After booting its head honcho, med-tech AirXpanders is slashing its headcount by a quarter and partially leaving Australia in a bid to cut costs.

Chairman Barry Cheskin says he is cutting the amount of raw materials they buy and stopping direct sales in Australia by moving to a distributor model instead.

Costs are expected to drop by 30 per cent in the June quarter, but he warns investors not to expect improvements in sales until the second half of this year.

While March quarter receipts did rise, cash burn remained high at $8.4 million.

AirXpanders (ASX:AXP) makes a patient-controlled breast tissue expander for women who’ve had mastectomies.

The company dropped Scott Dodson as chief and president in early April.

“The board believes that bringing on a new CEO at the moment will help drive the business at this phase,” Mr Cheskin said.

AirXpanders share began declining after sales growth softened this year and when its CEO departed.

The company started selling the product in the US in early 2017, having started in Australia in 2015.

But sales growth flatlined in the March quarter, dipping 2.6 per cent from the prior quarter just as they had been expected to surge.

The re-order rate also dropped to 40 per cent of the surgeons using the Aeroform product.

Mr Cheskin said on a conference call they had enough money to take them through to the end of 2018 — $US13.6 million partially in cash but largely in short term US Treasury securities — and were “contemplating their options” regarding a capital raise.

Airxpanders makes patient-controlled breast tissue expanders for women who’ve had mastectomies. Graphic: Airxpanders
Airxpanders makes patient-controlled breast tissue expanders for women who’ve had mastectomies.

Why have sales flatlined?

While Mr Cheskin did not explain why he believes sales have gone in the opposite direction to expectations, his explanation of how they are dealing with it illuminates where the board believes the problem areas may be.

The staff cuts will be almost entirely outside the US sales organisation — the market where AirXpanders is focusing on.

The vice president of the US sales group has been replaced with the top performing salesman, in a move intended to “promote the sales tactics of the country’s best performing region”.

AirXpanders is also putting more focus on “depth versus breadth” to encourage surgeons to re-order — in effect putting more resources into existing surgeons than bringing on new ones.

Mr Cheskin says surgeons will typically try a product a couple of times then wait to see how it works before reordering or returning to other methods.

They are also looking to use a distributor in Australia and cut expensive direct sales staff.

Market share has declined in Australia from around 30 per cent when Stockhead spoke to AirXpanders in October last year, to around 20 per cent.

AirXpanders shares were up 5 per cent at 14.7c in early Friday trade.

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