Aroa Biosurgery June 2021 4C – Commentary


  • US medical procedure numbers continue to reflect a positive trend supporting improved sales momentum. AROA maintains its published product sales guidance of $30-33 million (up 39-53% on FY21) and gross margin above 70%.
  • Net cash outflow from operations was NZ$2.7 million for the June quarter, in line with management expectations.
  • Cash on hand of NZ$31.4 million at 30 June 2021.
  • New Myriad Morcells™ product line extension launched at Society for Advanced Wound Care conference 10-14 May 2021.
  • Large retrospective Endoform™ real-world study in diabetic foot ulcers concluded and submitted, with publication expected in September quarter.
  • AROA’s dead space management system targeting an unmet need with an estimated US$2.5 billion market was previewed with investors and three further patents filed relating to key aspects of this technology.
  • Manufacturing construction progressing to plan to expand capacity from NZ$35 million to NZ$100 million in annual sales.
  • Annual General Meeting scheduled for 1pm (NZST), 11am (AEST) on Tuesday 20 July 2021.

Soft tissue regeneration company Aroa Biosurgery Limited (ASX:ARX, ‘AROA’ or the ‘Company’) is pleased to provide an update on its activities for the quarter ended 30 June 2021.

Financial commentary

AROA maintains product sales guidance of NZ$30-33 million (up 39-53% on FY21) and gross margin above 70%. EBITDA will continue to be negative as previously forecast. Guidance is subject to no resurgence of COVID-19 in the US, TELA Bio delivering strong growth (based on its revenue guidance of 48-65% growth in CY21 compared to CY20) and continued improvement in US medical procedure numbers. It also assumes an average NZD/USD exchange rate of US$0.72.

Cash receipts for Q1 FY22 were NZ$5.3 million, reflecting sustained sales activities over the course of the June quarter. This reflects lumpy product shipments and timing of payments, but is in line with management expectations.
Net cash outflow from operations was NZ$2.7 million for the June quarter, ending the quarter with cash on hand of NZ$31.4 million. In line with management’s expectations, this reflects payments which typically fall within this quarter, including employee bonuses for achievement of the Company’s FY21 performance goals and year end compliance costs.

In accordance with ASX Listing Rule 4.7C.3, AROA advises that an aggregate amount of NZ$102,000 was paid during the quarter to AROA’s five Non-Executive Directors in payment of their director fees.
Appendix A provides a summary of actual expenditure, compared to the estimated use of funds set out in AROA’s IPO Prospectus, in accordance with ASX Listing Rule 4.7C. Cash expenditure is consistent with the use of funds set out in that Prospectus.

Myriad Morcells launched at SAWC Spring

Following US FDA 510(k) clearance for Myriad Morcells in April 2021, AROA launched Myriad Morcells at the Symposium for Advanced Wound Care Conference (‘SAWC’) Spring. SAWC is the pre-eminent US wound event providing education, advanced state-of-the-art clinical reviews, and emerging research findings.

Myriad Morcells, is a powder format of Myriad Matrix™ that easily conforms to optimize contact with irregular wound beds and delivers a bolus of biologically important extracellular matrix proteins known to ‘kick start’ healing. Myriad Morcells will be used alone in some cases and combined with Myriad Matrix in other cases. Both products take advantage of the AROA ECM™ bioscaffold technology, including important secondary molecules and residual vascular channels to support new tissue growth, which may lead to faster healing, recovery and hospital discharge. Earlier pre-clinical studies have shown that the AROA ECM technology includes over 150 different components known to aid wound repair, blood vessel formation and attract stems cells. Myriad Morcells is now being evaluated in hospitals across the United States (‘US’).

Positive Outlook from TELA Bio

TELA Bio, AROA’s US commercial partner for hernia and breast reconstruction products (selling OviTex™ and OviTex PRS™), is maintaining its total revenue guidance of US$27.0 million to US$30.0 million. This guidance reflects growth of 48% to 65% over the prior year period. With launch inventory levels now consumed, AROA expects ongoing shipments to TELA Bio to correspond with increasing hospital demand. AROA receives 27% of TELA Bio’s net product sales.

The BRAVO study, which is evaluating the clinical performance of OviTex Reinforced Tissue Matrix for the treatment of ventral hernia, reported the full patient cohort of 76 patients at 12 months. Only two patients had a recurrence, both adjacent to the original repair, with the OviTex repairs remaining intact. 51 patients reached the 24-month follow-up, with no patients experiencing a recurrence.

To build on the success of the BRAVO study, TELA Bio has initiated the BRAVO II study to examine the efficacy and durability of the OviTex LPR for robotic hernia repair in up to 100 patients. OviTex LPR is specifically designed for use in robotic hernia repair. The incidence of postoperative surgical site occurrences, wound-related events, and other complications will be evaluated at 90 days, 12 months, and 24 months.

“Endoform RWD” DFU Study

In July, AROA concluded the “Endoform RWD study”, a large retrospective real-world data study comparing the healing outcomes in diabetic foot ulcers (‘DFU’s) treated with either Endoform (ovine forestomach matrix, ‘OFM’) or collagen/oxidized regenerated cellulose (‘ORC’). Each study arm includes over 1000 patients and represents the first large retrospective real world data analysis comparing OFM and collagen/ORC.

Up to one-third of the half billion people with diabetes worldwide will develop a DFU over the course of their lifetime1. Current estimates demonstrate one in six patients with a DFU will undergo an amputation, making DFUs the leading cause of non-traumatic amputations in the US2. Additionally, there are significant financial burdens incurred by DFUs. A 2012 retrospective study of 7099 DFUs reported a mean cost to achieve closure of $3927 per DFUs3. The DFU related cost and burden to the US health care system has been estimated at $9-13 billion4,5.

The clinical study has been submitted for peer reviewed publication and AROA expects to announce the outcomes within the September quarter.

Dead Space Management System Preview & Patent Filings

AROA previewed its new dead space management platform technology in presentations during the quarter. The new system is designed to close tissue cavities at a surgical site created by surgical dissection or tissue removal. It is comprised of a specially designed AROA ECM implant that is coupled to an external single-use negative pressure pump. When the product is deployed, the tissue surfaces are drawn together, held in place and tissue fluids are carried by the vacuum to an external fluid collection bag.

AROA intends to develop and launch a new class of products utilising this new platform technology. These new products will address an unmet need in a number of surgical specialties, including general and plastic surgery. The first product based on this technology is expected to be commercialized in CY23 for linear cavities, with a subsequent product being commercialized in 2025 for large surface area cavities. Management estimates that the market opportunity for this new class of products is more than US$2.5 billion.

AROA has recently filed three new patents relating to key aspects of this technology. These patents build on three previous patents filed for this platform technology since 2018.

Manufacturing Expansion

Construction of AROA’s second manufacturing facility is proceeding to plan and is expected to be completed by the end of the calendar year. The Company is well placed to meet increased demand in the coming year, and by March 2022 will have manufacturing capacity to support NZ$100 million in annual sales.

Investor Relations

AROA’s Investor Day on 5 July 2021 provided an opportunity for the Company to provide more background on key aspects of the business and introduce the leadership team. The event was well attended by Australian and New Zealand institutional funds.

Replays of the presentations can be requested from Simon Hinsley ( by 30 July 2021.

Annual General Meeting

The annual general meeting of shareholders of AROA is scheduled for 1pm (NZST), 11am (AEST) on Tuesday 20 July 2021. Shareholders may attend in person at the Company’s registered office at 64 Richard Pearse Drive, Mangere, Auckland, New Zealand or online at:

A full copy of the Aroa Biosurgery June 2021 4C – Commentary is available here.

1 Armstrong, D.G., et al., Five year mortality and direct costs of care for people with diabetic foot complications are comparable to cancer. J Foot Ankle Res, 2020. 13(1): p. 16.
2 Boulton, A.J.M., et al., Diagnosis and Management of Diabetic Foot Complications, in Diagnosis and Management of Diabetic Foot Complications. 2018: Arlington (VA).
3 Fife, C.E. and M.J. Carter, Wound Care Outcomes and Associated Cost Among Patients Treated in US Outpatient Wound Centers: Data From the US Wound Registry. Wounds, 2012. 24(1): p. 10-7.
4 Rice, J.B., et al., Burden of diabetic foot ulcers for medicare and private insurers. Diabetes Care, 2014. 37(3): p. 651-8.
5 Barshes, N.R., et al., The system of care for the diabetic foot: objectives, outcomes, and opportunities. Diabet Foot Ankle, 2013. 4.