Okay, thank you for your patience. We will kick off now. Welcome to Aroa Biosurgery's investor webinar and Q&A following the company's fourth-quarter results announced this morning. Please note that participants are in a listen-only mode. There'll be a presentation lasting for approximately 10 minutes, followed by Q&A. We'll be finishing up by 11:30 A.M. Australian Eastern 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.
Finally, please note that the session is being recorded. On behalf of Aroa today, we have Brian Ward, founder and CEO, and James Agnew, CFO. I'll now hand over to Brian and James. Please go ahead.
Thank you, Neetha, and welcome everybody, and thank you for joining our call this morning. So this is our report on our quarterly cash flow. I'm going to briefly introduce the company and then talk about our results and some operational achievements over the last quarter. So briefly, Aroa's a well-established high-growth soft tissue regeneration company. We're selling four families of products, predominantly into hospitals in the US. All of our products are based on our proprietary Aroa ECM platform, so you know, for soft tissue regeneration.,
They're targeting an opportunity in excess of $3 billion in the U.S. alone. We sell through two commercial channels: our own U.S. direct sales team of 50, and then through a partnership with NASDAQ-listed TELA Bio, who license from us the rights for hernia and breast reconstruction. Technology is well-established. We've applied over 6 million patient treatments.
There's a large body of scientific and clinical evidence that sits behind the products on over 71 peer-reviewed publications. In addition to our Aroa ECM platform, we've also been advancing our Enivo soft tissue apposition platform, that's in the process of regulatory approval with the FDA. And all up, we're an organization of approximately 270 people, so 80 or so of those based in the U.S., our direct sales team and supporting infrastructure for that. And then the balance of people based here in Auckland, so that's our corporate, manufacturing, development, quality, regulatory, and marketing functions. In terms of the base technology, essentially what we do is we isolate a very specific layer of tissue from the forestomach of sheep. This material has very unique properties in terms of the structure and porosity of it and also the biological composition.
We purify that in a way whereby we remove all of the components that the human body would react against, cause an immune response, but retain within it that native structure and the biological molecules that encourage tissue regeneration. So that becomes a building block for our range of products. We sell products for a variety of different procedures and conditions. So Endoform, the first product we launched, is designed for use in outpatient wound centers, in the early stages of healing diabetic and venous ulcers.
Our Myriad product is designed to be used in the operating room for acute soft tissue reconstruction, so in surgical procedures, procedures like trauma, tumor resections, and pressure injuries, acute procedures where there's been large volumetric loss of tissue. Symphony is a product that we are in the early stages of commercializing. It includes Aroa ECM, but also hyaluronic acid.
It's designed to be used with patients that have very severe impaired healing, and predominantly used in chronic complex wounds like diabetic ulcers and venous leg ulcers. And then the two products that we've licensed to TELA Bio are OviTex products. So this is OviTex for use in hernia repair. There's a version of this that has a permanent synthetic polymer, and a version that has a resorbable synthetic polymer. And then also OviTex PRS, which is designed for soft tissue reconstruction, predominantly used in breast reconstruction. So in terms of the Q4 financial results, strong cash receipts from customers of $18 million, which really reflects both a step up in our Myriad sales but also very encouraging to see OviTex and OviTex PRS sales coming back online and beginning to realign with TELA's growth trajectory.
So if you recall, the first half of the year was, our sales were very low to TELA, as they managed some inventory levels and improved their inventory management. We've seen a step up in that, in the second half of the year, and our sales begin to come back into line with their sales. Positive net cash flow from operations, in this quarter of $300,000, that exceeded our expectations of break-even, for the quarter. Net cash outflows from investing activities of $700,000, and that reflects continued investment into additional manufacturing plant and equipment. So there's a couple of things going on here.
We're investing to improve our capacity, to make sure that our tissue processing capacity matches our fabrication capacity. We're also investing in this to improve the efficiency of manufacturing, which in the future should lead to improvements in margin over time.
So benefits from a future capacity perspective, but also benefits from ongoing margin improvement as well. For the full quarter, we've achieved a 71% reduction in quarterly cash burn to $1 million, so ended with a strong cash balance of $ 29.5 million. So still in a very solid position in terms of our balance sheet and, you know, well-positioned to fund our way through to break-even, being cash flow positive. Just on the sales side, so, you know, we've continued to make good progress with Myriad sales over the last quarter, and we've increased the number of active accounts from 205 to 218 during the quarter. If you'll recall, in terms of our strategy with Myriad, what we've seen over the last three years is Myriad really providing this rapid volumetric fill of soft tissue deficits.
It's really notable in terms of the rate of that fill but also the persistence of Myriad. These two things really differentiate it from other products within the market. We've used Myriad in a wide range of different procedures, and more recently, we've been focusing on these large volumetric soft tissue deficits where surgeons need to quickly rebuild large volumes of tissue. Particularly focused in the last half of the year on trauma procedures, where often patients have been involved in vehicle accidents or other traumatic incidents where they've lost a lot of tissue, and the surgeon needs to be able to rapidly rebuild that. We've had a lot of success in trauma, and so we are realigning our sales team to put more focus on this area. It's attractive because of the results we're seeing.
It's also attractive because we're seeing Myriad being used in combination with negative pressure wound therapy. The combination of Myriad and negative pressure wound therapy looks like it gives surgeons faster rates of healing than they'd see with negative pressure alone. So the preliminary data with this looks strong. Based on that, we will be producing more publications around this and setting ourselves up this year for a pilot study to look at the difference between Myriad and negative pressure versus Myriad and negative pressure alone in a pilot study, which will then flow into a randomized controlled trial.
So we feel pretty bullish about the opportunity here. We're certainly from procedure numbers, you know, there's over 1 million procedures done with negative pressure wound therapy in the U.S. So we think it opens up a really large opportunity for the company.
In terms of TELA Bio, you know, we've continued to see strong growth from TELA Bio, over the last year. So, their sales were $58.5 million for the full year, so that's up 41% on the previous year. They also their guidance for this calendar year is $74 million-$76 million, which is, you know, 27%-30% up on last year. So, you know, we're continuing to see strong growth there. From an Aroa perspective, we're also seeing that our shipments are picking up to TELA Bio to realign with the sales trajectory. And that's reflected in our cash receipts from TELA Bio over the last year, which have increased by 20% compared to the first half of the year.
The other notable achievement with TELA Bio is the launch of a new version of OviTex. This version is designed specifically for use in inguinal hernia repair.
It's a new format, a new combination of Aroa ECM with polymers at a different density, designed to be used so that it can be easily used with a trocar to introduce the graft into the body, with robotic-assisted hernia repair or minimally invasive techniques. This is an extension to the range of products. You know, we think this is important strategically. It means that TELA's offering is much wider. It opens up an opportunity beyond ventral hernia and complex hernia, and makes it easier for TELA to compete in those accounts where customers are looking for a much fuller and wider offering from a company. Very much an enabler for increasing sales with TELA into further accounts. In terms of clinical evidence, it makes very good progress on the clinical studies that we're running.
We've completed the enrolment in the first-in-human study with Enivo. So this is a study of 10 patients in unilateral breast, sorry, mastectomy. And so that study is now complete, and we'll be writing that up for publication. We've also now recruited 300 patients into the master registry. So this is the registry that we've been running over 10 sites over the last two years, and we'll now begin publishing from that registry a series of publications over the next 12 months, looking at specific subgroups based on particular types of procedures, but then also consolidating that data and looking right across these patients to look at healing complications, sorry, healing rates and complication rates.
You know, progress with the Symphony RCT is going very well. We now have 90 patients enrolled in this trial, and further 30 patients to recruit.
So, we expect this to conclude mid-year, and with interim reporting towards the end of the calendar year. You know, notable publication over the last quarter is publication of the use of both Myriad Matrix and Myriad Morcells in abdominal soft tissue defects. And so, these are typically open abdomen procedures where there's been a loss of the abdominal wall over the internal organs, and the surgeons need to be able to reconstruct the abdominal wall. This is a serious procedure, very difficult to achieve closure with, and we've had, you know, great success in a relatively limited number of cases of you know, rebuilding that abdominal wall and healing these deficits. I think there's two things that are notable about this. One is the rate of tissue repair, the fact that we were able to rebuild abdominal wall tissue.
But also, again, what we're seeing here is the use of Myriad, in combination with negative pressure wound therapy, being very successful. So it sort of dovetails really nicely into what we're doing with Myriad in terms of pursuing the combination and showing that that increases the rate of healing. I think it also fits very well with a publication or a previous publication where we looked at Myriad in trauma procedures. I think there were 13 cases that had good outcomes with that as well, in combination with negative pressure wound therapy. So, Neetha, I'm going to pause there and pass it back to you. Thank you.
Thanks, Brian. We will now move on to the 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. We will start with some live questions. If you are asking a question live, I will send you an unmute prompt, which you will need to accept. Please introduce yourself before asking your question. We will give you the opportunity to ask a follow-up question if required. To facilitate this, you will remain unmuted while your question is being answered. The first question I have is from Elyse. Elyse, please go ahead.
Hi, Elyse Shapiro from Canaccord. Thanks for taking the question. You know, just kind of framing the result in line with the guidance that you put out at the third quarter, do you kind of see yourself falling in line with the range, and how do we view that kind of cash conversion for the year in that we got in the FY?
Yeah, look, we're releasing full-year results on the 21st of May. I mean, certainly, and we obviously haven't pulled that out for public release yet, but it's broadly in line with where we thought we'd be.
Got it. Great. Thanks. And then, just looking at that inguinal hernia product that TELA's just released, what sort of uptake are we seeing, you know, this close post-launch, and are we expecting that to have a material impact on near-term sales?
Yeah, I think it's very early days. I mean, we've certainly had, well, maybe I'll sort of step back.
In terms of the development of this product, this product's been, you know, what we've been doing is what TELA has been doing is modifying the existing OviTex products, to create a profile like this that could be used in inguinal hernia surgery. So there's been quite a lot of preliminary work, testing out this concept. And so surgeons have been using that for some time. And so what we've done with this development approach is essentially give them that project, give them that product ready to go. And so I think there's a group of surgeons that are already primed to use this product. There's also a wider group of surgeons that haven't been exposed to this product where we can see it being something that can be, you know, quite a quick add-on.
And then I think there's accounts whereby, because TELA didn't have a wider offering, they've not been able to get traction within those accounts. So I think there's a number of opportunities here, and I think, you know, the delivery of that, you know, I'd expect that to be impactful this year.
Great. Thanks. I'll pop back in. Thank you.
Thank you, Elyse. There was a recent question around when we'd be releasing full-year results, and that'll be on the 21st of May. There was a question around why we have not released unaudited results at this point.
Yeah, look, we're, you know, obviously we have the results. We're going through the audit process. It's really preparation and pulling together kind of a full release.
And so our thought was, you know, rather than rush to get it out, for this quarterly, we'd do a much more focused release of information on the 21st of May, and we can provide a much more comprehensive picture of where we're at.
Thanks, Brian. The next question I have is from Madeline. Madeleine, please go ahead.
Brian and James, it's Madeline from Wilsons. I just wondered whether or not you've had just your experience. You sort of mentioned the account growth for Myriad, and your ability to sort of access accounts and sort of turn them into productive accounts. I mean, have you had any issues there and just maybe a little bit more color that you can provide?
Yeah, I think you know, it varies a little bit between accounts in terms of how quickly those accounts come online.
I mean, I think once we have consignment stock in accounts or we're stocked in those accounts, you know, it's really about working with individual surgeons and getting them up to speed. So I don't think we've you know, since we've got started, I think we've seen that the speed at which we're able to do that increase, and the efficiency at which we do that increase. So I don't think there's any kind of notable changes or impediments that we're seeing in terms of that rate of uptake. You know, probably the converse, really, we're seeing that improve over time.
Okay. Great. And my other question was just in regards to, you know, I guess the uptake in the Myriad Matrix versus Morcells product. I mean, are you still sort of seeing surgeons favoring Morcells for sort of those soft tissue, you know, large volume defects?
Yeah, I mean, our sales are certainly skewed towards Myriad Morcells. So, you know, 60% of the sales are at the Morcells format. It does depend a little bit on the use case. So we're seeing Morcells be used earlier in procedures, and particularly where those wounds have very uneven surfaces. And sometimes what we're seeing with Morcells is that, you know, a single application is actually leading to a good outcome, and so there may not be follow-on use with the Myriad Matrix format. So I think that's part of the reason. You know, there are cases where we're seeing two applications the product, you know, initially with Morcells and then follow-on use with Myriad Matrix.
Thank you.
Thank you, Madeline. I'll now move to a written question.
There's a question around how the move towards focusing Myriad in the trauma space is panning out.
Yeah, I think, you know, the way we're thinking about this is it's a move over a period of time. And so, you know, we've built a pipeline of opportunities with our surgeons based on a wide range of procedures. And some of those things are in other specialties. So they're in colorectal surgery. They might be in plastic surgery. You know, it could be a range of different specialties. So we don't want to walk away from those opportunities. But as we, you know, as the company's evolving, what we are seeing is that in trauma procedures, there's certainly a very good use case for Myriad. So as we're bringing on new salespeople, you know, we're putting those new salespeople getting them to focus on trauma earlier.
For existing salespeople, as they look at new prospects, we're getting them to focus on trauma. Certainly as an organization, you know, as we're looking to generate clinical evidence, you know, we're focusing much more on trauma with that clinical evidence. So it's a slow shift, and I think that's going to, you know, a shift that's going to take 12-18 months. But you know, what we do see with trauma is a really differentiated outcome with Myriad, but also large defects and high case value, and where we can really demonstrate value to both the surgeons and the hospital. So that's what's sort of pulling us towards that.
Thank you, Brian. There's also a written question received asking if you can please comment on current production capacity and if there are any material potential bottlenecks you see coming up.
Yeah, look, I think we're you know, we've built a significant amount of production capacity over the last 2 years. So, you know, our downstream manufacturing so that's the process beyond isolating and purifying the tissue. You know, we have probably capacity to do, I'd say, in excess of $200 million in the existing facility. And, you know, that depends a little bit on product mix. It may be higher than that. What we've been working on over the last 12 months is to match that capacity with our tissue processing capacity. And so we're you know, we're a little bit behind of where we thought we'd be with implementing that new processing capacity. So some of the CapEx that we thought would fall into this year gets pushed out to next year.
But we, you know, we see that we'll be able to match the $200 million with the new facility that we're putting into place. So, you know, if you looked at our sales growth over the next couple of years, at least probably beyond that, we're going to have plenty of capacity in place to meet the requirements or probably go way beyond the requirements that we think we'll have.
Thank you, Brian. And a final question is around FY 2025 cash flow expectations.
Yeah, so I might you want to talk to that?
Yeah, absolutely. So look, you know, I think we've been very clear in, you know, a lot of our announcements over the last sort of six months that the company is driving to positive cash flow, and profitability or higher profitability over the next 12 months.
I mean, I will sort of mention, though, that yes, it is our goal to be cash flow positive on the full year for FY 2025. There is seasonality, and there is some lumpiness in our cash flows. Typically, the first quarter's being typically softer or a bit of a dip in cash flows in that first quarter, but we should see it come back to sort of positive cash flows in the last three quarters, specifically the last half of FY 2025.
Yeah, I mean, maybe I want to underscore that as well. I mean, we're very conscious of the market conditions and, being profitable and, transitioning to being, cash flow positive. So we are, focused on top-line growth but also focused on expense management, to make sure that we make that transition.
So, that is a very high priority for us over the next 12 months.
Thank you, Brian. We're coming up to the end of the time, so I'll hand it back to you for any closing remarks.
Thanks, Neetha. Well, look, thank you for joining. You know, I would encourage you to join the full-year results on the 21st of May. We'll have a webinar, a similar webinar in the morning. We'll certainly provide a much more comprehensive update on obviously our direct sales, and also TELA. And we'll be releasing our guidance for the upcoming year at the same stage. So, you know, certainly a much more comprehensive update than today. So thank you for joining, and look forward to talking to you at the end.