view, SKINBIO is a fascinating business. I'm really excited to be part of it, and I believe it is at a pivot point in its evolution. With Rachel, she's only four months into a six month contract. However, it's been clear even in this short time that she's laser focused and has shown a really deep commitment to SKINBIO. We also unfortunately announced last week about Ellie Emily Bertram's departure. We can't say any more than what was said in the r n s. However, she goes with thanks and our very best wishes. We've appointed an interim CEO CFO, which will be a non board role, and we will be looking for a permanent CFO in due course.

9:26 We also have solid support from our in house and local accounting teams, ensuring the financial operations continue as normal. On governance, it is the board's responsibility to ensure lessons are learned and embedded throughout the organization. Working alongside external advisers and drawing upon the recommendations arising from the review process, we have developed a detailed program of governance and control improvements. Good progress has already been made and further work is underway. This will be summarized in the annual report accounts for FY '26. And finally, Rachel and I strongly believe in maintaining open and constructive relationships with shareholders.

10:11 However, we also believe management time must be directed primarily towards rebuilding, strengthening, and growing the business. We therefore intend to engage actively with shareholders through appropriate and structured channels, including results presentations, investor meetings such as this, and periodic road shows, as well as the SKINBIO IR inbox, which is being monitored regularly. Our objective is to ensure shareholders remain appropriately informed whilst allowing management and the board to remain focused on execution. I will now go through the FY twenty five results, highlighting the adjustments we have made before I pass over to Rachel to talk through the half year twenty six results and current trading.

11:01 This slide sums up what we said in the r and s statement. Key areas to highlight are the adjustment to the revenue line of the 770,000 accrued royalty revenue. To clarify, this has been removed completely. This was not merely a timing issue. However, as we stated in the r n s of June 8, actual initial licensing income was recognized in eight half year '26 results and continues to do so in line with the contract. We have also removed 230,000 of certain directors bonus payments. Some directors have voluntarily paid back the amounts they were paid, and we will see this reflect reflected in the FY '26 results. We also have new auditors, Saffry LLP.

11:50 Moving on to the cash position. In my slide on takeaways, I talked about our cash position. The cost of a formal forensic investigation alongside associated legal fees was always going to be considerable. But as I said before, we needed to be able to draw a line and move forward with confidence. We will be pursuing recovery of costs where possible and reasonable. On the operational front, our pathway towards cash breakeven is centered on growing the two operating businesses whilst maintaining strict financial discipline. The board has undertaken a detailed review of the business, its cost base, and its funding requirements. Actions have already been taken to reduce cash expenditure, and additional opportunities remain available to us.

12:40 That is where management's focus is today. Finally, as I've said before, we intend to prepare our f y twenty six results on a going concern basis, indicating at least twelve months cash runway at the time of sign off. I will now pass over to Rachel to take you through the half year results and discuss current trading. Thank you, Alison. My role when I was first appointed was one of stabilization. I wanted to review all the material contracts, review the assets, the partnerships, and the IP for future growth and the commercial opportunities. Alison's already touched on some of the work we've done to stabilize the business. We've highlighted this in the half year report, and we've also mentioned some of the improvements we've put in place. But I'm gonna take you through some of that now.

13:31 Before I start, I wanted to run through how we've restructured the operational business and how we're going to report on that going forwards. It's been split into two divisions, products and services. So products is split into topicals, for the moment that's dermatomics, and oral supplements. That's AXIS Biotics and IP licensing and commercialization, which is SKINBIOTIX and other technologies. For the purpose of simplicity, I'm going to go through each division talking about their performance in half one, and then what we've been focusing on in half two. Let's take the two segments separately, and we'll start with products first. Next slide. So we have two main streams of topical products.

14:18 The first is built around clinically validated ingredients, and then the second is focused on microbiome based active ingredients. And we sell these products through a combination of direct and indirect retail channels. We sell them through commercial distribution partnerships, and we also have licensing. Dermatronics is going to be a priority for us. It's brand trusted by clinicians. It's for barrier repair and foot health. The demand remains stable, and we have a high quality customer base. That includes the NHS, Boots, Superdrug, and we also have specialist podiatrists. Dermatonics provides us with a solid revenue foundation. It delivers constant, consistent margins, and it offers clear opportunities for future growth.

15:09 AXIS Biotics focuses on skin health from the inside out and is a food supplement. It's a brand built on solid science with a really strong clinical story, and it centers around that gut skin axis. But that being said, Axis is still in a startup phase. It's an early stage consumer brand. It requires ongoing investment while that awareness builds. Because Axis is a food supplement, there are regulatory limits on the health claims that we can make. We cannot make medical claims unless they are supported by extensive and clinical trials. That's why our language focuses on the benefits of helping SKIN feel calmer and clearer rather than referring to a specific medical condition.

15:56 For AXIS, our aim is to reach those customers that would benefit the product the most, but we have to keep within within those boundaries of regulatory. And that's challenging. That requires creative brand and partnership work, and that's what we've been focusing on in h two. All microbiome beneficial food supplements are facing this same challenge. In the meantime, we're managing the brand carefully and ensuring that investment remains aligned with the resources available to us. And SKINBIOTIX, we've licensed that to Croda, who then in turn developed Xenokine, a neuroactive ingredient for the cosmetics industry. It's a really important asset for our business, and it does represent a solid opportunity for medium term shareholder value.

16:42 But we cannot predict the speed or the scale that will emerge. And from my experience with ingredient commercialization, these programs typically follow a long and fairly unpredictable path. It's never linear. There is patterns, and I'll take you through some of those now. Initially, what you'll see is founder led incubator brands. They adopt those ingredients first. They're agile. They can take a product to market under eighteen months. They have less red tape within their new product development processes. You then have small medium enterprises, the SMEs. They're more considered. They tend to have a new product development pipeline, and they have established brand equity.

17:27 They might be looking for ingredients to enhance their brand estate. And those timelines for SMEs would tend to be one to three years. And then you have the global players, and these are global considerations. And they will be reviewing ingredients somewhere in the region of three to five years out. So we know there's a lot of speculations and questions around the royalty growth, but it's important to say that we can't predict that at the precise moment. One important clarifying point, again, from the questions that we've had, we are paid for bulk orders. We are not paid for samples, and that's very usual for this industry. There are also two documents.

18:15 There is an NDA in place, which predates the license and is very typical for companies when they begin research and development together. That allows both parties to open up about expertise, science, IP, and technology. And then we have the license agreement. And we will not be divulging any further data on the license agreement. It's confidential. We will, of course, update shareholders when commercial milestones occur and when they're disclosable under AIM rules. But meaningful revenue will be measured in years versus quarters. But I do want to say that we are working with a really highly respected partner in Croda, and we should be incredibly proud of that. We are receiving initial royalty, and those incomes are included in our total product revenues for half year twenty six.

19:04 Let's move on now to the services. Next slide, please. So biotech solutions similar to dermatomics is a priority area for management attention. It's another generator of short term revenues and cash. A significant amount of work has been carried out by the new management of biotech to improve operations and make the business run more profitably. They have been focusing on driving efficiencies across all areas of production planning in order to maintain margins and especially in light of higher energy and fuel prices. So how does this look financially across the full year 2026? Next slide. So the focus for the first half was driving growth across products and services. As you can see from the numbers, revenues increased to 2,170,000, up from 1.58 in the prior period.

19:59 That growth was driven by a full six months contribution from BTS following its acquisition, together with the steady trading from both BTS and Dermatronics. AXIS performed more softly than we'd hoped. That's not unusual for an incubator brand in this stage of development even with the additional visibility that comes from Superdrug. We also started seeing the first contributions from our licensing income, which is a really encouraging early step. As revenue has increased, cost of sales has moved broadly in line with that growth, which means our gross profit margin is remaining stable at around 56%. We also delivered a modest reduction in operational losses compared to the previous period last year, despite continuing to invest in our brands.

20:46 So overall, the first half has demonstrated stable performance, resilient margins and improving operational efficiencies. Let's now take a look at how the business has been trading in the second half. So despite the disruption of the investigation, it really has been business as usual. The team have shown great determination and dedication, and the current trading, especially from our main operational drivers, Dermatronics and BTS, have shown solid performance. AXIS is all about building the brand for direct and indirect sales, and we'd be really focusing on margin and cost improvements. For example, the team have worked on reducing packaging, single outers which just fit through letter boxes.

21:31 This can reduce waste and cost, and we need to do more of these small but necessary initiatives going forward. We're pleased to see Xenokai as being recognized in various awards within the industry and long may that continue. So overall, we've got great products on the market. We've got a good manufacturing base that we can leverage both external and internal growth. In the short term I spent at the company, I've seen great opportunity with SKINBIO's assets, partnerships, and IP. So we're now going to conclude. Over to you, Alison. Thanks, Rachel. So in conclusion, it has been a really turbulent time for SKINBIO, but the aim is to draw a line under what's gone before. As I said in the chair's statement, the new financial year started with great optimism.

22:17 We had a strategy laid out. However, events in February 26 disrupted these plans significantly. The board and management focus had to pivot to significant investigation resulting in a restatement of last year's accounts. We are now, however, focused on the future. The aim now is to face forward to return the company to growth. There's going to be three areas that we're going to focus on. So strategically, our priorities are gonna be the engines of the group, is Dermatronics and BTS. They're steady businesses, good customer profiles, and we're actually gonna take some advantage of low hanging opportunities available to us. And that's where the management team need to focus on for the moment. Access is still in early stage, so we're going to be careful with the management against available resources there.

23:08 And for our IP, the opportunities are less in our control. We have our first IP license agreement that provides provides us with royalty income. And the ingredient is a novel skincare ingredient, which is an area of interest and it's growing space within the skincare industry. But it is important we allow our partners to do what they do best, and we don't wanna be a distraction or a hindrance to them or their customers. And then the second part, we're gonna look at operational focus. The business does need major work to bring the operational infrastructure into the right place. That's not particularly glamorous. It's essential. We've got to make sure there are better reporting facilities, better compliance, better process improvement. And only once that work is done will we then scale well.

23:58 Then the third aspect is corporate governance, which we've mentioned a number of times. Clearly, one of the responsibilities of the board following the review has to ensure that lessons are learned. Good progress has already been made and further work is underway. Shareholders should expect to see tangible evidence of these improvements reflected in our FY '26 annual reporting accounts. I would just like to emphasize that both Rachel and I have nearly fifty years of board level roles between us. I have been on commercial boards as a CFO for over twenty years and now as an NED for five years. I sit on three other boards, including two public sector adjacent boards at the Financial Services Compensation Scheme and the Ordnance Survey. As you can imagine, these organizations, the standards of corporate governance are exemplary, and I chair the Audit and Risk Committee of both of those organizations.

24:49 We've already started and will continue to ensure that all the appropriate governance structures are in place and functioning correctly. On board composition, as mentioned above, we have started a search for an additional non executive director who we expect to materially enhance the depth and breadth of the board's combined experience. We are also looking for a new permanent CFO. I would just like to thank you all for your attention during these slides, and I'll now pass you back to the IMC team to open the q and a session. That's great, Alison, Rachel. Thank you very much indeed for your presentation. Ladies and gentlemen, please do continue to submit your questions using the q and a tab situated on the top right corner of your screen. While the company take a few moments to review those questions submitted today, I would like to remind you the recording of this presentation along with a copy of the slides and the published Q and A can be accessed via our investor dashboard.

25:42 Alison, as you can see, we have received a number of questions throughout today's presentation. And if I may now hand back to you and kindly ask you to read out the questions where appropriate, and I'll pick up from you at the end. Thank you. Thanks very much. I just want to introduce this because we've obviously had an awful lot of questions before, this call. In fact, we've had over 40 questions. I think it's important to understand the, the nature of those. We had 19, which we believe are now adequately answered by the presentation, so I won't be referring to those questions. There were then also approximately six where matters are covered by legal privilege. And again, therefore, I can't respond to them given that situation. And then there were also about another eight that relate to matters prior to Rachel and I joining the board. And therefore, again, we don't feel as though we can comment on those.

26:34 We would like to say that we won't be commenting on anything that was said by members of the board prior to our our arrival. What we do want to do instead is stand by what we say to you from here on in. So looking at the questions that I can go through, there was has ex CF CEO Stuart Ashman been reported to police and or FCA for fraud? So we have obviously shared the FRP report with the appropriate regulatory authorities with whom we are cooperating. We can only comment comment on what we have done and won't speculate on their plans. Why did the company appoint new auditors who had recently paid out 71,000,000 in an out of court settlement over alleged Greensill audit failings.

27:20 Safaris are a good firm. I've worked with them before and they're working very well with the team. I would also highlight that if you eliminated all accountancy firms who who had an issue with auditing regulation, then we wouldn't have very many to pick from. I think all of the 10 of the top 10 have had issues such as this in the last few years. Have any staff or directors bought shares since trading and the shares resumed early June? No. Not yet. There's then a question about my joining time. So could I explain how I came to be appointed as a net at the start of the year? Clearly, the process took place before the start of the year, but there was no need to appoint me earlier than that. There was no burning platform that required me to join. So the logical point for me to join was the January 1.

28:16 There's then a couple of questions about governance. I it's just worth mentioning them. Will directors now subject themselves to annual reelection resolutions? Yes. It's good governance. Will future AGMs be convened at a more accessible time of year and be staged as hybrid meetings? Yes. It's good governance. So these are examples where you will see that we will make improvements. We then got, when will you provide updated revenue guidance? And do you accept that the lack of earnings visibility is a deterrent to potential investors? We will aim to do this later this year. Are you aware of any prospective business for the company or any part of it? And I'd say if we have had a bid, we would clearly have to disclose this.

29:03 Another question was, do incoming directors see a legitimately possible route to increase the share price in the next twelve months? I mean, I think we all know that it's fundamentals that change share prices. We can't dictate what the markets do, but all we can do is deliver on what we're promising and demonstrate this through good performance. Another question was when exactly did anyone at SKINS know that there would be such a large f y twenty five revenue miss? The issue was identified and announced to the marketing February 26. That was the first time it became knowledge to anybody at SKINS. There were a lot of questions about Croda, many of which I feel we have already answered, but there was a couple that, did stand out that we haven't, that we have heard nothing about doctor Surinder Chahal.

29:53 Please advise of his current involvement. I can confirm that doctor Chaal is no longer an adviser to the board. There was also Ashman stated repeatedly that Croda paid three months in arrears. Was he lying? What were contractual terms? And are they the same today? Rachel has already spoken about the Croda deal. And to reiterate, we won't be saying anything more about the contractual details. And also, as I said at the beginning of the q and a, we won't be commenting on what was or wasn't said by previous board members before we joined. And I think those are all the questions that I felt were outside of the, categories that I spoke about at the beginning.

30:40 So, I think with that, I can pass back over. And there's no other questions which have come in which I feel lie outside of those categories either. That's great, Alison. If I may just jump back in there and thank you for addressing those questions for investors today. But before we direct investors to provide you with their feedback, which I know is particularly important to yourself and the company, could I please just ask you for a few closing comments? Certainly. Sorry. Let me just get my tech sorted out. So we have tried to preempt as many questions as possible with the presentation and answered as many questions as possible within the hour. However, if we haven't answered your your question, you can send them to us at ir@skinbiotics.com, and we will respond to you as soon as possible.

31:26 So in closing, whilst recent events have clearly been challenging, the board's focus today is firmly on the future. The review process has provided clarity, and all material issues have been identified. The government's improvements are well underway. The strategic assets remain intact. The management team is focused on execution, and the board is committed to building a stronger business capable of delivering long term shareholder value. Thank you very much for your time. That's great, Alison, Rachel. Thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback, which will help the company better understand your views and expectations. On behalf of the management team, we would like to thank you for attending today's presentation, and good morning to