Biome Australia Brings Production Home to Push Gross Margins Above 65%
Biome brings Activated Probiotics manufacturing home in a zero-capex deal
Biome Australia (ASX: BIO) has signed a binding commercial manufacturing agreement with Specialty Probiotics Australia (SPA), effective 2 June 2026, to transition its Activated Probiotics range to onshore production. The agreement requires no upfront capital investment from Biome and carries no minimum purchase obligation. The first commercial batch is targeted for September 2026, with the full range expected to progressively transition over approximately 18 months.
CFO Lauren Dwyer
“Our current gross margin of approximately 61% is already strong and has been delivered without a single retail price rise since we launched Activated Probiotics in 2019. From a financial perspective, we believe this partnership will progressively lift our gross margin to 65%+ over the next 18 months as the range transitions to Australian production. This will be achieved while reducing the working capital tied up in larger inventory orders as well as inventory in transit, and importantly without any capital expenditure from Biome, allowing us to capture these benefits while maintaining a disciplined approach to the balance sheet.”
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What the agreement actually involves
SPA is a GMP-licensed Australian manufacturer specialising in probiotic production, led by Craig Silbery, co-founder and former Chief Executive Officer of Life Space. Under the arrangement, Biome supplies the active ingredients while SPA handles domestic manufacture, testing, and finishing of the Activated Probiotics range.
The exclusivity structure is geographically scoped: Biome sources domestic manufacture exclusively from SPA within Australia, with carve-outs for existing suppliers and remedies available if SPA fails to meet agreed quality or delivery standards. Biome’s European supply partnerships are explicitly retained to service EU markets, providing supply chain diversification.
Biome retains full ownership of its intellectual property and formulations, with any improvements to that IP vesting in Biome. SPA’s licence is limited to manufacturing products for the duration of the term.
Key commercial terms of the agreement are summarised below:
- Parties: Biome Australia Limited (ASX: BIO) and Specialty Probiotics Australia Pty Ltd (SPA)
- Effective date: 2 June 2026
- Initial term: Two years, with 12-monthly pricing and renewal reviews
- Exclusivity: Australian domestic manufacture only (European partnerships retained for EU markets)
- IP ownership: Retained by Biome; improvements vest in Biome
- Delivery terms: EX WORKS (Incoterms 2020) from SPA’s facility
- Liability insurance: SPA maintains public and product liability insurance of not less than $10 million per event
Craig Silbery, CEO of Specialty Probiotics Australia
“We are excited to be working with Biome and to support them strategically as they scale, by removing barriers in production and the supply chain and by supporting new opportunities in product development. Biome and its Activated Probiotics brand are among the most exciting, high-growth brands in the Australian market, and increasingly in global markets, and we look forward to the journey ahead together.”
The financial upside: margins, working capital and zero capex
The gross margin improvement is the headline financial outcome. Biome’s current gross margin of approximately 61% is expected to progressively lift to 65%+ over 18 months from the first commercial batch, driven by the cost efficiencies of domestic production.
The working capital benefits are equally material for investors to consider. Producing in Australia in smaller, more frequent batches is expected to reduce inventory holdings, improve stock turn, and eliminate the extended international sea freight lead times currently built into each production cycle. Less capital tied up in large offshore orders and in-transit stock translates directly to improved cash efficiency. A further downstream benefit is improved usable shelf life of finished product before it reaches customers.
Critically, all of this is achieved without any capital expenditure from Biome, making this a margin expansion outcome with balance sheet discipline intact.
| Metric | Before (offshore) | Expected outcome (onshore) | Timeline |
|---|---|---|---|
| Gross margin | ~61% | 65%+ | Progressive over 18 months |
| Inventory days | Higher (international batches) | Reduced (smaller, frequent local batches) | From first batch |
| Freight lead times | Extended international sea freight | Eliminated for AU production | From first batch |
| Capex required | — | $0 | Immediate |
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Vision 27 and what comes next
Biome’s Founder and Chief Executive Officer Blair Vega Norfolk has described this agreement as “phase one” of the company’s Vision 27 strategy to take greater control of its supply chain, manufacturing inputs, and product intellectual property. The framing is deliberate: this is a strategic milestone within a multi-year plan, not a standalone operational decision.
The retention of European supply partnerships ensures Biome maintains supply chain diversification as it scales internationally, servicing EU markets without disruption while Australian production comes online. For export markets more broadly, an Australian-made designation is expected to provide a meaningful point of difference, particularly with practitioners and consumers who place weight on product origin and manufacturing quality standards.
The transition also reduces the international freight footprint associated with Biome’s supply chain, which supports the company’s commitments as a certified B Corporation.
Forward milestones under the agreement include:
- September 2026 — first commercial batch targeted
- 18 months from first batch — full Activated Probiotics range targeted to transition to Australian production, subject to commercial scale-up
- Ongoing — European partnerships retained for EU market supply
- Ongoing — further manufacturing opportunities to be assessed under Vision 27
Blair Vega Norfolk, Founder and CEO of Biome Australia
“This move has been under consideration for more than two years and represents phase one of Biome’s journey to take greater control of its supply chain, manufacturing inputs and product intellectual property. As one of the cornerstones of our Vision 27 strategic plan, we are pleased to begin onshoring with SPA while continuing to assess further manufacturing opportunities over time.”
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