Aroa rises with positive operating cash flow targeted in H2 FY25

Aroa’s cash receipts from customers up 35% on pcp to NZ$19.9 million for the quarter
Net cash outflow reduced by $2.4 million on the previous quarter, forecasts operating cash flow positive in H2 FY25
Company strengthened its regulatory approval and clinical evidence during the quarter

Special Report: Soft-tissue repair company Aroa Biosurgery is up ~12% today after reporting its quarterly update with a strong increase in cash receipts from customers and reduction in cash burn as it forecasts to be operating cash flow positive in H2 FY25.

Aroa Biosurgery (ASX:ARX) said cash receipts from customers totalled NZ$19.9m for the quarter, reflecting a ~35% increase on pcp (Q2 FY24) and a ~12% QoQ increase, driven primarily by increased sales of Myriad, OviTex and OviTex PRS.

ARX’s Myriad family of products have been a strong performer for the company and can be used in a wide range of surgical procedures, where tissue needs to be rebuilt.

OviTex and OviTex PRS are reinforced bioscaffolds manufactured by ARX based on its extracellular matrix ECM technology and co-developed with its US partner TELA Bio.

The products are sold by TELA Bio in the US and Europe. The company is licensed to sell OviTex for abdominal wall reconstruction and hernia repair and more recently OviTex PRS for breast reconstruction.

Net cash outflow reduces

In line with expectations, net cash outflow from operations reduced by ~NZ$2.4m compared to the prior quarter, amounting to NZ$1.2m for the quarter.

ARX said this was mainly due to higher cash receipts, despite continued clinical expenses associated with the Symphony randomised controlled trial, which were now mostly cleared.

Symphony is a graft for complex non-healing diabetic and venous ulcers. ARX is currently undertaking an 18-month trial of Symphony with ~120 patients assessing the product’s efficacy in treating diabetic foot ulcers.

ARX said data from the multi-centre study was expected to be published in FY25 and would be an important catalyst in driving Symphony sales.

It expects to be operating cash flow positive in H2 FY25.

Net cash outflow from investing activities was NZ$600,000 for the quarter, primarily reflecting routine capital expenditure.

ARX reported a ~58% decrease in quarterly cash burn to ~NZ$2.2m, ending the quarter with a strong cash balance of NZ$21.6m and no debt.

ARX maintained its FY25 revenue guidance at NZ$80-87m, which was a 21-32% constant currency growth on FY24 with FY25 normalised EBITDA profit guidance maintained at NZ$2-6m.

Momentum builds for US operations

ARX said momentum continues to build for its US commercial operations, with productivity gains seen across the sales organisation and 5% QoQ growth in active Myriad accounts.

To support continued sales growth and productivity, ARX reconfigured its US sales leadership structure during the quarter.

Regional manager Mark Maerten was promoted to national sales director and two new territories were created, resulting in two additional internal promotions.

Regulatory approval and strengthening of clinical evidence

During the quarter ARX received regulatory approval in Argentina for Endoform, used in acute and chronic wounds, and Myriad Matrix, an extracellular matrix graft indicated for use in soft tissue reconstruction and complex wounds.

The company also received regulatory approval for Endoform in Egypt.

ARX said four peer-reviewed studies were published during the quarter, including the largest comparative assessment of commercially available ECM-based medical devices.

The pre-clinical study titled Comparative Analysis of Commercially Available Extracellular Matrix Soft Tissue Bioscaffolds, published in Tissue Engineering Part A, assessed 12 different ECM products, including Myriad Matrix, comparing structural properties and the effectiveness of cell removal.

The study found that AROA ECM is optimally processed with low levels of residual foreign DNA and a superior native structure, supporting the growing clinical evidence of AROA ECM platform technology.

Two investigator-initiated studies on Myriad’s efficacy in reconstructing oral soft tissue defects were also published.

Another study highlighted rapid revascularisation following Myriad application in complex facial and scalp trauma.

ARX said its sales and clinical teams participated in nine major industry conferences globally, including the American Association for the Surgery of Trauma Annual Meeting in Las Vegas and the International Society for Burns Biennial Congress in Birmingham, England.

In September, global certification organisation DEKRA successfully completed its annual on-site audit of ARX’s Auckland manufacturing sites.

ARX’s H1 FY25 results will be released on November 26.

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.