Welcome to Aroa Biosurgery's Investor Webinar and Q&A following the company's December 2024 quarter results announcement released this morning. Please note participants are in a listen-only mode. There will be a presentation lasting approximately 15 minutes, followed by a Q&A session. Following presentation of results, Aroa's Medical Science Liaison, Dr. Brandon Bosque, and US Foot and Ankle Surgeon, Dr. John Lawlor, will discuss the findings of the company's most recently published clinical study. The webinar will conclude at approximately 11:30 AM AEST, sorry, New Zealand time. If you have a question you would like to submit, please type it in using the Q&A function. 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 this 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, Sarah. As luck would have it, I've had a little bit of a technical issue here, so I'm just going to quickly reshare my screen. Microsoft chose to update itself just as I was getting ready to do this, so I'll just get going here. Okay, right, great. Thank you. So welcome, everybody, to today's quarterly report. So this is our report for our Q3, and obviously leading into the final quarter for the year. So normal disclaimer. I'm going to provide a really quick overview of Aroa. I know many people on the call know the company well. So as a company, we're focused on increasing access to high-quality technology in regenerative healing. So we're all about world-leading outcomes, unmatched value, and having widespread impact for patients and hospitals.
We're a well-established, high-growth soft tissue regeneration company, and all of our current product range is based on our Aroa ECM technology. So we're in soft tissue reconstruction, hernia, breast reconstruction, outpatient, chronic wounds, inpatient surgery as well. The way that we sell is through two channels. So we have our own direct sales team targeting an opportunity in the US of an excess of $1.8 billion. And we also have a partnership with TELA Bio focused on hernia and breast reconstruction. The total addressable market for both opportunities is an excess of $3 billion. So financial highlights for the last quarter. So positive cash flows from operations of $1.2 million. This is the Q1 of positive cash flow since we listed, so very pleased to be able to deliver on that. And we see ourselves being cash flow positive on an operating basis for the half year.
Net cash outflow from investing was NZD 0.8 million, reflecting ongoing investment into our manufacturing operations predominantly. We had strong cash receipts of NZD 19.5 million and overall increase in NZD 300,000 in terms of our cash balance. So we ended the quarter with a strong cash balance of almost NZD 22 million. In terms of operating highlights, Myriad continues to perform very well for us. So 46% year-on-year growth in Myriad sales, and now Myriad makes up 56% of our overall sales mix. So really nice to see Myriad continuing to grow strongly. A real highlight for this quarter has been the publication of the first study from our Myriad registry. So this is a registry that we established three years ago. We've been recruiting patients into this registry. The initial cohort into that registry was 300 patients. We've now extended that to 800.
am really pleased to be able to report on the first study. It's in lower extremity reconstructions using our Myriad product. We're going to talk about this a little bit later in the presentation, so I won't talk too much about it. I think there's a couple of things that really stand out, and that is the rate of tissue infill in these wounds. We saw that we achieved tissue fill and coverage typically within 30 days. Very importantly, no infections or complications. Typically, most patients only needed a single application of Myriad. That has enormous benefits for the surgeon in terms of not having to deal with infections, not having to re-operate, but also for the patient as well. That's really important. I think the other thing that's important about this study is it's a large study.
120 patients, 130 wounds, probably one of the largest prospective studies of this type that's been published. Very solid data to support Myriad as well. Outside of that, we managed to receive approval for Endoform and Myriad Matrix in countries ex-US. Lebanon, Vietnam, and Myriad got approved in Saudi Arabia. We continue to pursue regulatory approvals and distribution opportunities ex-US with local parties. That's something we're going to continue to build on over the next couple of years. Just in terms of guidance, we are updating our guidance. When we look at a reported basis, actual numbers for the end of the year, we're guiding to NZD 81-NZD 84 million total revenue. That is a change on what we previously put out there. This would equate to NZD 76-NZD 79 million on a constant currency basis. EBITDA is NZD 2-NZD 4 million.
So that's on a normalized EBITDA basis. On a constant currency basis, this would be between NZD 0-NZD 2 million. So the upshot of this is we've grown from NZD 69 million last year to NZD 81-NZD 84 million this year. We'll be profitable this year. And as I said earlier, we expect to be cash flow positive on an operating basis for the second half of the year. Just want to briefly touch on what we've been seeing with Myriad across a wide range of different procedures. And I think the presentation that follows this will further reinforce this. So what we're seeing is that Myriad is a product that really allows simplification of soft tissue reconstruction. We get this rapid coverage of vascularized tissue, typically within four weeks. And we tend to see that in a wide range of different procedures. We also see minimal complications.
It's a very low infection rate, and we don't see graft loss. That happens even in contaminated defects. These are great results in terms of being quite distinct from what's seen with a number of other products. I'll come to that in a minute. The other thing is we typically only require a single application to treat patients. It's great for patients, great for surgeons, and also good for hospitals as well. How does Myriad compare with other products on the market or competing products? Really outlining how Myriad compares versus two synthetic products. If you look at Myriad, I think the column to focus on here is the third column from the right. Importantly, the number of infections is very low. What we've done here is we've looked at the 12 publications that we've produced.
In those 12 publications, there are almost 280 patients. We have one infection in those patients. That is equivalent to one infection in those 12 publications, so 8%. But importantly, if you look at it as a total number of patients, that is one infection in almost 280 patients. So less than 1%, so 0.4%. If you compare that to a synthetic product, and there are two classes of product that I am talking about here, a synthetic product like polyurethane foam. What we see there is if you review their publications and you look at the rates of infection in those patients, typically the reported infections based on those publications are a lot higher. So in the case of polyurethane foam, what we see here is 45 infections out of 292 patients. The other thing is that you see graft loss as well, whereas we do not see that with Myriad.
In some of these other products, we see that the graft needs to be removed. If we come to cross-linked collagen and chondroitin sulfate, so sometimes referred to as a biological product, but it is actually a synthetic. Again, we see high rates of infection here. So reviewing 85 publications, typically, if you look through this, 90 patients infected out of a total of 1,483 have a 6% infection rate. And we see graft loss here as well. So in a nutshell, what we see with Myriad is this fast rate of healing, very low rates of infection, and we don't typically see graft loss. So I'm going to pause there and take some questions, and then we're going to move on to Dr. Lawlor's presentation.
Thank you, Brian. We'll now move on to the Q&A session. As I mentioned at the start, please use the raise hand function if you'd like to ask your question live. You can also submit a written question using the Q&A function on the Zoom app. So we haven't got any questions as yet. Right. We've got one here. TELA Bio is now selling a product called LiquiFix. Can you comment on the use cases?
Yeah. So LiquiFix is a type of surgical glue that's used to secure OviTex in place in hernia operations. So it's a complementary product to OviTex use. I mean, if you look at the value in those hernia cases, OviTex is predominantly where most of the cost is, and LiquiFix is really like an add-on to that procedure. So we don't see the fact that they're selling Liquifix as negative, probably a positive in terms of helping to build out a wider range of products for that hernia franchise.
Great. Okay. Now, we've also got a question from Elyse Shapiro. So she would like to ask the question live. So I'm going to take her off mute. Please go ahead and unmute yourself.
Thanks for taking the question. Just as we look to the downgrade, is that more related to a miss on the TELA side, or is it slower uptake from Myriad?
Yeah, I think there's two parts that contribute to it. Certainly, sales to TELA in the last part of the quarter, and then as we look forward in terms of our demand through to the end of the year, it's softer. And so that, our softer sales to them is probably about two-thirds of the downgrade. I think the other third is a little bit softer at the end of the Q3 for us as well. So we did see there's been with the hurricane in Florida, where a lot of our people are concentrated, some of the issues that there have been around the shortage of intravenous fluids with the plant in Asheville that was taken out. That's had an effect in terms of surgical numbers in that last quarter. But I don't want to deflect it completely.
On our own part, we were not quite where we wanted to be from a sales perspective.
That's helpful, and then I guess going forward, is this changing your view on the rep sales ramp or rep sales training, any sort of targeting that you're doing to physician types?
Yeah. I mean, I think the first point I'd make is that I think the growth that we've had, we're really pleased with how Myriad's gone. So in excess of 40%, I think it's a great trajectory. We are definitely working on a number of initiatives to improve that ramp rate. So we'll focus on specific procedures, training. We've just hired a trainer in the US, put in some more marketing resources in the US as well, and some more support around our sales team. So I think there's a few things that we haven't quite tuned up enough, and we're working on doing that. But despite that, the growth that we have achieved, I think, is pretty pleasing.
Thank you.
We'll move on to some more written questions. So we've got a couple of people asking your view on the impacts of tariffs with the Trump administration.
Yeah. Look, I mean, we have to wait and see in terms of if they get imposed. I think it's certainly a small cost to us. I think we're very well placed in terms of the margins that we make, where the selling price is, to be able to absorb tariffs. Obviously, we don't want to do that unless we have to. But I don't see it as something that fundamentally changes anything for Aroa.
Okay. We've also got a question here on an update around Enivo, if you could talk to that.
Yeah. So we are working through a process with the FDA at the moment regarding the regulatory requirements to commercialize Enivo. We are going to need to do a clinical study and some more preclinical work as well. Our expectation is that we will file an IDE, which is the approval to do the clinical study in the US for Enivo. We'd like to probably get that done by the end of this financial year, and then we'll move into undertaking the preclinical and clinical studies. In terms of timing, we'd expect that to be an 18 to 24 month process. And the clinical study in that sort of $2 to 3 million range. And that's we've budgeted for that, and that's for our existing expectations in terms of budget going forward.
Okay, and after this year, is the company expecting to remain cash flow positive from here on out?
Yeah. I mean, that's our goal. We've talked about that at the beginning of the year, and we've made a good transition. In the Q1, we see that continuing into the Q2. We certainly, with growing revenue and reasonable good control of our costs, we think we can maintain being cash flow positive going forward now and increasing profitability.
Okay. So that leads on to the next question. Do you expect revenue growth to re-accelerate over the next 12 months?
Yeah. Look, I think there's a lot of really good things that are coming together. So I think we've got to see today with the clinical study. We're starting to get some very large studies with more patients that are much more convincing than we've had in the past. So that body of data is coming together. I think our sales operation in the US is maturing, and we have much better understanding of what we need to do to succeed. So I think that's improving. The maturity of our sales team in terms of time and territory is increasing as well. And so I would expect that sales should accelerate. It's always a little bit hard to predict when that is. But I sort of feel like the fundamental pieces that really drive this business forward, we're beginning to get those in place.
And the really encouraging thing, I think, for Myriad is that we are seeing success across a wide range of procedures. And I think that's unusual for this type of technology. And what I think it does uniquely for us is allow us to be the one product here that can satisfy a wide range of different needs, puts us in a very unique position. So I think Myriad's very well placed to be a leader in the soft tissue reconstruction category.
Great. Okay. So just one follow-up question around tariffs. If you could clarify why you don't think that's going to have a significant impact?
Yeah. I think it's going to add some cost. But at the moment, we are a well-priced product within the categories that we operate. So there is certainly headroom to pass on those costs further down the line. So I don't see that as putting us in an uncompetitive position. I also think that we have very high margins versus competitors, but typically versus other medical device companies. So while it's an increased cost, obviously, that has, and it will have, a small effect on profitability. I think there's plenty of headroom. Can I add anything to that?
Yeah. No, I think Brian's absolutely right. I mean, at this stage, we don't see the likelihood of tariffs alone. And like Brian said, we're more than comfortable passing on that cost to our customers.
Thank you. Right. So I'm just conscious we do have a number of other questions, but we are needing to move on. So I think we'll just take one final one, and then if you'd like to, we could respond via email to the remainder. So will you be adding more salespeople in the next 12 months?
Yes, we will. So we're at 56 field sales reps now, and we expect to add somewhere between 10 and 20 in the next financial year.
Fantastic. Okay. So thank you, Brian and James, and thank you for the questions. As mentioned, any that we didn't get to cover, we can reply via email if you've provided that information. We will now move on to the clinical presentation. So I'm going to hand over now to Dr. Brandon Bosque, who will introduce Dr. Lawlor and start the discussion on the Limb Salvage paper.
Thank you so much, Sarah, and thank you, Brian and James as well. Thank you all for joining us today. As Sarah mentioned, I'm Brandon Bosque, medical affairs with Aroa Biosurgery. But more importantly, it's my great pleasure to introduce my colleague, Dr. John Lawlor, who is the lead investigator for Aroa's latest peer-reviewed study, and it was entitled, "Limb Salvage via Surgical Soft Tissue Reconstruction with Ovine Forestomach Matrix Graft, a Prospective Study." This was published in the journal Plastic and Reconstructive Surgery Global Open. Dr. Lawlor is a foot and ankle surgeon and associate of the American College of Foot and Ankle Surgeons with over 20 years of clinical experience specifically in the soft tissue regeneration space. Dr. Lawlor received his doctorate of podiatric medicine from the Barry University School of Graduate Medical Sciences in Miami, Florida.
He’s still based in Florida in the southwest region of the state. He has developed a robust wound care and limb salvage practice. Though he treats all aspects of foot and ankle, this has been his passion and been his focal point for the last 20 years. Dr. Lawlor, thank you so much for joining us today. John, are you still with us?
Yeah. Can you hear me?
Yes. Yes.
Yeah. thank you for having me and good talking with everyone.
I appreciate you, John. So let's dive right in. Let's talk about the design of the publication itself. So to our best knowledge, this is the largest prospective inpatient surgical reconstruction of limb salvage to date. So can you walk us through, especially if someone is not extremely familiar with how clinical research is designed, can you tell us what a large prospective study in this space means?
I think really, when you go to a large group, we do a lot of surgery and a lot of wound care on a regular basis. But when you actually sit down and create a study, you actually can build the data that will kind of give you the direct results or a more quantifiable result of your practices. So from a physician standpoint, I was excited to be involved with a study like this because it allowed us to actually really quantify our results as well as dealing with the product itself.
Exactly. Kind of in a more formal manner than maybe a retrospective case series. If we're enrolling patients ahead of time prospectively, then it's obviously a much more formalized way to do these types of studies. So I agree with you. That's a really impactful study design and not something we traditionally see in limb salvage. And I think one reason we don't see that often is because, in general, patients that require surgical limb salvage are quite complicated, challenging in terms of their health and other factors. And that leads me to my second question for you, Dr. Lawlor. So in the study, 95% of the patient cohort had at least one major risk factor for a major limb loss or a major amputation, a below-knee amputation or an above-knee amputation.
And more than half, 55%, had three or more of these complicating factors that lead them to be of a higher risk for major limb loss. What are the challenges that you and surgeons like you run into when dealing with patients and treating patients that have these high risks?
Really, if you do serious wound care work, comorbidities and risk factors are part of the process. Very rarely do you deal with wound care patients that are perfectly healthy. People don't develop wounds if they are healthy. This is really, I think, more of a real-world study where the patients that come into the office, the patients that we see in the hospital, they're sick. These people have comorbidities. They have arterial disease. They have diabetes. There are socioeconomic issues we've talked about. People are homeless. People are financially insecure. The perfect patient doesn't walk into the office of the hospital. The patients that we're going to see and that we're going to treat are sick patients, and they're going to have health issues. I think to really address wound care, you have to address those issues.
Yeah. That's such an important point. You hit the nail on the head there because a lot of these patients that a lot of the studies, like a randomized control trial, which is rightfully the gold standard of medicine, doesn't always quantify as well in the limb salvage space, to your point, because these patients are so complex socioeconomically, insurance-wise, health-wise, that a lot of times they are excluded from these prospective studies, excluded from randomized control trials, but then the results of those trials don't always give us the exact picture of the patients that we're actually trying to heal, the patients that have cancer and poor blood flow and kidney disease and advanced age, so yeah, I think that being able to include those patients in a prospective study is quite impactful, and really pleased that you took up such a monumental task.
Speaking of which, now let's talk a little bit more about the outcomes from the study as well. As Brian mentioned before, a large study, 120 patients having 130 wounds. Of course, some patients have more than one wound. So looking very broadly, one of the big endpoints was that time to 100% tissue fill. So you have these deep volumetric wounds, kind of a shark bite type of wound, if you will, even though they're not actual shark bites, but just a lot of soft tissue loss, exposed bone, exposed tendon. And with the use of Myriad, you're able to get that tissue filled in in about 30 days, and importantly, with one surgical application. Let's talk a little bit about what the significance of achieving that type of outcome in 30 days with this patient population and what it means to do it with one product application.
Right. I think when you address it from the standpoint of one application, it's like, what does that mean? And I think when you're dealing with inpatient patients, you have patients who have a significant wound. They have a significant infection. How can we cover that? And then, at least in the American medical system, it's how do we get them out of the hospital? So if you can perform a procedure and apply a device that will allow the patient to have coverage of their wound and a good chance of healing, we're able to move them to the next step of their healing, whether that's to a skilled nursing, long-term acute care facility, or even to home. The device is providing coverage and healing, and we don't have to keep them in for extended stays. So medically, one surgery is always better than two.
So if you can provide the appropriate treatment with one single application, that can be a game changer in the wound care world.
Exactly. Like you said, these patients tend to be quite sick. So anesthesia and the stress of surgery on them going multiple times is not always a good thing. And like you said, financially, not only for the surgeon and for the health system, multiple trips to the operating room is not a good thing. So if we're able to get patients on their way, discharge from the hospital sooner, it's only beneficial to them, the surgeon and the healthcare system. So that's a really, really good point. So another element of this study is, of course, complications. Complications is an important part to consider and an important element of prospective studies. And it was quite remarkable that there were no device-related complications, no postoperative infections, and patients didn't suffer any major limb loss, at least that were kept within the study.
Tell me a little bit about what having no complications means both from a study and practically for a surgeon?
Right. Well, the device that we had learned about, because I had significant experience with the device before the study, but as we went through the study, I think the fact that it does not allow for colonization very well. So we don't develop infections because the device doesn't have inert parts or what do you call it, metallic parts or something that can be colonized. So the device will break down as it's designed to do, and in the presence of bacteria, it will not allow for it to become the source of an infection. So I think that's really one of the benefits of the product. You're not worried about developing an infection because of the product.
Exactly. And obviously, for a practicing surgeon and for patients having a postoperative infection or any type of complication, graft loss, that puts the healing trajectory back a little bit, and it also adds costs because then you need to go back and treat potential reoperations. So to your point, Dr. Lawlor, by not having these types of complications just leads to a better outcome for patients and less cost for the healthcare system. So wrapping things up, the last topic I wanted to talk to you about, clinical outcomes are so important, but thinking about a couple of years ago when you were looking to design the study and develop a protocol, I remember distinctly that you really felt adamant that there needed to be a comparative cost analysis.
There needed to be a health economics piece to this study for it to be really impactful, which was very, very impactful to me hearing from a surgeon that, yeah, cost is really important, and we need to study that in depth. And you were able to do so. And looking at other commercially available dermal matrices in the surgical limb salvage space, what was really remarkable to see was to quantify that at up to 195% cost difference between utilizing Myriad in a similar cohort than with another commercially available dermal matrix. So if you were treating the same cohort, some of these dermal matrices could be almost triple the cost.
Again, talk to me a little bit about why was doing a health economics and cost comparison so important to you, and what does it mean to you and surgeons that are treating this patient population to have a product that could potentially cost up to three times less than similar products?
Right. Well, I think when you're working within a healthcare system, cost analysis is important because in an inpatient setting, the hospital will always have a cost. So if you have a product that will achieve the result you're looking for for a fraction of what the competitors may cost, as a physician, you're going to get less pushback in using your product. But just I think in general, it's a good thing to look at those things as we talk about their costs universally. Patients that could otherwise have an alternative treatment that might cost five, six times what we talked about, it adds up. So the hospital allows us to use a product that's cost-effective.
The patient's able to be treated at least as well, if not better, and then they're able to move on to the next level without accumulating additional costs or barriers to a discharge from the hospital.
Exactly right. So it's a lot easier to get these types of products in. If it's less costly, the hospital value analysis and the different administrators will be a little bit more pleased with utilizing a product that is less costly. But again, to your point, it costs the system less to get just as good of an outcome, if not better, for patients. So I'm really pleased that you pushed really hard for that comparative cost analysis, and I think it is really impactful. So anyone that has a chance to read the paper, please take a look at not only the clinical outcomes, but the comparative cost analysis. I think it makes it quite unique in this space in the scientific literature. Dr. Lawlor, I really appreciate your time. We might have a couple of questions, so hopefully you can hang with us for a few more moments.
I'll turn things back over to Sarah to see if we have any other questions.
Okay. We haven't got any questions just yet, but we'll leave it a few more seconds to see if any come through. Right. Well, it seems like you've addressed the topic very thoroughly because there are no questions. So I'm just going to hand it over briefly to Brian to close the session out.
Great. Thank you, everybody, for joining. Pleased to be able to deliver the result we have today. Obviously, really working towards the year-end result now, and we think that growth that we put on this year versus last shows the kind of trajectory that we're on. Good to see Myriad performing well as well, and look forward to reporting our full-year results in May, so thank you for joining, and we'll talk to you at the next update.