Deals with the big boys take longer and are often less lucrative than you think

Copied and pasted from the OptiBiotix thread. A few thoughts about this start-up company.

Why is it taking so long for OptiBiotix to strike a deal with a multi-national?

In a way, Nanoco's "exclusive" deal with Dow Chemical is a excellent reference point. When the deal was announced, it was too much excitement and the SP duly shot up on general euphoria. However, the share price has since come back to earth with a bump and the "exclusive" deal is now a "non-exclusive" deal.

This line from Nanoco's August trading update tells you a compelling story,

"The Company has received notification of its royalty payment from Dow for the quarter ended 30 June 2016 and, although modest, it is higher than the first royalty received earlier this year."

The big companies call the shots.

Think about OptiBiotix and the Slimbiome technology platform for instance.

Let's say that Opti want a licensing deal with a multi-national. The multi-national will feel it is taking all the risk. Why should the multi-national do all the marketing? i.e. convince consumers that the products are safe and indeed do what they say on the tin. It's not as if there aren't thousands of dietary products or (so-called) cholesterol busting products already out there. They might like the technology but they're not going to spend multi-millions in marketing and offer Opti a big slice of the pie. Why would they? There's already plenty of diet shakes and bars out there already, and there will be plenty of rival technologies.

That's why I believe that they've cut a deal with the Healthy Weight Loss Company for GoFigure, and taken a 51% stake. A small company where OptiBiotix will be stumping up cash for marketing but taking a bigger share of any revenues.

Howvever, if you google diet bars and shakes I'll bet you'll get literally thousands of pages. See if you can locate GoFigure? Marketing spend will be horrendous to get even decent sales in an overcrowded market.

They are not providing a must have technology. In fact, a Mediterranean diet will be far healthier in the long run, far tastier and a fraction of the cost. Indeed a healthy Mediterranean diet is better than statins for reducing cholesterol.

In short, you can apply the same principles to all their technology platforms. They are not "must have" technologies, and hence if they are trying to cut deals with multi-nationals then the multi-nationals will be playing hard-ball and that's why it's taking so long.

If any deals do crop up then the devil will be in the detail. Don't get overly exuberant and expect lots more cash raisings in the months and years to come before they (if they ever do) reach meaningful revenues (never mind cashflows or profits). A £50m market cap. is too large a valuation at this point in my opinion.