Aroa is flying high with strong forecasted growth and profitability. Pic: Getty Images
Health & Biotech
Soft tissue repair company Aroa Biosurgery is focused on building its product offering, gaining a foothold in key markets, and transitioning to a high profitability business with forecast growth of up to 30% annually.
Aroa Biosurgery (ASX:ARX) was founded in 2008 by veterinarian and now CEO Dr Brian Ward after he discovered extracellular matrix (ECM), a tissue scaffold found in the forestomach of sheep, closely resembled human tissue in structure and contained more than 150 essential proteins crucial for healing.
Listing on the ASX in July 2020, the New Zealand-headquartered ARX is one of a trio of soft tissue repair companies on the Australian bourse including Polynovo (ASX:PNV) and Avita Medical (ASX:AVH)
AROA ECM is ARX’s proprietary extracellular matrix (ECM) biomaterial, containing a complex mix of biological molecules and form the building block for its range of soft tissue repair products.
“We isolate a very specific layer of tissue from the forestomach of sheep and purify that in a way that can be implanted into people and be used as a basis for soft tissue regeneration,” he says.
“What we’ve seen with this material clinically is it rapidly forms new tissue, its relatively resistant to infection, and we don’t have adverse immune responses, so it’s become the building block for all our technology and products.”
The company focuses on trauma, post cancer surgery and chronic complex wounds.
Earlier this year ARX received US Food and Drug Administration (FDA) 510k approval for
its Enivo pump and catheter, which are key components of its new Enivo Tissue Apposition Platform, designed for dead space management.
ARX recently announced a new study highlighting positive outcomes using Myriad Matrix and Myriad Morcells in complex traumatic wounds.
The peer reviewed study was published in the September issue of industry leading journal ePlasty and outlines the clinical effectiveness of Myriad Matrix and Myriad Morcells in complex traumatic wound reconstruction procedures.
The retrospective case series assessed 13 complex traumatic wounds across 10 patients, including injuries from motor vehicle accidents, abdominal dehiscence following hernia repair, Fournier’s Gangrene, compartment syndrome and pressure injuries, at a single US Level 1 trauma centre, between January 2021 and February 2023.
The study found the average time to soft tissue coverage and fill was 23.4±9.2 days, with a median product application of 1.0 with no complications reported from the cohort.
The study builds on an increasing body of evidence demonstrating that ARX’s ECM products can be used to facilitate formation of well vascularized soft tissue in patients with trauma injuries.
ARX has a strong focus on the US market with 95% of its sales focused on the world’s largest healthcare market.
The company sells in the US through its own direct sales team of 45, which is set to grow to 50 by the end of FY24.
It also sells through a distribution agreement with TELA Bio, which has 80 sales reps focused on breast reconstruction and hernia surgery.
Ward says when first established the business was focused on development and manufacturing so formed distribution partnerships, including with TELA Bio.
“We didn’t initially have our own infrastructure in the US and over time we have built our own sales organisation and that’s enabled us to sell directly,” he says.
“The sales model with TELA bio has helped in getting us established with their markets but outside of that there’s plenty of opportunities in other areas so we’ve got our own sales teams to target those areas.
Ward says sales from TELA bio have proven to be lucrative for the company.
He says the total soft tissue regeneration market across all its products is more than US$3 billion annually.
The company’s first product Endoform for acute and chronic wound care is less at ~US$70 million.
“While that product got us started it is not really the driver of growth for the future,” he says.
ARX recorded audited full year product revenue of NZ$60.5 million, a 55% increase on FY22. Total revenue (inclusive of project and license fees) was NZ$63.4 million, representing 60% growth on FY22.
The company has provided product revenue guidance of NZ$72-$75 million for FY24 delivering a 25-30% constant currency growth on FY23 and total revenue of NZ$73 to 76 million.
“We see we can continue to grow the business at 25 to 30% per year and it’s a high gross margin business with guidance for this year 85%,” Ward says.
The company forecasts to be EBITDA positive in FY24 in the vicinity of $1 million to $2 million.
“Over the next couple of years, we should transition to be a highly profitable business,” he says.
“One of the things that has held us back is we’ve had a big investment in development and particularly our Enivo platform so that’s probably stalled that transition to profitability by a couple of years.”
Ward says ARX has been well supported by institutional supporters since its listing.
“We’ve got a really good register of probably the top tier small cap investors in Australia who participated at the IPO and have continued to buy,” he says.
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.
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