Skin Elements (ASX:SKN): Interview with Chairman Peter Malone

March 31, 2022

Skin Elements, SKN

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Skin Elements

We spoke to Peter Malone, Executive Chairman of Skin Elements, about the breakthrough SuperCuvr product and how there’s nothing better in terms of its effectiveness against removing COVID-19 from surfaces. We also talked about the opportunity in the disinfection space for companies whose products are natural and organic.

Transcription below.

 

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Transcription

 

Stuart: Hello, and welcome to “Stocks Down Under.” My name is Stuart Roberts and I’m one of the co-founders of that publication. And joining me today from Perth on Tuesday the 22nd of March 2022 is Peter Malone who’s the executive chairman of Skin Elements, ASX:SKN. Peter, good morning.

Peter: Good morning, Stuart. How are you doing, mate?

Stuart: Very well. Peter, you’ve have just achieved a major breakthrough in the global fight against COVID. You have the world’s only approved disinfection product that can bring about a 7 Log reduction in virus on treated surfaces. How did you and your colleagues achieve that with SuprCvr?

Peter: Look, Stuart, as you probably realize, it wasn’t just developed over the COVID period. The depth of research to do this was [inaudible 00:00:56.293] 15-year research and development program in the biotech space. Three of us had been working on this for over a decade, particularly on how to preserve organic ingredients, and then, of course, deal with the actual aspects of the virus when we saw it hit the street in early 2020. It’s been a $30 million R&D project. We’re very, very deep in our scientific skill in this space. It’s probably better than most globally. You can imagine one of the big biotech companies putting just $30 million into one little project drawn on a desk and then coming back after 15 years. There would probably be some good findings come out of that research.

And, of course, we lucked in with the, as we want to…it’s not an ideal thing for the world to have a viral outbreak, particularly global, but we lucked in, of course, with that coming forward. The product was ready and, of course, as I say, this product here, the first, natural, organic, plant-based disinfectant that will kill the virus. And didn’t just kill the virus as you stated. It got a Log 7 reduction score, which is, in fact, an extension of the score used to finish at Log 6 reduction. It had to be extended by a factor of 10 to score our product. And, of course, it gave it a score of about 1,000 times more powerful as it says on the bottle than most other products sitting on the street in supermarkets in the world.

Stuart: Now, in the research report that we at Pitt Street Research have just published, we talk about how the world of cosmetics has trended in a big way towards products that are natural and organic. And with SuprCvr, you’re picking up on that trend. That puts you potentially in the same league as companies like BWX, for example. Talk to us why consumers are looking for a product like SuprCvr in terms of what’s in it.

Peter: Well, I think, basically, the safety it brings with the efficacy of the product. You get a better and stronger product that does the job it’s supposed to do, which in this case is to kill viral issues on desks, chairs, tables, in the air. And parallel with that, you get a safe product, awfully safe, that is plant-based in an organic product specification that the body can cope with. So spray it around. A good example is if I spray this just here, I can obviously spray it on my hands, it cleans and keeps them free from the virus. I can spray it around my body because it’s organic and it doesn’t have any effect on the body. And it’s the game-changer. It just gives us what we’ve always sought. I mean, at the end of the day, people look for better and better products as the generations go through. And this is the new generation where technology is coming to the fore. You’ll see that all across the globe.

There’s things being produced today that were never considered. I mean, this is a whole aspect of even technology itself. You know, imagine walking around with a mobile phone in your hand in 1975. You might be…you know, you’d be someone weird. How do you get a call to a mobile phone? Now we take it for granted. How do we get a plant-based, you know, disinfectant that will kill a virus? Well, nothing actually was killing the virus till now because every disinfectant built was designed to kill bacteria at a period when we didn’t have a virus. So if you got to the end of the day, the whole change happened when the virus outbreak happened. The array of product on global markets was get around killing bacteria. And they had to moff up and try to do the job of killing viruses. So you had things like deep cleans happening with bacteria killers. Well, [crosstalk 00:04:58.888].

Stuart: Exactly the wrong product you needed at that time.

Peter: Exactly. And just to give the switch, the way I see it is we’re living in a world which is conscious consumerism. In the old days, before 2000…

Stuart: Yeah, I remember those times.

Peter: …[inaudible 00:05:18.258] was on a table offered on the shop and you didn’t question it. Now you don’t wanna pay for this. Like in Sydney and places, you walk around and you see people looking at things in the shop and reading labels. They’re then putting them back on the shelf. And you say to them, “What was wrong with that?” “I didn’t like the ingredients,” or, “Didn’t have the right specifications.” Or, “It’s not good for the planet.”

Stuart: Right. Now, one thing that you’re going to have to build is the distribution engine for SuprCvr. You’re not Reckitt Benckiser, or SC Johnson, or any of these other well-known brands. But you’ve started the process of building distribution. Tell us about the recent distribution you did for the Australian market, and what potentially is coming for other markets.

Peter: Yes. You’re dead right. Distribution is the key here. We’ve got the world’s best product, no question. TJ’s confirmed that and globally, it’s been confirmed. But you’re right, distribution’s the key. And we move quickly. I and a couple of the other directors took the opportunity to move quickly and appoint an Australian distributor first and we also gave them rights to New Zealand, exclusive. And they, today, are just about to launch a marketing campaign. That’ll be on TV and radio across Australia. And that campaign will explain what SuprCvrs is about and go and get yourself some SuprCvr. The good news is it’s already been rolled out to just under 200 stores, Metcash IGA stores in Western Australia. And there’s been a run on those stores for the SuprCvr already, I’ve noticed.

So, you know, I’ve got texts the other day by a couple of people who said, “Look, where do we get it?” “IGAs,” and then raced out and got it and got trolley-fulls of [inaudible 00:06:55.148] suddenly needed a product you didn’t have to cover their… We’re going through what the rest of Australia went through a couple of months ago, which is every second person here is getting COVID. And it’s Omicron’s variant and it’s soon to be quickly brought under control, but keeping places clean is the key to it. And this is what the product does. So, we don’t have the channels to market like the big J&Js or the big pharmaceutical companies.

The global market’s there for us. But things are happening quickly. We’ve just got a group out of New Zealand which we’re talking to at the moment. And they are looking to do something significant in these other marketing…some of the other sectors. We’ve got things happening in the U.S. and there’s things happening in the UK, which are discussions which are escalated. And, you know, at the end of the day, we move as quickly as we can on a new product. But the idea is to lock down Australia and New Zealand into a safe category and get that market fixed because at the moment, it’s not an unsafe place to live, it’s just unsafe for the virus. And we want to make that area safe. People will feel comfortable.

Stuart: One of the things we drew out in our research report, and this was striking to me, is the way habits have changed as a result of this pandemic. We never used to have worried too much about whether surfaces had been cleaned so that they could be free of viruses. Nowadays, you know, we’re washing our hands, we had been wearing masks, and we’re getting used to cleaning surfaces again, for example. Those habits are not going to change back to what the good old days in a hurry. So you’ve got a tailwind behind you in terms of people who just know to use a product like yours.

Peter: Oh, absolutely correct. I mean, the biggest key is that people who do want to keep the area they’re working in safe from other viral outbreaks caused by third parties. And that’s where it’s coming from. So, the only way you can bring that on effectively is to ensure you’ve got a product on the desk that you can actually, like I say, you pick it up, you spray it around you, and you’ve got four hours of cover. Now, that’s the type of security you didn’t have yesterday. So if you want to sit there comfortably and work and someone across the desk is not looking too special, you think you’re pretty safe compared to where you would have been without it.

That also looks at, you know, where we sit. What does this mean in terms of product? It didn’t exist? Well, it did exist in another form. It existed in a chemical disinfectant, highly toxic to the body, very difficult to use other than cleaning companies after dark. Cleaning offices wouldn’t be habitated for another four or five hours in the morning. The crux of this is you talk about global changes, the biggest change we’ve seen in recent times is probably the transportation, the car industry where we lived on petrol. We sort of still sort of live on at the moment.

Stuart: At the moment, yeah.

Peter: Yeah, but it’s a very different market opportunity going forward. If you look down the barrel of that future where the early days of the electric car and the Tesla program, and now it’s the largest car company in the world. It produced over a million cars last year from [inaudible 00:10:19.714]… It’s been, in the last 20 years from an idea to reality to the biggest car company. And I think we’re going to see many, many technologies created in the next 10 to 15 years which is going to completely change the way we do things and think, how we undertake our lives. And one of those is SuprCvr. And this is sort of the pandemic solution. There’ll be other solutions in other top-of-market opportunities.

Stuart: Well, then talk to us about that. What’s next in terms of the Skin Elements pipeline?

Peter: Look, I think in reality, yeah, our broad-based research has been into ingredients that can be used safely by humans. And we have done a lot of research in that 15-year period which has spun out a number of various different products and that are being test-marketed and looked at. And so at the end of the day, I think we’re going to find that there’s going to be a breakout of skincare product. And the biggest one, I think parallel with what we’re doing, is the sunscreen market. It’s been elevated today to almost the highest growth market going forward. And I think that’s going to be evident in what we see coming forward too as well. So, our product range is going to give us the opportunity to probably bring that into a global market proposition very quickly. The benefit of irradiation block is obviously very clear to everybody in this current period. Radiation on the skin is one of the biggest issues facing people globally. It’s not color of skin. It’s not solved by the part of the world you live in. It’s not a product that you can dodge the effects of.

And therefore, sunscreens are going to have to be more effective at doing this with the comfort of the body in care. And that’s not the case with our historic sunscreen products. They weren’t there to help the body. They were there to do a good job of trying to block radiation and some of their radiation bands. So there it goes again. It’s the, we now know what we’ve got to cover. It’s UVA and UVB in complete form. UVC, we don’t need to worry about. That’s out in space. You know, if we do see Musk and his team head out to Mars, they might have a different [inaudible 00:12:51.494] sunscreen. But at the end of the day, it’s where skin’s going to be, these new skin products. And really, we see SuprCvr as the first of those skin products. I mean, like I say, this is a skin product. I’ve just got cover now for four hours. Whatever I touch, my hand is still sterile. [crosstalk 00:13:13.676]

Stuart: Right. You know, Skin Elements was suspended for a lot of 2021 while you raised the capital in order to complete the SuprCvr program. You’re now back up and running. In terms of what we can look forward to, there’ll be obviously new distribution arrangements for the original product, some more R&D. And I guess a reason will be rising sales curve as well.

Peter: Yeah, okay, because I mean, the program has really just started for us. We’ve only just completed our first manufacturing block of product, which is through the distributor that was in excess of $1 million worth of product made last month. We’re now getting forward to developing our next program, which is our next block of manufacturing for them. We’ve got a meeting today at 12:00 that’s [inaudible 00:14:00.015] but that’s in the next sort of pitching around the advertising that’s going to come through and the marketing efforts on global markets for us going forward. So, in some ways, the size of the opportunity is enormous. There’s no question.

It’s a disinfectant market that was struggling to be $20 billion and now they’re talking about in the next couple of years, it’s going to be past $50 billion, and a couple of years after that it’ll be $100 and something billion. And we sit at the forefront of one of the few products that can take advantage of that business growth. And that’s a business growth just in a very narrow sector where we’ve built SuprCvr before. We jump out of that sector and we jump into the global market for organic skincare product. We’re talking multiples of those sectors across a range of countries. So it’s definitely a growth-phased market. What we’re doing… Now, the correlary to that is where are we? And we see in Perth, we’re almost unknown. We were an invisible lab for 20 years almost.

We come out with a significant spend and people are coming to grips with where we are and what we’re doing and how we do it. Give us six months, the world will start to have a different pitch on us. We get product out, we get a little bit noisier in the street because of that visibility, we get some of the funds. They suddenly tip to us and say, “Well, we think we should have a bit of a position.” It’s the Tesla position before it becomes Tesla the business. It’s Tesla, the research concept. We’re a bit further than that. We’re actually in the business phase now. And I think it does deliver us the ability to get away from our research investors and bring on the mainstream investors. And really, that’s the switchover that I think the ASX gives us.

Stuart: Great. Well, it’s going to be a great 2022. Well done on what you and your colleagues have achieved. It’s been a great achievement from where we were prior to the pandemic. And here’s to the next stage of the journey going forward.

Peter: Good stuff. Thank’s very much, Stuart.