Soft tissue repair company Aroa Biosurgery FY24 revenue grows 12% yoy to NZ$69.1 million
Myriad revenue up 73% to NZ$23.3 million
Aroa focused on delivering positive operating cashflows in FY25
Special Report: Soft tissue repair company Aroa Biosurgery’s FY24 result is in line with guidance with total revenue up 12% yoy to NZ $69.1m and its Myriad family of products continuing to be a key focus.
Aroa Biosurgery (ASX:ARX) reported full-year product revenue of NZ$68m, reflecting a 12% increase on FY23, 10% on a constant currency (cc) basis, and an 18% increase from H1 FY24 to H2 FY24 .
The company saw a 73% increase (70% on cc basis) in full-year Myriad product revenue to NZ$23.3m with active accounts growing by 31% to 218.
ARX says, as expected due to inventory management by its US distribution partner Nasdaq-listed Tela Bio, full-year OviTex/OviTex PRS product revenue fell 7% and 8% from FY23 on a reported and cc basis to NZ$32.6m.
However, ARX says inventory issues normalised in H2, with Tela Bio’s demand for the products re-aligned with their sales to deliver a 19% rise in OviTex/OviTex PRS revenue.
TELA Bio has provided CY24 guidance of US$74.5-76.5m, an increase of 27-30%.
“The re-alignment between TELA Bio’s demand for, and sales of, OviTex/OviTex PRS in H2 FY24 signals a return to the previous growth curve,” ARX says.
“AROA also expects TELA Bio’s streamlined stockholdings to smooth demand and bring both parties’ sales into closer alignment going forward.”
ARX says Endoform sales were in line with FY23, with a modest contribution from Symphony.
Ex-US product revenue continued its strong yoy growth, with a 58% increase on FY23 to NZ$2.8m.
ARX says product gross margin of 85%, represented a 1% increase on FY23, both on a reported and cc basis.
More spending on US expansion and clinical development
ARX says selling and administrative expenses were NZ$59m — a 31% increase from NZ$45.1m in FY23 — driven by continued expansion of US-based sales operations, growth in aggregate commission payments to US sales staff for increased Myriad sales, and increased clinical development activities.
ARX had a larger investment of NZ$3.6m into the Symphony randomised control trial (RCT) during FY24 than anticipated, due to faster patient recruitment. The Symphony RCT with ~120 patients is an 18-month multi-centre study assessing the product’s efficacy in treating diabetic foot ulcers.
ARX says data from the study, which is expected to be published in FY25, will be an important catalyst in driving Symphony sales.
R&D expenses were NZ$9.2m, compared to NZ$10.6m in FY23, which ARX says was largely due to reduced expenditure on its second technology platform Enivo decreasing from ~NZ$7m in FY23 to NZ$5min FY24.
Enivo may reduce secondary complications in mastectomies, with positive results emerging from its pilot clinical trial of the device showing promise in the important clinical management of dead space.
ARX has received US FDA clearance for two of three components of the Enivo system and is engaging with the FDA to confirm the design of clinical and pre-clinical studies to support a further clearance to commercialise the Enivo system.
ARX spent NZ$2.8m in development costs in FY24, compared with NZ$1.3 million in FY23.
The development costs primarily represent investments made into existing product line
extensions and manufacturing process improvements, where there is certainty of the investments generating future economic benefits.
Myriad to boost revenue
ARX expects its Myriad portfolio to continue driving strong growth in the soft tissue reconstruction market following its strong FY24 performance.
The company is putting greater focus on opportunities in surgical trauma, and particularly those where Myriad is used in combination with negative pressure wound therapy (NPWT).
ARX expects Myriad to provide a range of benefits in these procedures, including in the quality and rate of healing, as well as from a health economics perspective, and is focusing its clinical development accordingly.
Preliminary experience suggests that Myriad in combination with NPWT may accelerate healing, reduce interventions and pain, and reduce NPWT applications.
ARX also expecting to complete two prospective studies in the coming year to support clinical adoption in the procedures.
Since transitioning from a joint venture to its own direct sales force three years ago, ARX has witnessed substantial growth in the use of its Myriad product line for supporting soft tissue reconstruction across various surgical procedures.
Operating cashflows progress toward breakeven
ARX says quarterly cashflows from operating activities progressed towards breakeven during the year, with the company posting positive net cash inflows from operations in the fourth quarter.
On a full-year basis, net cash outflows from operating activities were NZ$7.4m, compared to previous outflows of NZ$3.8m as ARX increased investment into its US commercial operations and clinical development activities.
Purchases of property plant and equipment fell from NZ$6m in FY23 to NZ$3.5 million for FY24.
ARX says the continued investment was into additional manufacturing capacity which is expected to complete by Q3 FY25.
Capitalised development costs were NZ$2.8m, compared to NZ$1.3min FY23 reflecting investment into product line extensions and manufacturing process improvements.ARX ended FY24 with a strong cash balance of NZ$29.5 million with no debt.
Working towards breakeven in FY25
ARX says it is focused on investment in growth and increased sales productivity to drive profitability and positive operating cashflows in FY25.
The company expects to deliver FY25 total revenue of NZ$80-87m, reflecting 21-32% cc growth on FY24, driven by continuing Myriad sales momentum and TELA Bio’s sales re-aligning with their revenue forecasts.
The company expects to end FY25 with a normalised EBITDA profit of NZ$2-6 million.
Ward says FY24 brought a mix of challenges and successes.
“Myriad performed well, with our US sales team delivering 73% year-on-year sales growth, driven by active account growth11 and increased productivity,” he says.
“TELA Bio’s inventory management improvements led to a reduction in their stockholding from approximately 33% of revenue in FY23 to around 22% in FY24, but this has now set us up for more aligned sales growth moving forward.
“With these adjustments now behind us, we are confident that FY25 will see a return to our previous trajectory.
“Delivering shareholder value remains our top priority, and we are focused on demonstrating that AROA is becoming a high growth cashflow positive business.”
This article was developed in collaboration with Aroa Biosurgery, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
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