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Melbourne-based probiotics company Biome Australia (ASX: BIO) has signed a binding commercial manufacturing agreement to bring production of its Activated Probiotics range onshore, partnering with Specialty Probiotics Australia (SPA) at its Gold Coast facility in a deal that requires no upfront capital investment from Biome.
The agreement targets a first commercial batch by September 2026 with a full transition of manufacturing over 18 months.
Biome says the move forms phase one of its Vision 27 strategy and is expected to progressively lift gross margins from 61 per cent at present to more than 65 per cent.
SPA is led by Craig Silbery, co-founder and former CEO of Life-Space, the probiotics brand sold to Chinese health supplements giant By-Health for $690 million in 2018.
Silbery acquired the assets of the former Probiotics Australia out of administration in 2024 with backing from H&S Investments and flagged plans to spend up to $40 million upgrading the Gold Coast manufacturing facility to service Australian and Asian markets.
"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," says Biome founder and CEO Blair Vega Norfolk.
"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."
The deal carries an initial two-year term and grants SPA exclusivity over Biome's Australian manufacturing, with carve-outs for the company's existing suppliers and provisions for quality or delivery failures.
SPA is required to maintain product liability insurance of not less than $10 million per event.
Biome's CFO Lauren Dwyer says the onshoring will deliver meaningful financial benefits beyond the margin uplift, pointing to working capital improvements from shorter supply chains and reduced lead times.
"Our current gross margin of approximately 61 per cent is already strong and has been delivered without a single retail price rise since we launched Activated Probiotics in 2019," says Dwyer.
"From a financial perspective, we believe this partnership will progressively lift our gross margin to 65 per cent-plus 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."
Biome says that Silbery brings "significant expertise" in probiotic manufacturing and commercialisation, adding that it will be working closely with SPA to support Biome's growth across its domestic and international markets.
"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," says Silbery.
"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."
Biome Australia reported first-half FY26 revenue of $12.4 million, up 40 per cent on the prior corresponding period, and a net profit of $1.18 million representing 172 per cent growth.
The company's annualised revenue run rate sits at $25.8 million, with cash of $3.39 million and drawn debt of $2.12 million at the end of the third quarter.
Last month, Biome extended its exclusive supply agreement with European partner Probiotical SpA through 2028, retaining offshore manufacturing to service EU markets.
The arrangement means Biome will operate a dual supply chain - Australian production through SPA for domestic and regional markets and European production through Probiotical for its growing EU footprint.
Biome says the onshoring initiative is expected to strengthen the provenance credentials of the Activated Probiotics range, which is sold through more than 3,000 pharmacies and health food retailers across Australia.
The company notes that Australian-made positioning carries particular weight in Asian export markets where the brand is expanding.
Shares in Biome surged 20 per cent today to close at 27c, although the stock is still trading well below the 2026 high of 49c achieved in January.
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