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Hardman & Co

Tissue Regenix Group Dual revenue stream growth

Hardman & Co Report Report DownloadsTissue Regenix Group Plc (LON:TRX) has a broad portfolio of regenerative medicine products developed from decellularised human and porcine soft tissues for the wound care, orthopaedics, and cardiac markets. Since the launch of DermaPure, focus has been on expanding in the US wound care and orthopaedic markets: in August 2017, TRX acquired CellRight Technologies, bringing in synergistic bone regeneration technology. FY’17 results will be the first to reflect the acquisition and will include 5 months of the enlarged entity. The 1H’17 results presented here are for stand-alone TRX, and show organic growth, both from the EU jv and from DermaPure, to a £1.38m total.

Strategy: To build a regenerative medicine business with a portfolio of products using the proprietary dCELL platform; underpinned by compelling clinical and economic outcomes to drive higher adoption rates; whilst retaining the strategic and corporate flexibility that the three therapeutic corporate entities provide.

Interims: TRX reported 1H’17 results to end June 2017, not affected by CellRight, with sales beating our forecast by +£0.20m to £1.38m. Net cash was better than expected at £3.61m on 30th June, subsequently strengthened by the £40m capital increase for working capital and the acquisition of CellRight.

Sales: Both DermaPure (US) and GBM-V (jv in EU) sales were above expectations by around £0.1m each. Reported growth was +118% to £1.38m (£0.63m); note, there were no jv sales in 1H’16 and the accounting date changed. Transitioning to more in-patient activity saw underlying DermaPure sales grow +13% to $1.1m.

Acquisition: Post-period end, TRX completed the acquisition of CellRight Technologies in San Antonio, Texas for up to $30m/£23m, immediately giving greater exposure to the US orthopaedic market. TRX paid 3.8x prospective EV/
sales and 12.5x EV/EBITDA for CellRight, which has traded profitably since 2014.

Investment summary: Tissue Regenix Group Plc is building commercial momentum through three clear value drivers: sales of DermaPure in US; regulatory submission of OrthoPure XT in EU; and agreement of a joint venture for commercialisation of woundcare and cardiac products in Europe. CellRight will boost FY2017 and accelerate the time to reach sustainable profitability and cash generation.

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Disclaimer: Statements in this article should not be considered investment advice, which is best sought directly from a qualified professional.