Announcement PDF ANNUAL REPORT 2022 The Microbiome Health Company BIOME AUSTRALIA LTD ACN 627 364 014 About Biome aims to improves the health and quality of life of Australians suffering from some of the most common and chronic health conditions using evidence-based complementary medicines. As a microbiome health company that pursues clinical trials, Biome works at the intersection of the natural medicine and pharmaceutical world. Biome Australia develops, licenses, commercialises, and markets innovative, evidence-based live biotherapeutics (probiotics) and complementary medicines, many of which are supported by clinical research. In partnership with some of the world’s leading organisations in microbiome research and development, Biome produced several unique live biotherapeutic (probiotic) products with innovative delivery technologies that improve their stability and efficacy to create its flagship range of complementary medicines: Activated Probiotics®. Supported by clinical research, including randomised, double-blind, placebo-controlled trials, Activated Probiotics help prevent and support the management of various health concerns, including low mood and sleep, bone density loss, iron malabsorption, mild eczema and irritable bowel syndrome (IBS). Through practitioner-only distribution, Biome is committed to educating health professionals on the newfound systemic health effects of the gut microbiota, helping them to provide innovative, evidence-based natural medicines for the management of some of humanity’s most prevalent and chronic health concerns. ACKNOWLEGMENT OF COUNTRY We acknowledge the Wurundjeri people as the Traditional Owners on whose Country we are based. We pay respect to their Elders past, present and emerging and acknowledge their continuing connection to land, sea and community. We extend that respect to Traditional Owners throughout Australia where we work and operate. Biome Australia Ltd THE MICROBIOME HEALTH COMPANY PAGE 3 Table of content 01 Company Timeline 05 02 Probiotics 101 07 03 Our offering 10 04 Chair Letter to shareholders 12 05 CEO Letter to shareholders 14 06 Operations Report 15 07 Growth Program & Market Opportunity 45 08 Annual Financial Report 52 09 Corporate Directory 100 THE MICROBIOME HEALTH COMPANY PAGE 4 Biome Australia timeline July 2018 January 2019 March 2019 BIOME AUSTRALIA FOUNDED ACTIVATED NUTRIENTS LAUNCH SYMBION DISTRIBUTION DEAL 6 employees Biome launches its certified organic range of nutraceuticals Biome gains distribution with pharmaceutical wholesaler Symbion November 2019 June 2019 March 2019 ACTIVATED PROBIOTICS LAUNCH API DISTRIBUTION DEAL LISTING OF 10 MEDICINES Biome gains distribution with pharmaceutical wholesaler API on the Australian Register of Therapeutic Goods Biome launches its conditionspecific probiotic range $387K FY19 SALES REVENUE June 2020 November 2020 January 2021 TERRYWHITE CHEMMART DISTRIBUTION DEAL UK PRACTITIONER MARKET LAUNCH BIOME OSTEO CLINICAL TRIAL Activated Probiotics launches nationally with TerryWhite Chemmart Activated Probiotics launches into the UK Practitioner market Probone21 clinical trial using Biome Osteo commences in partnership with La Trobe University and Probi AB $833K FY20 SALES REVENUE 2000 DISTRIBUTION POINTS March 2021 February 2021 BIOME LIFT CLINICAL TRIAL PRACTITIONER MARKET LAUNCH In partnership with La Trobe University and Probiotical S.p.A. Activated Probiotics launches into the Australian practitioner market with Oborne Health Supplies and vital.ly June 2021 July 2021 $2.32M FY21 SALES REVENUE STRATEGIC DISTRIBUTION PARTNERSHIP Biome signs strategic distribution partnership with TerryWhite Chemmart including exclusive national promotional program THE MICROBIOME HEALTH COMPANY PAGE 5 September 2021 November 2021 RENER & ARIYA HEALTH DISTRIBUTION DEAL B CORPORATION CERTIFICATION BIOME COMPLETES INITIAL PUBLIC OFFERING Activated Probiotics increases distribution in the Australian practitioner market with Rener Health Products and Ariya Health 3000 DISTRIBUTION POINTS $4.12M FY22 SALES REVENUE 30 EMPLOYEES June 2022 February 2021 PRICELINE PHARMACY DISTRIBUTION DEAL BIOME DAILY KIDS CLINICAL TRIAL Biome signs distribution deal with Priceline Pharmacy Biome Daily Kids clinical trial commences in partnership with Federation University TOTAL OF 14 LISTED MEDICINES ON THE ARTG THE MICROBIOME HEALTH COMPANY PAGE 6 Probiotics 101 The World Health Organization (WHO) defines probiotics as “live microorganisms that, when administered in adequate amounts, confer a health benefit to the host”. In order for a food or supplement to be considered ‘probiotic’ it must fulfill the three parts of this definition: • Alive when ingested • Contain an appropriate therapeutic dose • Have a defined health benefit supported by research THE MICROBIOME HEALTH COMPANY PAGE 7 The gut microbiome Figure: Demonstrating the proposed links between an unhealthy gut microbiome, inflammation and increased risk of chronic disease1. The human gut is host to a thriving community of microbial life, including bacteria, viruses, archaea, and fungi known as the gut microbiome. In recent decades, factors such as a low fibre diet and certain medications like antibiotics have negatively influenced the abundance and diversity of microbes living in our gut. As a result, the gut microbiome has been found to be interacting with human health in negative ways. Disruptions to the makeup of the gut microbiome is thought to negatively impact health through a number of different mechanisms. For example, an unhealthy gut microbiome triggers a breakdown of intestinal cell health and a phenomenon known as leaky gut which allows for the gut microbiome to interact with the underlying immune system. The immune system’s response to potentially harmful microbes from an unhealthy gut can create inflammation which travels from the gut to the rest of the body via chemical messengers (e.g. cytokines) circulating in the blood. Chronically raised inflammation stemming from the gut is thought to impact the health of many different organ systems, and contribute to the increasing prevalence of chronic disease. Antibiotic use, a key disruptor of the gut microbiome, has now been associated with the increased prevalence of a number of chronic diseases, including asthma and allergies, irritable bowel disease, diabetes and obesity, and depression and anxiety1. Beneficial probiotic bacteria represent a new generation of therapeutic agents which may be able to mitigate the negative effects of an unhealthy gut microbiome. In human clinical trials, specific strains of beneficial bacteria have now been shown to improve health outcomes in a number of chronic diseases. THE MICROBIOME HEALTH COMPANY PAGE 8 Probiotics as live biotherapeutic products Biome denotes probiotic bacteria that target specific therapeutic outcomes in disease states as ‘live biotherapeutics’. This term has been adopted by the company to differentiate probiotic strains with general health benefits often used in fast-moving consumer goods and food supplements, and those that possess evidence of efficacy supporting their therapeutic application in specific health conditions. Due to the increasing body of evidence supporting the therapeutic application of specific probiotic strains in disease states, live biotherapeutics are increasingly regarded as their own class of therapeutic goods. The U.S. Food and Drug Administration defines a live biotherapeutic product as a biological product that contains live organisms, such as bacteria, is applicable to the prevention, treatment or cure of a disease or condition of human beings, and is not a vaccine. Biome’s Activated Probiotics® range is more aligned with the principles of live biotherapeutic products. THE MICROBIOME HEALTH COMPANY PAGE 9 Our offering Clinically trialled Condition specific Biome Australia’s live biotherapeutic products are all supported by clinical evidence of efficacy. Six live biotherapeutic products are supported by human clinical trials on the finished formulations, in many cases first in the world. Activated Probiotics® has produced a range of condition-specific live biotherapeutic probiotic products that may help to prevent osteoporosis, reduce the severity and frequency of asthma attacks, reduce depressive symptoms and increase iron absorption. 25 product portfolio 18 proprietary products Biome currently has 25 products in its portfolio across three brands which continue to grow as new products are developed. The product portfolio includes 18 proprietary products (live biotherapeutic probiotics and nutraceutical products) to which Biome owns the formulation 10k+ Practitioner-only health professionals educted Throughout FY22 by Biome’s education team Elevating the credibility of Biome’s products through working with health professionals to support their active recommendaiton of Biome’s products THE MICROBIOME HEALTH COMPANY PAGE 10 3 ongoing clinical trials • • • Probiotics and sub-threshold depression Probiotics and osteopenia Probiotics and childrens immune health Expertise The board and management has a strong global track record with existing professional networks across the healthcare industry in Australia, Asia and Europe. The expertise and passion of Biome’s team sets Biome apart and is a critical and unique differentiator. Microencapsulated probiotics Innovative microencapsulation delivery technology supports 5x greater survivability of Biome’s microencapsulated probiotic bacteria when compared to uncoated probiotics THE MICROBIOME HEALTH COMPANY PAGE 11 Chair letter to shareholders Dear fellow shareholders, revenue growth, reduced operating losses, gross margin improvement and sustainable growth, It gives me great pleasure to present Biome all while in our first year as a publicly listed Australia’s inaugural FY22 Annual Report. company. Following the successful listing onto the In September 2022, the team completed Australian Securities Exchange in November the move to our new offices in Collingwood, 2021, the Biome team have been busy executing VIC, enabling internalisation of warehousing on our strategy, resulting in significant growth functions, providing more control of this key and success across the business. element. Additional team members have Despite ongoing external forces including COVID, inflation, supply chain challenges and global instability, the Biome team have executed across all core areas. During the financial year, the team received successfully been recruited over the past months to ensure Biome has the resources in place to continue to execute our rapid growth plans. On behalf of the Biome Board of Directors, I would like to thank you for your ongoing support. positive outcomes on two breakthrough independent clinical trials supporting the launch of two new products and have engaged La Trobe University and Federation University to commence further research on targeted probiotics for three key conditions, mental health, osteoporosis prevention and children’s immune health. We expect significant progress in all three this financial year. Biome products are now available at circa 3000 locations around Australia and in the United Kingdom. Locally available at both TerryWhite Chemmart and Priceline Pharmacy, our key pharmacy distribution partners for Activated Probiotics. Our team have delivered another year of strong growth, reaching sales of $4.12m, up 78% on FY21, closing quarter four at an annualized run rate of $5.5m. I am very pleased with the financial performance of Biome, delivering substantial ILARIO FAENZA Non-Executive Chairman CEO letter to shareholders It is my pleasure to share this CEO letter: the first as standards of social and environmental performance, a public company. transparency, and accountability. This was a proud Biome is doing important work to help solve unmet medical needs for patients with various health conditions. This spans across the areas of mental moment for the business as our positive impact is paramount to our team, our culture and for the ongoing recruitment of industry leading talent. health through to irritable bowel syndrome (IBS) and With the close of FY22, I am pleased to share that skin health. This support into novel clinical research Biome has successfully re-signed our strategic and product development in live biotherapeutics is distribution partnership with Terry White Chemmart, leading the industry for innovation and represents signed a breakthrough agreement with Priceline a real opportunity to impact the quality of life of not pharmacy and finished the year as the number only Australians but the wider global population. one in growth, professional vitamin brand within a The feedback from our network of allied health professional partners is that Activated Probiotics’ products are changing the lives of their patients: number of our pharmacy banner groups and both of Australia’s largest pharmacy wholesalers, Symbion and API. further evidenced by the incredible customer loyalty It was a challenging year for our partner and retention we receive. Data from our strategic manufacturers, with upward pressure on raw distribution partner, TerryWhite Chemmart, shows material prices and logistics costs. To manage that the average Activated Probiotics customer this risk, we negotiated an improvement in raw purchases more than two monthly units of probiotics material costs and achieved scale benefits, further per transaction and returns to repurchase at a higher improving our gross margin. During the pandemic, rate than the category average. just-in-time inventory management has been a The financial year 2022 was a keystone year for Biome. The business reached scale in distribution, setting the company up for ongoing growth for the coming years. As previously shared, Biome’s sales revenue has grown to over $4.1m – a 78% increase on FY21 – and distribution has increased 50% since IPO on November 30 to circa 3000 health outlets. Successful results of independent clinical trials on the use of targeted probiotics for Asthma and Acne further proved the efficacy of Biome Breathe challenge for many companies. Biome’s operations team successfully maintained a constant supply of products through implementing a rolling twelvemonth manufacturing forecast and preallocated production and logistics slots to minimize any out of stocks. Our distribution partners are reporting significant out-of-stocks of up to 50% for other brands within the vitamin category, positioning Activated Probiotics to continue to rapidly gain market share. and led to the launch of Biome Acne probiotic. In a Biome’s major retail pharmacy partners – TerryWhite challenging global market we have closed the year Chemmart, Blooms the Chemist, Wizard Pharmacy, with an increased gross margin of 58%. Pharmacy 777, Priceline Pharmacy and Pharmacy In addition to listing on the ASX, Biome was awarded its B Corp certification in November 2021. B Corps are companies that meet the highest verified Choice – have all supported ongoing growth by increasing shelf space and accepting all of our new products to core range and planogram. Throughout the year we launched four new targeted probiotic practitioner markets. As these markets grow, we products: Biome Acne and Biome Eczema for expect to demonstrate the scalability of the brand patients with skin conditions, Biome Her for vaginal across international borders. health and Biome Baby for infant colic and immune development. All of these new products have received positive feedback from health professionals and their patients. We have locked in supply of product for the next twelve months on preferential trading terms with Biome’s key suppliers to make sure we can support what is predicted to be another record year for As key to our mission, Biome will continue to develop novel, clinically-proven products that have the potential to help patients with unmet medical needs. We appreciate your support in coming on this journey with us and look forward to sharing many more successes together in the financial year 2023. revenue generation. Having reached operating scale in Australia, we expect our rapid revenue growth to continue with only moderate increased operating costs. Our sales and education teams have done the hard work in securing national distribution across pharmacy and practitioner channels and are set up to provide one of the highest quality product and service offerings in the market. Biome’s team is well underway with its national, deep education and sales program detailing health professionals. Our aim is to become the number one trusted probiotic brand in Australia, and we are well on the way to achieving this. I am pleased to share the early successes of Activated Probiotics in the European market. 18 months into the test-market program, the brand now has national distribution in the UK and Irish Blair Vega Norfolk Managing Director Operations Report THE MICROBIOME HEALTH COMPANY PAGE 15 Aiming to be a global leader in premium evidence-based live biotherapeutic products. THE MICROBIOME HEALTH COMPANY PAGE 16 Targeted products for targeted outcomes Biome aims to be a global leader in premium evidence-based live biotherapeutic products. Biome is changing the probiotic space within the Australian, New Zealand and UK markets through the release of live biotherapeutic products which each target a specific health concern and aim to improve patient outcomes. In FY22, Biome Australia released five new live biotherapeutic products. Four of these products, including Biome Her Probiotic, Biome Eczema Probiotic, Biome Acne Probiotic and Biome Baby Probiotic, targeted new conditions and expanded the customer demographic. An additional pack size for Biome Advanced Probiotic, which was formulated to support antibiotic recovery, was also released and is now available in 10 capsules to better support patient affordability and increase uptake of the product alongside antibiotic prescriptions. With the release of these new products, supported by clinical evidence of efficacy, Activated Probiotics is now able to help a greater number of patients and address a greater number of health concerns. THE MICROBIOME HEALTH COMPANY PAGE 17 Innovating with new targeted products BIOME HER PROBIOTIC To help maintain a healthy vaginal microbiome Benefits supported by a clinical trial on women with recurrent vaginal candidiasis. The study demonstrated a recurrence rate of only 14.3% during the 7 months following the administration of two probiotic strains in Biome Her TM (Lactobacillus fermentum LF10 and Lactobacillus acidophilus LA02) for 10 weeks. This is significantly lower when compared to recurrence rates following standard treatment. BIOME ECZEMA PROBIOTIC To help reduce the symptoms of mild eczema Benefits supported by a randomised, double-blind, placebo-controlled trial. The study demonstrated that administration of the probiotic strain in Biome EczemaTM to adults with moderate-to-severe eczema reduced symptom severity by 53% and improved quality of life by 55%, while no significant changes were reported in the placebo group. BIOME ACNE PROBIOTIC To help reduce the symptoms of acne Benefits supported by a randomised, double-blind, placebo-controlled trial. The study demonstrated that use of the probiotic formulation in Biome AcneTM led to a 31% reduction in acne severity in four weeks, and a 39% reduction in 8 weeks which was statistically significant when compared to placebo (p < 0.05). BIOME BABY PROBIOTIC To help support immune and digestive health and reduce symptoms of colic in infants Benefits supported by a randomised, double-blind, placebo-controlled trial. Use of two probiotic strains within Biome BabyTM Probiotic led to statistically significant reductions in crying time in bottle-fed infants compared to placebo during the third month of treatment (p = 0.01) THE MICROBIOME HEALTH COMPANY PAGE 18 Enhancing the performance of probiotic products with innovative manufacturing and packaging MICROENCAPSULATION TECHNOLOGY Activated Probiotics® uses an innovative microencapsulation technology to protect its probiotic bacteria from the harmful effects of stomach acid, allowing up to 5x more probiotic bacteria to survive transit through the stomach and reach the colon alive, compared to traditional uncoated probiotics. PHARMACEUTICAL GRADE BLISTER PACKAGING Activated Probiotics’ capsules are individually sealed in pharmaceutical-grade blister packing. This packaging ensures each serve remains individually sealed until the moment before consumption and better protects probiotic bacteria from the damaging effects of environmental moisture, oxygen and UV light compared to alternative forms of packaging, such as bottles. FAST-MELT FORMULATIONS FOR CHILDREN Activated Probiotics’ single-serve sachets in products intended for children over the age of 2 contain a fast-melt formula that dissolves in the mouth without the need for water. With natural sweeteners and vanilla flavouring, this combination creates an enjoyable experience for children taking Activated Probiotics’ products. FLOW CYTOMETRY ENUMERATION Activated Probiotics uses the latest flow cytometry technology to more accurately count the number of living and metabolically active bacteria found in its products, when compared to traditional plate count measures or colony forming units (CFUs). Flow cytometry technology analyses bacteria one-by-one using fluorescent dyes and lasers, ensuring only viable bacteria are counted in the final tally of ‘billion live bacteria’ (BLB). THE MICROBIOME HEALTH COMPANY PAGE 19 Driven by clinical evidence Biome Australia is proud of the fact that its live biotherapeutic products within the Activated Probiotics® range are supported by clinical evidence of efficacy, with a number of products supported by randomised, double-blind, placebo-controlled trials on their complete formulations. Biome believes that increasing the level of evidence supporting complementary medicines is an important goal for the industry. Greater evidence-based products will lead to better health outcomes for consumers Product and the public health system, and lead to wider acceptance of the industry. Biome is constantly seeking to expand the evidence base supporting its existing products. Over FY22, a number of Biome’s products and formulations have been the subject of ongoing clinical trials that are seeking to build upon their current body of evidence and investigate their efficacy in new applications. These trials have been possible through collaboration with key Ethics Approval Recruitment and Trial Commence world-leading research partners, including LaTrobe University, Federation University, Probiotical S.p.A. and Probi AB. These research projects are currently investigating the application of Biome LiftTM Probiotic on subthreshold depression, Biome Daily KidsTM Probiotic on absenteeism and immune health in children in daycare, and the probiotic strains within Biome OsteoTM Probiotic in women with osteopenia. Completion of Recruitment Preliminary Results Final Results Q3 FY23 Q4 FY23 Q3 FY23 Q4 FY23 TBA TBA TBA TBA ASTHMA Biome Breathe Probiotic ACNE Biome Acne Probiotic SUBTHRESHOLD DEPRESSION Biome Lift Probiotic OSTEOPOROSIS PREVENTION Biome Osteo Probiotic PAEDIATRIC IMMUNE HEALTH Biome Kids Probiotic Complete Q3 FY22 Q1 FY23 Scheduled THE MICROBIOME HEALTH COMPANY PAGE 20 Culture & Values THE MICROBIOME HEALTH COMPANY PAGE 21 We feel strongly that business can be a force for good THE MICROBIOME HEALTH COMPANY PAGE 22 BCorp The past financial year saw Biome Australia awarded a proud acheivement: B Corp Certification Certified B Corporations® (B Corps™) are for-profit companies that use the power of business to build a more inclusive and sustainable economy. They meet the highest verified standards of social and environmental performance, transparency, and accountability. The Biome team feels strongly that business can be a force for good. Biome Australia aims to improve not only health outcomes, but be seen as a company working to redefine success in business, demonstrating that inclusivity and sustainability can be part of a healthy economy. THE MICROBIOME HEALTH COMPANY PAGE 23 People & recruitment Biome Australia is an equal opportunities employer. In line with B Corp values, Biome aims to provide a flexible and supportive workplace. Excellent staff retention rates give an indication of team member satisfaction. All recent new hires have come from within the networks of existing staff members, reinforcing this contentment. Biome feels fortunate to be frequently approached by professionals within the field who have been following the journey of Biome Australia and are keen to hear of any potential openings. Biome is proud of its reputation as an excellent place to work. THE MICROBIOME HEALTH COMPANY PAGE 24 Education First THE MICROBIOME HEALTH COMPANY PAGE 25 Education is the thread running through everything we do at Biome Australia THE MICROBIOME HEALTH COMPANY PAGE 26 Education & training We pride ourselves on providing sophisticated education of the highest quality, informed by the latest research in microbiome science. We believe education is key to achieving our aim to be the most trusted probiotic brand in Australia. Thank you so much for today’s education session. Highly informative and mind blowing information on such an exciting area of research. Highly recommend to anyone to get on board these education seminars to get up to date info on all things probiotics! Rebecca Kimm | Naturopath Biome Australia’s education leadership team attend conferences and keep up to date with cutting edge research, then distill learnings to the field team. Our sales territory managers / practitioner education consultants (PECs) are talented and empathic healthcare professionals. They use their in-depth knowledge of the research behind our products to foster trust with the pharmacy and practitioner accounts they serve. As well as providing education on Activated Probiotics products, they are wellversed in broader microbiome science and keep abreast of the latest findings and research. This helps us maintain our reputation as the bestinformed provider of live biotherapeutics. the factors which allows us to recruit high quality and committed field team members. All of our recent new hires have come from within the networks of existing staff members, reinforcing this contentment. We feel fortunate to be frequently approached by professionals within the field who have been following the journey of Biome Australia and are keen to hear of any potential openings. We are proud of our reputation as an excellent place to work, and proud of the quality of education being delivered by our team. Throughout the era of lockdowns, we utilised technology to assist in reaching practitioners for clinical and research updates. Over the course of FY22, Biome Australia delivered more than 40 educational webinars across Australia and New Zealand with more than 10k health professionals attending. Our UK team delivered monthly webinars, as well as multiple virtual and in-person education sessions across the UK and Ireland. Practitioners across Australia, New Zealand, the UK, and Ireland have great trust in Activated Probiotics. This trust is bolstered by the provision of high quality in-person and virtual education. Key Education staff present at pharmacy banner group conferences, providing clinical updates to pharmacy professionals. This education is then followed up in individual pharmacies by the field team, ensuring that key messages have been assimilated. Our field team also provide oneon-one and small group education sessions to healthcare professionals who are not within a pharmacy setting, such as general practitioners, medical specialists, naturopaths, nutritionists, and dietitians. In line with our B Corp values, we aim to provide a flexible and supportive workplace. This is one of Rebecca Edwards | Director of education THE MICROBIOME HEALTH COMPANY PAGE 27 Sales THE MICROBIOME HEALTH COMPANY PAGE 28 Be the leader in education & provide evidence-based live biotherapeutic probiotics THE MICROBIOME HEALTH COMPANY PAGE 29 9.2% $380,008 SALES BY BRAND FY22 $4,122,425 Activated Probiotics 90.8% $3,742,417 7.1% $293,234 Other 0.2% $9,514 SALES BY GEOGRAPHY $4,122,425 Australia 92.7% $3,819,677 Overseas Unclassified 30.5% $1,257,618 4.5% $183,994 SALES BY CHANNEL $4,122,425 Pharmacy 65% $2,680,812 Practitioners Unclassified THE MICROBIOME HEALTH COMPANY PAGE 30 Biome’s mission is to build trust with consumers and health practitioners and to make natural medicine accessible to all. Biome is now partnered with six key distributors throughout Australia to cater for private clinicians, health food stores, and pharmacies. Biome’s sales strategy leads with education and customer service. The foundation of every sales and marketing touchpoint is evidence-based education and training. All seven states and territories of Australia are served by the national team of practitioner education consultants. These territory managers are qualified health professionals who execute the Biome sales strategy across all distribution channels. With continued service and support the team gains trust and develops long lasting relationships which continue to support and drive new business. FY22 saw the hiring of a national account manage, increasing support for banner activity, marketing, promotions, territory mapping, coaching and skill building to maximise the full potential for all accounts. distributors servicing the