Aroa Biosurgery focuses on transitioning operations to cashflow positive in FY25
\nUS distribution partner TELA Bio reports strong growth to flow through to Aroa
\nBiotech making strong progress on clinical trials and new product lines <\/p>\n
Soft tissue repair company Aroa Biosurgery is focused on increasing sales of its existing products and delivering strong topline growth, becoming profitable and transitioning its operations to be cashflow positive in FY25.<\/p>\n
Aroa Biosurgery (ASX:ARX)<\/strong><\/a> says it is confident of being cashflow positive in 2025 as it looks to synchronise growth with its US distribution partner TELA Bio, expand product lines and capitalise on growing opportunities in the wound care market.<\/p>\n ARX\u2019s share price lifted more than 7% on Friday after NASDAQ-listed TELA Bio reported a strong FY23 result<\/a> with revenue of US$58.5m, up 41% on FY22 which was in line with consensus and guidance of US$57-60m.<\/p>\n TELA provided FY24 revenue guidance of US$74-76m, with growth of 27-30%.<\/p>\n ARX produces its patented OviTex products for TELA Bio, which boasts a team of 80 specialised sales representatives in the US focused on breast reconstruction and hernia surgery.<\/p>\n ARX CEO Brian Ward says additional lines of its products for hernia repair and breast reconstruction will be released for TELA Bio over the next 12 months.<\/p>\n \u201cIt\u2019s pleasing to see TELA report such positive results, with demand for OviTex products continuing to grow.\u201d<\/p>\n \u00a0<\/p>\n ARX took a hit to its share price upon release of its Q3 FY24 results at the end of January, where it downgraded its full year revenue guidance by ~8% to NZ$67-$70m, up 8% on the previous year.<\/p>\n It is now expecting an EBITDA loss of NZ$1-$3m, from previous guidance of positive EBITDA of NZ $1-2m.<\/p>\n The downgrade was attributed to overestimated revenue from TELO Bio along with a delay to a joint product development project with the company and slower than anticipated sales of its Myriad product range.<\/p>\n Ward says ARX\u2019s OviTex and OviTex PRS remain on a strong growth trajectory. He says TELA BIO have held higher levels of stock over the last two to three years as they were getting started with their sales.<\/p>\n \u201cThey have now learned which SKUs are needed, which are fast and slow moving, and trimmed stock holdings to minimise obsolescence due to product shelf-life,\u201d he says.<\/p>\n \u201cThey are now at a stage where they\u2019ve had enough experience selling these products to operate with lower stock levels to support sales growth,\u201d he says.<\/p>\n Ward says implications over the past 12 months for ARX has been that the company has not supplied TELA Bio with the same level of orders to the previous year despite Tela growing at over 40% on the previous year.<\/p>\n \u201cNow that TELA BIO is into a new operating mode, we will be more synchronised.<\/p>\n \u201cWe would anticipate as move forward that our Ovitex sales we will be growing at a similar rate to TELA Bio which will have a big effect on our business and is a positive as we look forward to FY25.\u201d<\/p>\n \u00a0<\/p>\n ARX\u2019s primary market is the US, where 95% of its sales occur. The medtech employs a direct sales team of ~50, which had been budgeted to double their sales of the Myriad product range in FY24.<\/p>\n \u201cWe are going to end up growing between 70-80%, so less than we expected but still very strong growth,\u201d he says.<\/p>\n \u201cWe fell short of doubling Myriad sales, partly due to switching from selling into a mix of specialities to a much stronger focus on targeting trauma centres.<\/p>\n \u201cThere has been a realignment of our sales effort which we are confident will give us a better return over the medium term.\u201d<\/p>\n Ward says Myriad continues to gain momentum in sales and it is looking to further expand its sales team in H2 FY25.<\/p>\n ARX last week announced it had appointed US-based seasoned life sciences commercial strategist Darla Hutton as an independent non-executive director to help guide growth.<\/p>\n \u00a0<\/p>\n Headquartered in New Zealand, ARX\u2019s proprietary ECM biomaterial, serves as the foundation for its range of soft tissue repair products, comprising a scaffold and complex mix of biological molecules known to be important in tissue regeneration.<\/p>\n ARX was found in 2008 by Ward, also a trained veterinarian, after discovering that the extracellular matrix (ECM) in the forestomach of sheep closely resembles human tissue and contains over 150 essential proteins for healing.<\/p>\n In 2023 ARX received FDA 510 clearance for a resorbable dental product using its ECM platform. ECM-based barriers are used for treating oral soft tissue defects, including guided tissue regeneration. The global dental barrier membrane market is valued at more than US$400 million.<\/p>\n ARX also has several upcoming catalysts, including its randomised control trial for Symphony, for treating diabetic foot ulcers.<\/p>\n \u201cWe expect an interim readout of that trial by October with the final results by March or April 2025 so it\u2019s potentially a great catalyst for that product,\u201d Ward says.<\/p>\n \u201cWe\u2019re scaling up our commercial activities for Symphony and we will shortly begin selling into outpatient wound care centres where reimbursement is established.\u201d<\/p>\n Ward says ARX\u2019s largest prospective study to date, MASTRR, examining Myriad Matrix and Myriad Morcells across various surgical specialties and procedures to evaluate both short and long-term healing outcomes, is also making progress.<\/p>\n \u201cWe have now nine centres operational, and 268 patients recruited out of a target of 300 and we expect this to lead to at least one further publication this year,\u201d he says.<\/p>\n ARX\u2019s first clinical study of its Enivo system for the management of dead space after a mastectomy is expected to be finalised over the next couple of months with results published towards the end of 2024.<\/p>\n Positive results from the study, which began in New Zealand in August 2023, have been emerging with the Enivo system showing promise in the all-important management of dead space.<\/p>\n \u201cWe will have more clarity on the regulatory pathway for Enivo by the middle of the year,\u201d Ward says.<\/p>\n \u00a0<\/p>\n Ward says sales are growing and FY25 should see growth lift further.<\/p>\n \u201cOur sentiment about the opportunity in front of the company and our ability to build a really successful business in the sector over the next four to five years has not changed,\u201d he says.<\/p>\n \u201cThere will be quarterly volatility just because we are in the early stages of scaling a fast-growing business.<\/p>\n \u201cOperationally, within the business we feel really good about the prospects in front of us and we will do better in some quarters and worse in other quarters, but it will even itself out. Annually we will be delivering consistent growth year-on-year.\u201d<\/p>\n \u00a0<\/p>\n Ward says ARX is aiming to be cashflow for operations in FY25.<\/p>\n \u201cThere are three goals for this this year, delivering strong topline growth, becoming profitable and transitioning to being cashflow positive for operations,\u201d he says.<\/p>\n Broker Morgans has 12-month target price of $1.20 on ARX and an add rating,\u00a0 believing compared to its peers the company is trading at attractive levels.<\/p>\n Senior healthcare and life sciences analyst Scott Power says TELA\u2019s latest result gives confidence in the growth of ARX moving forward.<\/p>\n \u201cTELA BIO has provided guidance for CY24 of 27% to 30% revenue growth which is line with consensus forecast,\u201d he says.<\/p>\n \u201cAll this works well for Aroa with TELA Bio being its US marketing partner and the company receiving 27 cents in the dollar of sales.<\/p>\n \u201cWe expect a positive share price reaction for Aroa on the back of this result.\u201d<\/p>\n \u00a0<\/p>\n <\/span><\/span>\u00a0<\/p>\n At Stockhead, we tell it like it is. While Aroa Biosurgery is a Stockhead advertiser, the company did not sponsor this article.<\/em><\/p>\n <\/span><\/p>\n The post Aroa Biosurgery targets sales growth and operations cash flow positivity in FY25<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"\u2018Growing at a similar rate\u2019 with TELA BIO<\/h2>\n
Change of focus for Myriad for \u2018better return\u2019<\/h2>\n
Upcoming growth opportunities<\/h2>\n
Forecasting for growth to lift<\/h2>\n
Cashflow positive operations in 2025<\/h2>\n
The ARX share price today:<\/h2>\n\n