Biome Australia's Tax-Loss-Driven Slide Masks Genuine Growth

Strong distribution deals and 30% revenue growth continued, even as tax-loss selling halved the stock over eight months and a new onshoring deal set up margin expansion.

31 Aug 2026 · 3 min read

Biome Australia delivered strong distribution deals with Mecca and Go Vita and consistent revenue growth above 40 percent for its Activated Probiotics range, before a temporary quarterly cash flow disappointment and broader tax-loss selling drove the stock down more than 50 percent, even as director buying, a capital-light onshoring manufacturing deal, and record fourth-quarter cash receipts confirmed the underlying business remained on track.

Strategic distribution deals and clinical trial validation

Saville Capital said Biome Australia, a recent addition to the portfolio, made a couple of positive announcements, following recent strategic distribution deals with Mecca, which included BIO's Activated Probiotics as part of its launch of a new wellness category, and Go Vita, Australia's largest health food distributor. The fund later said BIO announced its first human clinical trial on its proprietary probiotic strain, Lactobacillus plantarum BMB18, had been submitted for ethics approval and registered with the Australia New Zealand Clinical Trials Registry, investigating the strain's efficacy in patients experiencing digestive symptoms and occasional sleep or mood disturbances.

BIO announced that the first human clinical trial on its proprietary probiotic strain, Lactobacillus plantarum BMB18, has been submitted for ethics approval and registered with the Australia New Zealand Clinical Trials Registry.

— Saville Capital, Monthly Report, December 2025

Strong growth, then a temporary disappointment

Saville Capital said BIO delivered another strong quarter, with second-quarter FY26 sales revenue up 41 percent on the prior corresponding period to $6.5 million, EBITDA of $1.0 million and net operating cash flow of $600,000, reflecting continued execution of its growth strategy across domestic and international markets while adopting a prudent approach to cost and capital management. The fund noted director buying in March, taking assurance from this as it generally reflects internal confidence and a view that the current share price isn't aligned with likely performance, before BIO had its first disappointing quarterly update in some time in April, with customer receipts surprisingly flat on the prior year and slightly negative operating cash flow, though most of the weaker result was understood to be due to timing issues rather than a sharp slowdown from its recent growth run rate above 40 percent.

We understand that most of this weaker result was due to timing issues as opposed to a sharp slowdown from its recent revenue growth run-rate of >40%.

— Saville Capital, Monthly Report, April 2026

Tax-loss selling halves the stock, despite unchanged fundamentals

Saville Capital said Biome Australia halved over the prior eight months amid heavy selling the fund attributed to tax-loss selling rather than stock-specific news, noting valuation multiples across affected portfolio names, including BIO, were at all-time lows and dislocated from larger peers, expecting the trend to reverse.

Biome Australia also halved over the prior ~8 months amid heavy selling the manager attributed to tax-loss selling rather than stock-specific news. Valuation multiples across affected portfolio names, including BIO, were at all-time lows and dislocated from larger peers.

— Saville Capital, Monthly Report, May 2026

A capital-light onshoring deal and record cash receipts confirm the thesis

Saville Capital said Biome Australia signed a commercial manufacturing agreement with Specialty Probiotics Australia to bring production of its Activated Probiotics range onshore, requiring no upfront capital, consistent with its capital-light strategy, with gross margin around 61 percent expected to rise above 65 percent within 18 months of the first commercial batch in September 2026, alongside working-capital benefits from lower inventory days and elimination of international freight costs. BIO then reported cash receipts of $5.9 million in the fourth quarter of FY26, up 23 percent quarter on quarter and 61 percent on the prior corresponding period, resulting in FY26 revenue of $23.9 million, up 30 percent, driven by continued practitioner and pharmacy demand for its Activated Probiotics and Activated Therapeutics ranges across domestic and international markets.

What fund managers say they are watching next is delivery of gross margin expansion toward above 65 percent once onshore manufacturing begins in September 2026, continued 30 percent-plus revenue growth momentum, whether the tax-loss-selling-driven de-rating reverses as Saville expects, and progress on the BMB18 clinical trial's investigation of digestive, sleep and mood benefits.