A year ago, AirXpanders was one of the darlings of the medical technology sector.

But with the shares (ASX:AXP) down more than 90 per cent this year — and hitting new lows by the day — investors could be forgiven for wondering if the company has much of a future.

AirXpanders, which makes patient-controlled breast tissue expanders for women who’ve had mastectomies, last month slashed its headcount by a quarter.

Missed sales, the removal of its chief executive and a build-up in unsold stock signalling the need to raise more cash has given bears the upper hand, with bulls in retreat.

Its novel treatment for breast cancer patients undergoing reconstruction surgery buoyed interest in its shares when it went public less than three years ago, pushing the sharemarket value well over $130 million at its peak – a far cry from the $22 million you can buy the company for today.

But its inability to build out sales in the US — the key market it has tackled since its launch — has seen the shares touching new lows, falling another 9 per cent Tuesday to 8.3c.

Apart from anything else, weighing on investors’ minds is its rapidly dwindling cash reserves which stood at $US13.6 million at the end of March, down from $US22.6 million at the end of 2017.

Additionally, outflows in the June quarter are forecast at $US7.8 million, before taking income into account, which ran at a little under $2 million in the March quarter.

AirXpanders shares (ASX:AXP) over the past year.
AirXpanders shares (ASX:AXP) over the past year.

To date, AirXpanders has raised $US109 million, most recently raising $A45 million in February last year. It also has borrowings on the balance sheet, which has soured investor sentiment.

Underscoring its problems, unsold stock of its product stood at $US10 million [yep $US10 million] in March. If it can’t shift some of that stock, then another call on investors is on the cards in the coming months.

“It’s not going to be pretty,” one close observer of the company said of the needed changes. “But if it gained access to $10 million that would give it a clear runway into June of next year.”

Indicative of the mounting pressures the former chief executive left last month, and with no traction in sales, staff levels were slashed by a quarter, to conserve cash.

‘Fairly disappointing’

“A quarter of flat sales is fairly disappointing,” says Matthijs Smith, an analyst with Cannaccord Genuity.

“Sacking the CEO always tells you the company is not travelling as well as you had hoped. Also there are capital demands.

“The shares are currently priced as though the wheels are falling off – and it is far from that. It needs to sort out its cash, and hire a new CEO.

 “These are pretty simple things to sort out. It is not easy, but it is addressable.”

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.

AirXpanders has a tissue expander which is targeted the breast reconstruction market. It avoids the need for ongoing saline treatment, while giving the patient direct control over the speed of the process.

More importantly, the product is easier to use since it eliminates the need for the needle injections required for saline-based tissue expanders.

AirXpanders claims its product helps patients proceed to the insertion of a breast implant faster than would be the case otherwise.

Even so, getting doctors to sign up has proven to be a slow process.

And the competition is a pair of 10 tonne gorillas in the form of Allergan and Johnson & Johnson, which both have big positions supplying traditional saline-based tissue expander products, as part of a suite of products which include breast implants.

As a result, AirXpanders reckons this could give its competitors a leg up by favourably pricing bundled products, for example, although close followers of the company argue AirXpanders has been able to achieve a higher than expected price in the U.S. indicating the underlying strength of demand for its product.

“People’s views [towards AirXpanders’ shares] are being dictated by the share price rather than their view of the prospects for the company,” argues Cannaccord’s Smith. “It is quite fixable.

“I think it is more a hiccup than a crisis. But the cash issue needs to be resolved.”