Morning, welcome to Aroa Biosurgery's Investor Webinar and Q&A, following the company's Appendix 4C and quarterly update announced this morning. Please note that participants are in a listen-only mode. There will be a presentation lasting for approximately 10 minutes, followed by a Q&A. We will have to finish up by 9:30 AM Australian Standard Time. If you have a question you'd like to submit, please type it in using the Q&A function on the Zoom app. We will also be opening the floor to live questions. If you would like to do that, when the Q&A session commences, please use the raise hand function on the Zoom app. Please note that the session is being recorded. On behalf of Aroa Biosurgery today, we have Brian Ward, Founder and CEO, and James Agnew, CFO. I will now hand over to Brian and James. Please go ahead.
Thank you, Neetha, and thank you, everybody, for joining the call this morning. So I'm gonna go through a quick presentation, as Neetha said, and then go to the Q&A. So just jump straight into it. So just a quick background on Aroa Biosurgery. So we're a well-established, high-growth, soft tissue regeneration company. Four families of products that we sell in the U.S., all based on our Aroa ECM platform. I'm targeting a opportunity, total addressable opportunity in excess of $3 billion in the U.S.. We sell through two channels, our own direct channel, through our own direct sales team, and also through our partner, TELA Bio. The technology is well established.
We've had over 6 million product applications to patients in the U.S., and a large body of scientific and clinical evidence that sits behind these products. In addition to our Aroa ECM platform, we've also been working on a new technology platform, our Enivo platform. We'll talk a little bit more about that in the presentation. Just briefly, in terms of our technology and products, so what we do is we isolate a very specific layer from the forestomach of sheep. We purify that in a way that it removes all the cell and cell content, those components that the human body would react against. But we retain the structure of the matrix and the important signals that attract cells and encourage them to grow. That becomes a building block for all of our products.
Myriad is our soft tissue reconstruction product, used in acute surgery. This is the product where most of our efforts going in terms of commercial activity in the U.S. We recently launched Symphony, the CTP or skin substitute product, for use in the outpatient wound center and Physician's office, predominantly in diabetic ulcers and venous ulcers. Historically, you know, a key part of our portfolio has been our Endoform product, a product also used in the outpatient wound center, for diabetic and venous ulcers. We've partnered two products to TELA Bio, OviTex product for Hernia, and an OviTex PRS product, Predominantly used for Breast reconstruction. So when you look across all of these products, we tend to see that our Aroa ECM restores functional tissue.
We've a large body of scientific evidence based on both Endoform, Myriad, and OviTex that supports this. So there's three things that we know we need technology to do. We get rapid formation of well-vascularized tissue that's tolerated very well in the contaminated field and resistant to infection, and we don't see any negative inflammatory responses when this technology is used. And so we tend to see that irrespective of whether it's Endoform, Myriad, or OviTex. So just to go to our Q2 financial highlights. Cash received from customers for the quarter was AUD 14.8 million. Net cash outflow from operations was AUD 3.2 million. That reduced by AUD 1.6 million from the previous quarter.
Net cash outflow from investing activity was AUD 1.2 million for the quarter, and that reflects additional investment into our manufacturing plant and equipment capacity. So last year, we put a significant investment into our downstream fabrication capacity. This year, we're increasing our tissue processing capacity, adding additional freeze drying capacity and tissue processing capacity. We ended the quarter with a strong cash balance, so AUD 34 million, so in very good shape in terms of cash. And we're seeing that the net cash flow from operations is expected to tend towards break even for the balance FY 2024. So we're making an important transition in that we are, from an operational perspective, getting towards break even in the H2 of this year. So on that basis, we're maintaining our guidance.
So guidance remains, $72 million-$75 million, based on a constant currency of 0.65. Gross margin, 85%, and normalized EBITDA of $1 million-$2 million. So let's talk a little bit about, sales. So, you know, we've been putting a lot of effort as a company into, improving our sales profitability and, you know, optimizing our sales, model. In the last quarter, we saw 10 field reps average a run rate of over $250,000. That's up from eight the previous quarter and 5 the quarter before that. Half of our sales team now have a run rate in excess of $250,000.
Myriad continues to grow strongly, so this now represents 57% of our direct sales mix, and that's up from 50% in the previous comparable period. Nice to see Myriad continuing to track well, and our sales growing strongly. If you think about where we are for the sales organization, we're definitely changing phase. So, you know, in the early years, the first few years of putting in place our own direct sales team, we were very focused on building access, and so getting into accounts and beginning to establish the ability to sell. With that, there was a long lag in terms of the time of bringing a salesperson on board to getting to where you can actually sell.
You know, we're now moving into a very different phase with our business, and so we have good access into, you know, a large number of accounts. So, we're around over 190 accounts with our sales people. And so we're now moving to access being less important, and it being much more important to demonstrate the value of our product and to set ourselves up with a sales model that is very scalable. So if you look at value, what we've determined with the Aroa ECM platform is that the technology in Myriad particularly rapidly fills in volumetric defects.
We've been able to use Myriad to simplify procedures, and what I mean by that is we're commonly seeing that Myriad only needs to be applied once, and simplify the technique for surgeons and simplify the aftercare for nurses. I'll talk a little bit more about that shortly. When we started off, we were using Myriad in a wide range of different procedures, and we've learned that Myriad is particularly well suited in these large volumetric wounds where they're commonly contaminated. And so we're now forming much more focus on trauma, and we see trauma and the procedures that enable us to be trauma as a real strategic beachhead for us. And we're also beginning to expand the clinical data in this area and Health Ecnomic data in this area.
The other thing that's really important for us is focusing on how can we scale the business efficiently. So there's two things that we're thinking about here. The first thing is sales productivity, so growing within accounts, bringing more surgeons on board procedures, and looking at ways that, in terms of how can we do that quickly? We're optimizing the sales team composition, so how can we use the different types of sales people that we have to build an efficient sales structure? We're also looking at the supporting infrastructure that we need in terms of the ability to support the sales team to be successful. Then finally, what is the portfolio that the sales team needs to be able to expand rapidly and leverage that mix of SKUs that exist within their portfolio?
So there's a real focus on getting this productivity right, so that as we scale the organization, we can really do that in an efficient way. You know, secondly, we're focused on profitable growth. So, you know, to do that, it's really about efficiency, so extending within IDNs. And so what I mean by that is when we gain access to one hospital, often that gets us on the formulary for a Hospital system. So then as we place new people in new territories, making sure that they're within systems where we already have access, so that we don't have that large lag in gaining access before we bring somebody on and are able to achieve sales. And we're also looking at, you know, how quickly can we scale the sales team?
So making sure that we're scaling that sales team, but also at the same time, remaining profitable. So I think, you know, we've come a long way over the last couple of years, and I think there's a lot of focus now on, you know, improving the ability for us to scale this up, in an efficient way. In terms of Enivo, we do have two of the components for Enivo cleared now. So we have the Enivo pump and the Enivo catheter. And in August, we submitted a 510(k) to the FDA, for Myriad Flow. So Myriad Flow is a new product. It's a product that can be used in combination with the Enivo Pump, and the Enivo Catheter, and that is now progressed to, substantively reviewed by the FDA.
So what that means is that it's now, it's in a stage where the FDA is considering that dossier under the 510(k) pathway. We've received some initial questions back from the FDA, which we will respond to by mid-November, and we'd expect those questions to be reviewed and have a response back from the FDA by December. And so with this, you know, with this new version of Myriad, you know, we will have much more clarity in terms of whether the FDA will consider clearing this under a 510(k) by the end of December, potentially early January.
Just to kind of reinforce, you know, how Enivo fits into our portfolio, this product's for dead space management or tissue acquisition, used in many of the surgeries where products like Myriad would be used. So where Surgeons separate tissue, create cavities within that tissue that are predisposed to filling up with fluids, that becomes seromas or hematomas, and that can later lead to complications. So we see this as a product that's very complementary to our existing portfolio, provides a opportunity for us to improve outcomes, but also provides a wider portfolio for our salespeople to sell into the surgeries that they are currently involved in. And we've previously talked about this, but we have very good preclinical evidence that supports the use of this product.
So when we look at closure of dead space, reduction of seroma, very strong results in preclinical models. And we've now progressed on to testing this in patients, and I'll talk a little bit about that in a few minutes. So I'd just like to highlight one clinical paper that appeared in the literature in the last month. So this is the use of other ECM, which is Myriad, in surgical management of complex full-thickness soft tissue defects. So this is a retrospective pilot case series. So these cases are typically cases where a large amount of soft tissue has been lost, and you've lost both the skin, but often underlying tissues like muscle and fascia. So it's a very deep defect.
This case series looked at 10 patients with 13 defects and evaluated the effectiveness of Myriad in creating granulation tissue and covering those defects. The primary endpoint was the time to 100% granulation tissue, and a secondary endpoint was any device-related post-operative complications. These were large defects, and not only were they deep, but they were quite large in terms of surface area. So mean area was over 200 sq cm in a defect at the time of treatment, were typically about 3.5 weeks. Most of these defects had exposed structures. So what I mean by that is vital structures, so arteries, veins, nerves, or bone, were exposed.
So these are typically defects that need to be covered quickly, and often they're very difficult defects to heal. So the mean time for granulation, 100% granulation, was 23 days. It was so, you know, good healing and all the outcomes, which was, you know, great to see. No major post-operative infections or adverse events. There's a couple of other things that really jump out from the study. I think the first thing is that while all of these defects healed, they only required a single application of Myriad. And, you know, commonly in these sorts of defects, they can require multiple applications of ECM or dermal substitute products. The second thing with this is that all of these defects were used in combination with negative pressure wound therapy.
Typically, with negative pressure wound therapy, the negative pressure wound therapy dressings are being changed, you know, particularly 2x-3 x a week. What we saw with this study is that, the negative pressure wound therapy dressings only needed to be changed, weekly, so a significant reduction in the frequency of, changing those dressings. And that is, you know, significant impacts for, the cost of healing, the requirements, for nursing time, to change these dressings, but also, for patient comfort. You know, the change in the negative pressure wound therapy dressing is often very uncomfortable for patients, and can be, you know, quite a onerous process. So not only are we seeing, great clinical outcomes here, but also seeing economic benefits, and patient benefits.
So I think that's demonstrated, you know, the use of Myriad in some very dramatic soft tissue defects, great outcomes, but also, you know, good outcomes in terms of patients and economics. So let me just go to our clinical research program. So, you know, I think across the board, you know, our study is progressing very well. So the Myriad registry is recruiting well ahead of time. So we now have 225 patients recruited in the registry, and we have nine sites operational. When we first started recruiting into the registry, of those nine sites, you know, the initial sites were more focused on pediatric and colorectal procedures.
We've made quite a switch recently to really power up the number of trauma centers within the registry. So we now have five trauma centers that were brought on as part of the registry, and they'll start to really generate a lot of cases for the registry. And you can see there, you know, we plan to produce, you know, a trauma publication by the end of the year, and an extremity publication from the registry towards the end of the year as well.
You know, based on our experience, our recent experience in using Myriad in trauma cases on a day-to-day basis, but also what we're seeing in the registry, we've decided to set up a clinical study using Myriad in combination with negative pressure wound therapy and acute reconstruction over exposed structures. So, you know, will predominantly be in the trauma centers, and, you know, we're looking to evaluate Myriad in combination with negative pressure versus negative pressure alone. You know, we think from what we've seen through the work of the Myriad registry, that we believe that this study can be very successful. From a Symphony perspective, making good progress there as well. So we now have 45 patients recruited into the Symphony study.
We're targeting 120 in total. We have eight of the 10 sites now operational. So recruitment for the Symphony study, I'm sure, will accelerate over the next 6 months or so. We're also setting up a registry for Symphony, and we've seen, you know, huge benefit from the registry with Myriad, and we're now pursuing a similar registry for Symphony. To give us a good readout across a range, these different types of wounds. In terms of Enivo, we've progressed doing our first in-human study in Enivo, and so this is in mastectomy post, sorry, in post mastectomy. We're recruiting 10 patients into the study. Three patients have been recruited, and this is on a single site.
We see this as a set-up for a larger perspective, individual study, with Enivo, starting, you know, later in the year. So just like a brief sort of comment on manufacturing production. So, you know, our manufacturing capabilities are well established here in Auckland, and every year we are audited by a Notified Body from Europe who review our quality systems and look at the way in which products are manufactured by Aroa. This is a requirement by the European authorities, but they also serve as an auditor for the FDA. And so, we've just completed the sort of program with a Notified Body and, you know, come through that with flying colors.
So I think it's really important in terms of ensuring that we're operating to the highest standards, and that you know, manufacturing processes and you know, the way the things are being done here comply with the requirements both in the U.S. and Europe. So, you know, very pleased with how we've come through that, and I think that gives us a lot of confidence in our ongoing manufacturing capabilities. So just to talk about catalysts, I think there's five things that really matter. You know, obviously, sales momentum from Aroa. This is predominantly driven by Myriad. So, you know, continuing strong growth there. Strong growth by TELA Bio.
So, you know, they are expanding the sales team, you know, recently closed some finance, you know, really building on their clinical evidence as well. So, you know, we're continuing to see that. Enivo by FDA clearance, so this is the final component, Myriad Flow, so, you know, that will allow us to launch the full product. Changes around traditional CTP reimbursement. So, we've seen CMS step back from fundamental changes to this reimbursement, but push forward with some more minor changes, and that's things like ASP reform change, so the reform chain that's happening with physicians, and some of the other actions that are going on.
So, you know, that's, you know, there may be more fundamental changes, but I think those small changes, you know, will make a difference. I think the other key thing is, where we are as a business. So, you know, now transitioning from, you know, a company that was, operating at a loss to, being profitable, and then transitioning through to being, cash flow positive. So this is something that we've been very focused on over the last 12 months, and I think we'll see that, come through in the next 12 months. So Neetha, that concludes my presentation, so I'll pass it back to you for, Q&A.
Thank you, Brian. We will now move on to a fairly brief Q&A session. As I mentioned at the start, please use the raise hand function on the Zoom app if you would like to ask a question live. You can otherwise type your question in using the Q&A function. Now, we'll start with some live questions. It looks like there is a question coming through from Sebastian Clemens from Jarden. Sebastian, please go ahead.
Thanks very much. Just wondering if you can give us some insight into the sales momentum quarter on quarter, just in particular to TELA Bio, if you've seen that accelerate in Q3?
Seb, are you talking about TELA Bio -
Right.
Our sales for TELA Bio?
Correct. Correct, yes.
Yeah, we are. We're seeing, you know, in the first half of the year was quite flat for us, and then we've seen an increase in sales coming through in the H2.
Okay. Okay, good. And I've just got one other one. Just on the EBITDA guidance of AUD 1 million-AUD 2 million for the full year. Just noting the net operating cash outflows for the half around negative AUD 8 million. How should we think about EBITDA for the half, and I guess the expectations for the H2? It seems like quite a big skew in the H2. Is that right?
Y eah, that, that's correct, Steve. I mean, it's pretty clear that, you know, we made operating losses in the first half and look, you know, we're maintaining that guidance. So you'll see, you know, in the H2, there's obviously profit or EBITDA profit to not only offset those losses, but to provide a small, you know, a small EBITDA for the full year. I think, you know, look, we'll provide more insights into that when we report our results at the end of November. Sure, thanks. I'll turn back in the queue.
Thank you. It looks like there is also questions coming through from Madeleine Williams from Wilsons. Madeleine, please go ahead.
Hi, team. Just sort of, I guess, wanting to unpick that a little bit more with the product level breakdown. I mean, has Myriad, it seems that Myriad's, potentially performing better than you expected. And if you can give sort of any indication, I guess then, if there is, some contribution from Symphony in the first half and what those expectations are for the H2.
Yeah, look, I'd say that Myriad is performing to plan, so it's where, it's where we thought it would be. You know, we did see, you know, we did think we had strong quarter-on-quarter growth, and we've seen that. And, you know, we continue to think that will happen through the H2 of the year. With Symphony, you know, sales this year for Symphony, our forecast was relatively modest. You know, it's the first year of Symphony being launched directly. We're focused more on the Artificial Organs here, so, you know, given that there's stability and reimbursement there, less on the physicians office. And so this year is really sort of set up so for a relatively low level of sales this year, but then, you know, picking up a little bit more so next year.
I think, you know, the main driver this year continues to be Myriad.
Yep. Okay. Thank you. And then just with in regards to Enivo and the, Myriad Flow product, I mean, is that different to the, I know you obviously had the, catheter and pump approved, and there was meant to be the third element, which was the sleeve or implant. Is that Myriad Flow sort of slightly different to that sleeve in, sleeve or implant and sort of what happened there? Is that just to try and get the, the full product, I guess, approved sooner?
Yeah, that's it. So we're, you know, in terms of difference, I think what Myriad Flow gives us is the ability to have that third component in a much wider range of formats. And so I think there's upside in terms of what we can potentially do with that product. It's also about giving us the ability to get it cleared earlier this year. So the, you know, Myriad is a product that the FDA is much more familiar with. We submitted the, what we call the Enivo, which was the FDA component of the pump. It was submitted as a part of the FDA. We didn't fit clearly within the more mechanical devices. So we think this simplifies the approval process, and, you know, gives us a much better shot of getting it cleared through that pathway.
You know, I think to date, we've had a pretty good run with the FDA. I think we certainly, you know, there's still quite a lot of uncertainty around whether it will get cleared through that pathway. I think by the end of the year, we'll be in a much better position to know how that's going to go.
Okay, thanks. And just really quickly, I'm sorry, just wanted to check, how many people, I'm sorry if I missed this, but, in the pivotal trial for Myriad?
Yeah. We haven't determined the number yet, and we're really around working out, you know, what, you know, how much of a difference we think there's going to be, and therefore powering it accordingly. So I think we'll come back at the end of the next quarter, you know, with where we think that is.
Okay. Thanks, Brian. Thanks, James.
Thank you all. It looks like we're coming up to the end of the session. So if you submitted a written question and have registered your name against that, we will try and respond by email. Otherwise, please feel free to send any questions through to our investor Aroa Bio email address. Brian, I'll hand it over to you for any closing comments.
Great. Thanks, Neetha. Look, you know, we think we've had a good start first half of the year, good quarter. You know, we can see ourselves now, you know, going into a quarter where TELA's sales are stronger in the H2. You know, we continue the momentum with Myriad. So it will certainly feel like we're on track in terms of guidance and growth for this year. So, and thanks, everybody, for joining, and we'll have our half year results at the end of November.
Thank you, Brian and James. We will leave it at that for now, and we look forward to seeing you next time. Thank you. Bye.