Aroa Biosurgery (ARX: $0.79), a wound-healing products company, continues its resilient performance with a 35% increase in cash receipts during the September quarter compared to the PCP. Total revenue during the September quarter was NZ$14.8 million.
For the company's 2024 financial year (ending 31 March) the company is forecasting product revenue between NZ$72-75 million, up from NZ$60.5 million in 2023. The normalised EBITDA is expected to be constant this year at between NZ$1-2 million (compared against NZ$1.5 million in 2023). Aroa finished the September quarter with NZ$34 million in cash.
Another pleasing aspect of the results is the anticipated reduction in the company's cash burn from operations, which fell by NZ$1.6 million from the previous quarter to NZ$3.2 million, despite a slight decline in cash receipts from the June quarter (NZ$15.2 million).
Aroa's strategy has been to develop new, higher margin product lines such as the Myriad products. Launched just three years ago, the Myriad products have generated 67% of the company's direct sales, compared to 50% in the previous corresponding quarter. The Myriad products are purposed for trauma surgery, which represents an estimated market size of US$300 million a year.
Globally, in January 2021, there were just 10 accounts for the Myriad products, and 46 in January 2022. Over the last six months, Aroa has increased the number of customers using Myriad products by 21 to 187 in the US alone.
The company's sales team has increased from 32 staff in August last year to 42 currently, plus eight in-house salespeople. Of these, 10 sales people are generating annual sales of US$0.75 million each, up from just five reps generating this amount six months earlier.
Aroa's first main product was Endoform, which commands a lower margin. The company sells its Ovitex products (for hernia repair and abdominal reconstruction) through its partner TELA Bio.
A major upcoming milestone for this year is the anticipated FDA clearance of the Enivo system, for which two components have already been cleared. The Enivo system uses negative pressure to remove fluid from "dead" spaces after surgery. It is expected to be used with the company's other tissue replacement products (which are derived from ovine forestomach). The addressable market is estimated by the company at over US$1 billion a year in the US.
Aroa is capitalised at $271 million and is trading at a forecast 2024 Price-Sales ratio of 4.1.
Bioshares recommendation: Speculative Buy Class A
Information contained in this newsletter is not a complete analysis of every material fact respecting any company, industry or security. The opinions and estimates herein expressed represent the current judgement of the publisher and are subject to change. Blake Industry and Market Analysis Pty Ltd (BIMA) and any of their associates, officers or staff may have interests in securities referred to herein (Corporations Law s.849). Details contained herein have been prepared for general circulation and do not have regard to any person’s or company’s investment objectives, financial situation and particular needs. Accordingly, no recipients should rely on any recommendation (whether express or implied) contained in this document without consulting their investment adviser (Corporations Law s.851). The persons involved in or responsible for the preparation and publication of this report believe the information herein is accurate but no warranty of accuracy is given and persons seeking to rely on information provided herein should make their own independent enquiries. Details contained herein have been issued on the basis they are only for the particular person or company to whom they have been provided by Blake Industry and Market Analysis Pty Ltd. The Directors and/or associates declare interests in the following ASX Healthcare and Biotechnology sector securities: Analyst MP: 1AD, ACR, AVR, CGS, CUV, CYC, DXB, IMM, LBT, MX1, OPT, NEU, PAB, PXS,RNO,SOM. These interests can change at any time and are not additional recommendations. Holdings in stocks valued at less than $100 are not disclosed.