Aroa Biosurgery (ARX: $1.08) describes itself as a high growth tissue regeneration company. That high growth has been achieved in FY2023 (its financial year ends 31 March) with annual sales expected to reach the target NZ$60 - NZ$62 million, up at least 54% on the previous year.
The company has been able to maintain strong growth, even across the pandemic, with most of its sales being into US hospitals. The company has a sales team of 49 staff which has grown to expectations (up 13 over the year). CEO Brian Ward said that US hospital operations are now back to 85% - 90% of pre-Covid levels.
The company has four product families, with one of those being the Ovitex products used for hernia and breast tissue reconstruction that are sold by TelaBio. TelaBio reported 41% growth in sales for 2022 to US$41 million.
Aroa's Myriad products, which are currently the growth driver for the business, are used for the treatment of ulcers, surgical and trauma wounds.
The next product line to be launched this month will be the Symphony product for complex wounds. It combines the company's core technology with hyaluronic acid.
Aroa expects to deliver an EBITDA breakeven result for its financial year just passed. Ward said that had the company not been investing in its next product line, Enivo for closure of cavities following surgery, it would have already been a profitable company.
The addressable market for the Enivo application is estimated by the company at over US$1 billion. Ward said that there are synergies for the company, with many of its other products being used when dead space management is also required.
Aroa now employs around 270 staff, with 200 based in New Zealand and the balance in the US. It is increasing its manufacturing capacity, which with production efficiencies is expected to reach a capacity to support NZ$150 million in sales a year (up from an expected NZ$100 million). The facility is currently operating at between 40% - 50% of capacity.
The appeal of the Aroa products, according to Ward, is that they offer a faster rate of healing, result in less complications, and reduce the overall cost of treatment. Aroa has priced its products at 30% below competition, as other products are 'rationed' due to their high cost and thereby limiting usage.
Aroa Biosurgery is capitalised at $368 million and finished the March quarter with around NZ$50 million in cash.
Bioshares recommendation: Speculative Buy Class A
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