Is This Biotech IPO player Market Darling for Tomorrow: Aroa Biosurgery?

  • Jul 26, 2020 AEST
  • Team Kalkine
Is This Biotech IPO player Market Darling for Tomorrow: Aroa Biosurgery?

Summary

  • NZ-based biotech player, Aroa marked its ASX debut on 24th July 2020, soaring more than 80% on the first day trading.
  • Aroa is a soft tissue regeneration company which has developed a unique technology called Endoform® derived from sheep forestomach.
  • Its range of five products has been used in more than four million healing procedures.
  • Aroa generated NZ$22m in product revenue for the year ending 31st March 2020.

With biotech being an emerging sector in Australia, there are more than 140 biotech companies listed on the Australian Stock Exchange. While the healthcare sector has been in spotlight amidst the pandemic induced health crisis, a New Zealand-based biotech company marked its debut on the ASX on 24th July 2020, soaring more than 80%.

Soft-tissue regeneration company Aroa Biosurgery Limited (ASX:ARX) began trading on the ASX, raising A$45m from the investors. The company sold 40 million new shares at a price of A$0.75 per share, with a market capitalisation of A$225m. It raised A$30m capital with its first-day trading, with remaining coming from limited sell-down by the company’s early investors.

Aroa IPO, underwritten by Bell Potter and Wilsons as Joint Lead Managers, received an overwhelming response from its investors across Australia, New Zealand and other markets abroad. It also saw a strong vote of confidence from the existing shareholders who endorsed in around half of the funds raised.

By March 2020 year-end, the company had achieved product revenue of NZ$22.0m and NZ$18.7m in gross profit. During this period, the company reported to be EBITDA positive.

 

All About Aroa Biosurgery

Aroa has focused for more than ten years in research and development on improving the rate and quality of healing in wounds and soft tissue reconstruction. The company have developed Endoform®, which is a soft tissue regeneration technology.

Endoform® is derived from sheep forestomach, and it acts as a scaffold to regenerate tissues which were lost or damaged during disease or injury. It allows the patient’s cells to grow into new tissues and re-establish blood supply. The wounds continue to heal with the patient’s tissues.

Aroa already has its five products in the U.S. market, which have been in used for more than four million procedures, including chronic wounds, hernia, soft tissue and breast reconstruction.

The company also has new products development in the pipeline. It states that the products are 20 to 60% less expensive than its competitor products. It has regulatory clearance in more than 37 countries to sell its products.

Aroa currently employees 140 people across its headquarters in Auckland, New Zealand and its USA-based Appulse office, a sales-focused joint venture. The company was founded in 2008, and it is based on the regenerative properties of forestomach extracellular matrix technology investigated and developed by Dr Brian Ward.

In 2014, the company relocated and expanded into a newly established facility in Auckland. Endoform Dermal Template is the first product by Aroa, which is used for chronic non-healing wounds. The product was launched in the U.S. Its first commercial surgical product; a Reinforced Bioscaffold was developed with Tela Bio Inc. It was used in ventral hernia repair and abdominal wall reconstruction.

Also read:  Lens on Aroa Biosurgery: Medical Device Company Set for ASX debut

Current Revenue Model

Currently, the total revenue opportunity for Aroa products in the U.S. is US$1.5bn, while the estimated market for its upcoming products is expected being over US$1bn.

The company plans to grow its sales inside its already existing U.S. market as well as expand to other countries like Canada, Europe and few Asian countries where the company already has its footprints.

Till now in the U.S., it has achieved sales with more than 600 hospitals. The company is also in contract with significant group purchasing organisations and surgical distributors.

Another key distributor for Aroa is NASDAQ listed partner Tela Bio Inc. It manages Aroa’s product distribution across 200 accounts in the U.S. hospitals. In 2020, Tela Bio is expected to increase its account in top 500 hospitals in the U.S., which covers soft tissue reconstruction.

Aroa will put emphasis more on sales and marketing with the funds it has raised; this will also include increasing its manufacturing capacity through encouraging and accelerating product development. The company will use the funds for working capital purposes and repay borrowings.

Innovation in Sales and Marketing Amidst COVID-19 disruption

Due to the COVID-19 disruption to many existing U.S. facilities for wound care, Aroa stepped up its strategies to supply its products. The company opened an additional pathway for its clinicians and patients to access Endoform® as some wound care centres are temporarily closed.

Patients need to have immediate access to critical wound care and soft-tissue reconstruction technology for better healing. Because of the current reprioritisation in the healthcare system, the patients can be at risk if they do not receive the treatment on time. Therefore, Aroa teamed up with online medial supply company Medical Monks for smooth access of Endoform® to existing and new patients.

Industry experts believe that Aroa is still new in its journey, and if the company increases its market penetration, it is likely to get a better valuation.

 


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