Weaker-than-expected growth
On a constant currency basis, revenue was expected to be at least NZ$80 million for the full year. However that forecast has been brought back to a minimum NZ$76 million for the 12 months ending March this year. Including positive foreign currency movements, revenue for the full year is expected to be between NZ$81 - NZ$84 million. (The company can be credited for continuing to report on a constant currency basis.)
The December quarter result was weaker than expected. Two thirds of this was due to Myriad sales and one third due to sales by the company's distributor in the US, Telabio, for the Ovitex product range.
Of interest is a pattern emerging in Aroaís growth in cash receipts, with a strong cash receipt growth period followed by a weaker cash receipt growth period for the last eight quarters. (See table.)
Aroa expects the second half of this financial year to be cashflow positive, with the company reporting its first cashflow positive quarter (December quarter). The company expects to remain cashflow positive from this point with increasing profitability moving forward.
Aroa currently has 56 field reps in the US, with that number ex- pected to increase by 10% - 20% in the year ahead.
With respect to expected tariffs to be applied in the US, CFO James Agnew said the company has no issue in passing these on to customers, given the Aroa products are well priced. CEO Brian Ward said this will not place the company in an uncompetitive position and expects revenue growth to accelerate.
Aroa Cash Receipts
| |
|
NZ$m |
Growth (pcp) |
| FY25 |
Q3 |
19.5 |
9.9% |
| |
Q2 |
19.9 |
34.3% |
| |
Q1 |
17.8 |
17.7% |
| FY24 |
Q4 |
18.0 |
46% |
| |
Q3 |
17.7 |
3.8% |
| |
Q2 |
14.8 |
34.3% |
| |
Q1 |
15.2 |
8.9% |
| FY23 |
Q4 |
12.3 |
68.1% |
| |
Q3 |
17.1 |
87.4% |
Clinical Data - No Limb Loss in Major Study
Late last year a study was published on the use of the Aroa wound healing technology in patients at risk of limb amputation undergoing lower limb reconstructions. Of the 120 patients in the study, almost all (95%) had at least one risk factor for amputation and 55% had at least three risk factors.
The Aroa tissue products (Myriad Matrix and Myriad Morcells) was used in the surgical reconstruction procedures, with no amputations after one year, and no infections. Remarkably the procedures required just one application of the Aroa products.
Lower Costs
According to the paper published (Limb Salvage via Surgical Soft-tissue Reconstruction with Ovine Forestomach Matrix Grafts: A Prospective Study, Lawlor et al), the treatment cost of the Aroa products was 33% - 70% of the cost of five other wound healing products used for similar procedures. The cost saving is even greater when additional applications for some of the other products is added.
Aroa is capitalised at $197 million with NZ$22 million in cash at the end of last year.
Bioshares recommendation: Speculative Buy Class A
Disclaimer:
Information contained in this newsletter is not a complete analysis of every material fact respecting any company, industry or security. The opinions and estimates herein expressed represent the current judgement of the publisher and are subject to change. Blake Industry and Market Analysis Pty Ltd (BIMA) and any of their associates, officers or staff may have interests in securities referred to herein (Corporations Law s.849). Details contained herein have been prepared for general circulation and do not have regard to any person’s or company’s investment objectives, financial situation and particular needs. Accordingly, no recipients should rely on any recommendation (whether express or implied) contained in this document without consulting their investment adviser (Corporations Law s.851). The persons involved in or responsible for the preparation and publication of this report believe the information herein is accurate but no warranty of accuracy is given and persons seeking to rely on information provided herein should make their own independent enquiries. Details contained herein have been issued on the basis they are only for the particular person or company to whom they have been provided by Blake Industry and Market Analysis Pty Ltd. The Directors and/or associates declare interests in the following ASX Healthcare and Biotechnology sector securities: Analyst MP: 1AD, ACR, AVR, CGS, CUV, CYC, DXB, IMM, LBT, MX1, OPT, NEU, PAB, PXS,RNO,SOM. These interests can change at any time and are not additional recommendations. Holdings in stocks valued at less than $100 are not disclosed.
