Good afternoon, and welcome to Aroa Biosurgery's half-year update released to the ASX this morning. From the company today, we have Founder and CEO, Brian Ward, and the company CFO, James Agnew. Before I hand it over to the guys to get started through the presentation, I'll just remind you that we will conduct a Q&A session at the end of the presentation, which you can submit questions through the Q&A panel at the bottom of the screen, and we'll get to those post conclusion. Brian, I'll now hand it over to you to get started. Thanks very much.
Thank you, Simon, and thank you everybody for joining this webinar today. As Simon said, we released our quarterly this morning, and this is a half year update on progress for this financial year. I just want to briefly just a quick brief recap on Aroa, and I'm sure many people are familiar with the story.
We're a soft tissue regeneration company, well-established, four products in the market, targeting an opportunity in excess of $2.7 billion. Sales through our own direct presence in the U.S., and also through our commercial partner, TELA Bio. You know, well-established technology used on a lot of patients, a lot of clinical and pre-clinical evidence to support the platform.
Most of our products are based off our AroaECM platform, but also we are bringing forward a new platform, our Enivo platform, for tissue apposition. You know, as I mentioned, you know, we're targeting opportunities in healing complex wounds, and also in soft tissue reconstruction. All of our technologies is based off our AroaECM technology for four product families there.
All of our products exhibit very similar properties, and that is rapid formation of well-vascularized tissue, well-tolerated within contaminated sites, and certainly has anti-inflammatory properties, and very easy to use for surgeons in a wide range of procedures. In terms of the half year results, you know, we're delighted with where we've come in with our sales.
In New Zealand, NZD 28.8 million. That's a 44% growth rate on a constant currency basis over the same period last year, and 20% up on the previous half year. Myriad sales have really led the way for Aroa, so sales in this half being NZD 5.6 million.
That's a 242% growth rate on a constant currency basis, and a 147% on the previous quarter. Really good to see gross margin improving as well. Our guidance was at 77%, and we're up to 84%. Some of that's accounted for by foreign exchange, but also, you know, we're seeing an improvement in our product mix towards higher value products.
Also some really nice gains in terms of process improvement in manufacturing. Then, you know, foreign currency gains, you know, contributing to that as well. If we look at the half as a whole we're on a normalized EBITDA basis, we're positive.
That's ahead of where we thought we'd be. Really good to see both the strong sales growth, but then also, you know, managing our costs and coming in at that break-even point. You know, we continue to see, you know, foreign exchange tailwinds. With a high dollar, relatively low NZD, you know, we've had a very positive contribution to this result from foreign exchange, about NZD 3.4 million.
Yeah, we finished the half with a cash balance of NZD 50 million, so still have a very strong balance sheet. You know, we're well capitalized, certainly don't need to go back to the market to raise money at the moment. We feel like we're you know we've got a number of very positive things happening for the company.
Strong sales growth, Myriad leading the way, improvement in margins, and our strong balance sheet, which sets us up really well for the second half of the year. Just want to quickly run through progress in our different product lines. As I said earlier, Myriad you know seeing a very good result here. We're now at 35 salespeople in the field.
We have eight of our sales reps that have over half a million dollars run rate. W e're seeing a positive improvement in sales productivity across the team. We expect our sales team to be at 41 by the end of this financial year.
In terms of sales productivity, we are seeing the group as a whole track up positively. We're seeing our line extensions help in terms of adding to that sales productivity. We think with the launch of Symphony, that's going to allow our sales reps to focus in fewer accounts and really drive up that productivity within those accounts.
We're really excited with the trend that we're seeing here operationally, but also what we're also seeing is the ability of our product portfolio to contribute to sales productivity as well. In terms of clinical, the master clinical registry is going very well. We were forecasting to have 70 patients recruited to this registry by the end of the year.
We're tracking very positively here. We have 97 patients recruited, three sites up and running. This is the registry that will run over three years, recruiting 300 patients in 10 sites and be used as a data source for a range of publications focused on a range of different clinical procedures. Now we're continuing to see success with our target procedures.
Certainly seeing some success in big soft tissue reconstruction cases, such as trauma, NSTIs, open abdomens, and pressure injuries. Nice to see us growing into these large procedures, where the case value can be anywhere between NZD 10,000 and NZD 30,000. Myriad line extensions are also set to make a contribution. We launched Myriad Morcells.
That's gone very well for us. The Morcells is now almost 60% of our sales mix, and we have a finer version of this, the Myriad Morcells Fine Powder, which we expect to launch at the beginning of next financial year. We expect that to make a significant contribution to the Myriad franchise.
In terms of Symphony, this year we had soft launch of Symphony into the VA. That's gone well. We've seen good clinical outcomes, and it's really set us up well for the full launch of this at the beginning of next financial year.
As we've talked about previously, CMS has been looking at reimbursement changes for the skin substitute category. There's some draft changes that have been put out by CMS which they intend to begin to put into place at the beginning of next year. They certainly look very favorable for Symphony.
We're seeing a leveling of the playing field here in terms of regulatory approvals, reimbursement coding, and a move towards favoring products that have high efficacy at a relatively affordable price. It sits very well with Symphony.
You know, we think Symphony's in a strong position to do very well next year. We also have received from CMS an A code, which will allow coverage and payment of our Symphony product. That will come into effect early next year. We're now gearing up for the launch of Symphony. Symphony will be sold through our existing field team.
In addition to calling on the inpatient operating room within those same hospitals, they will also call on the outpatient wound center. We think this has a potential to drive significant increases in productivity. On the clinical side, we've had a pilot study running with Symphony in combination with Endoform.
This has been extended into a much larger study with 50 patients, and we're in the process of setting ourselves up for a randomized controlled trial with Symphony versus standard of care. W e're very focused on generating very good clinical data to support Symphony and to support our sales team. OviTex continues to build very nicely.
You know, we're seeing TELA Bio update their guidance, so they've narrowed their guidance towards the top end. $42-$45 million, which is up significantly from last year at $29.5 million. Good clinical data coming through. The Bravo one study, recurrence rates of 2.6%. The ReVas study, recurrence rates of 1.9%. We're seeing extremely low rates of hernia recurrence.
If you compare that to you know, the market-leading products, that's anywhere between 10% and 30%. A significant difference we're seeing with the use of OviTex. We continue to do some significant development projects with TELA Bio.
I'm focused on some line extensions for laparoscopic surgery, breast reconstruction, and the core OviTex product as well. Those products will begin to come through next calendar year. Endoform this remains the base of our business at the moment. You know, relatively flat for this product.
We're maintaining that and really putting our focus into growing Myriad, which is the strongest growth opportunity for us. We recently put out a market announcement about our Enivo platform. This is our dead space management tissue apposition platform. We expect to go to the FDA with this by the end of this year, and we're targeting November. That's very close.
All the information, all the data is coming together to support this application. W e expect to you know, have a response from the FDA by the second quarter of next calendar year. We released an update on the preclinical results for the Enivo. Really strong results there in terms of you know, minimizing dead space and tissue acquisition.
We think this model is very applicable to many of the procedures where surgeons encounter problems with dead space. We're beginning to set ourselves up to do a 10-patient clinical study in mastectomy beginning next year. Now, this is an important platform for Aroa. We think it fits very well with our existing Aroa ECM technology.
We see the potential for our products to be used together and to get synergistic healing outcomes. This is a platform that we we've got huge expectations for to continue to drive future growth. Just in terms of guidance, we're updating our guidance. Product sales, we expect to come in at NZD 60 million-NZD 62 million this year.
Total revenue NZD 62-NZD 64 million. That includes a license fee, a one-off license fee from TELA Bio for a sales milestone and some project fees. Gross margin we've made good improvements with that gross margin. We can continue to maintain those. We're forecasting gross margin to come in at 84%.
You know, for the full year, we expect to be on a break-even basis. that would mean our cash balance is maintained at around about NZD 50 million. strong position, you know, for the second half of the year and, you know, good finish to the end of the year as well.
In terms of catalysts and milestones, you know, we see COVID continuing to wane over the remainder of the year. It's certainly not a factor at the moment in terms of constraining sales growth. We see ourselves continuing to build on the Myriad sales momentum that we have, and, you know, that driving growth.
We see the Symphony launch as being a real catalyst for us next year, both from a top-line perspective, but also from a sales productivity perspective. You know, we continue to see TELA Bio having a strong performance and you know, continuing to get adoption both with OviTex and OviTex PRS. We're also expecting Enivo to go through the FDA process next year. Potentially being cleared in the second half of next year. Simon, I'm going to leave it there and pass it back to you for Q&A. Thank you.
Great. Thanks, Brian. We'll just pause for a second just to allow for questions to be submitted through the Q&A panel at the bottom of the screen. First question is from Sebastian Clemens at Jarden. Gross margin on a previous constant currency basis improved 4% from 77% to 81%. How much of this is driven by Myriad, and how much is driven by manufacturing productivity improvements? Also, what is the gross margin on project license fees?
Yeah. Do you want to talk to that?
I think a large part of it, the gross margin improvement, it was probably about 1% was in manufacturing. Then the balance was probably the sales mix in terms of the contribution by Myriad, particularly Myriad Morcells. In terms of the project and license fees.
I mean, we're actually due a milestone payment in the form of a license fee from TELA Bio in the next six months. It's $1 million and there's 100% margin on that. Project fees, I mean, sort of makes up the balance of about half a million dollars. That's really just a co-contribution. I mean, that's, you know, there's 100% of cost which is sitting in our R&D line item, for that.
Great. Thanks, James. Next question. What's the risk dead space doesn't get approved for Enivo?
Yeah. Look, I think it's, you know, there's two pathways forward for Enivo. You know, the A plan is to submit it as a 510(k) and, you know, for it to be cleared through that process. Now, there's, you know, there is some risk with that. If it doesn't get cleared as a 510(k), then we will need to submit it as a de novo.
You know, if it's a de novo, then, you know, potentially that's going to require a clinical study. You know, that could take us another 18-24 months. You know, I think it's, you know, this compared to other submissions that we've done previously, and this would be, you know, we've done at least 10 submissions before and got products cleared.
This is, you know, potentially a harder submission to get through on a five ten K. Having said that, you know, the team and the consultants that we're using in the U.S., you know, have a reasonable degree of confidence that this will go through as a five ten K. I think it's until we have it in front of the FDA, they look at the data, it's very difficult to tell.
The way we're thinking about internally is, you know, it's a fifty-fifty chance. If we get it cleared as a five ten K, then it could be commercial in the second half of next year. If we don't, then, you know, we push it out a couple of years. You know, we're feeling pretty good about it at the moment.
Great. Thanks, Brian. Question from Elyse Shapiro at Canaccord. Are you starting to see improvements from the onboarded GPOs in terms of new buying? And how many of the Myriad accounts are health trust accounts?
Yeah, I think it's about 30% of the accounts are health trusts. You know, we're certainly having success with health trusts. More recently, you know, we've had some success in some other GPOs as well. It's a little bit all over the map, depending on where our sales reps have relationships, what parts of the country they're based in. You know, generally, having those GPO contracts in place is one more gate that is easy to go through and makes that sales process a lot more efficient.
Great. Thanks, Brian. We'll just pause for 10 or 15 seconds just for any further questions. Otherwise, we'll finish up there. We'll just pause for one second. This question from Sebastian again at Jarden. Just wanted to confirm that Myriad direct sales force be shared across Symphony as well as Enivo, or do you expect Enivo will require their own dedicated sales force?
Yeah. Look, we see all of these products being sold through the same sales force. You know, our team is very excited about Enivo. We see the Enivo technology being very complementary to what we're doing with the AroaECM platform.
We see it as being very synergistic. Over the medium term, you know, we see all these things being sold together and actually together improving healing outcomes. Yeah, we think it's one sales team for the full portfolio.
Great. Thanks, Brian. What is the current annualized U.S. sales spend?
That's a good question. I don't know off the top of my head. I mean, it's the U.S., in terms of U.S. dollars, I mean, of our total expenses, the U.S. dollar sales expense accounts for about 40% of our total expenses. If you can reverse engineer that and the fact that we're operating at a break-even level in our gross margin, then you should be able to figure that out.
Great. Thanks, James. Are there any similar products to Enivo already approved by FDA?
No. There are predicates, you know. There's a pump system for use with uncuffed drains. That's the closest predicate. You know, there's a lot of technical similarities with that product. The difference being that that's not a product that apposes tissue in the same way that Enivo does. I think enough technical similarities in order to provide a predicate for a 510(k). But in terms of the outcomes that you get, it's certainly quite a different product.
Great. Thanks, Brian. How do you view Dr. Mohr's contribution to the company in the medium term?
Oh, look, I think you know, Dr. Mohr is, you know, has been a very successful entrepreneur, inventor. She's got a huge amount of experience through her time with Intuitive Surgical. You know, Intuitive Surgical has been, you know, one of the real stars of the med tech industry over the last, you know, 10, 20 years.
She's, you know, been through the growth journey of that company since the very early stages. I think she can bring a huge amount of experience to the board. She has, you know, a phenomenal network. You know, she's, you know, certainly a huge awareness of, you know, what trends in surgery and, you know, trends in devices. I think she can make a really strong, you know, strategic contribution to our role.
Great. Thanks, Brian. That concludes the Q&A. I might just hand it back to you for closing remarks.
Thanks, everybody, for joining. I think it's, you know, we're really pleased with the result. We think we've got some, real momentum here, and certainly, you know, looking forward to, you know, delivering on the second half of the year.