Tissue Regenix Group Regulatory News (TRX)

Tissue Regenix Group plc

("Tissue Regenix" or the "Group")

Trading update

Leeds, 8 February 2021 - Tissue Regenix Group (AIM:TRX), the regenerative medical devices company, provides a trading update for the year ended 31 December 2020.

Highlights

· Total Group revenue of £12.8m delivers performance in line with previous year despite the impact of COVID-19

· Strong cash position of £9.5m following successful fundraise in June 2020

· Capacity expansion project continues on schedule

· Additional commercial partnerships and product launches undertaken throughout the period

The overall financial performance of the Group is expected to be in line with market expectations* with anticipated revenue of £12.8m (2019: £13.0m). Following the successful fundraise completed in June 2020, the Group has a strong cash position of £9.5m at 31 December 2020, to support the working capital requirements and further investment into the planned capacity expansion programme. 

* Market expectations are for FY20 revenue of £12.5m, Adjusted EBDITA of £(4.0)m and cash of £10m based on Stifel's forecasts

Daniel Lee, Chief Executive Officer, Tissue Regenix, commented: "The Group returned a strong performance for 2020 against the challenging backdrop of the ongoing COVID-19 pandemic. We were successful in maintaining a sales line consistent with previous years and additionally securing further strategic partners and private label agreements in an industry where many companies experienced a downturn in demand as hospital resources were redirected. With two new products launched during the year and the commencement of our capacity expansion programme following the fundraise completed in June 2020, the Group is well positioned to address market demand and new opportunities as market conditions normalise."

Financial performance

The financial performance for the year was impacted by the ongoing coronavirus pandemic which became evident from Q2 onwards, together with material cash constraints that the business experienced in the first half of the period. Notwithstanding this, the Orthopaedics and Dental (CellRight) division successfully grew top line sales by 10%, largely driven by a strong Q1 performance. In addition, it maintained strong relationships with strategic partners and saw an increase in the utilisation of a newer, growth product line, AmnioWorks™, which will be utilised in surgical specialties such as ophthalmology. 

Revenue from DermaPure®, under the BioSurgery division, was more significantly impacted by the pandemic and associated restrictions, as US hospitals postponed elective surgical procedures, such as urogynaecology and soft tissue orthopaedics, where the DermaPure® products would be utilised, resulting in a 21% decrease in revenues for this division. There is beginning to be a slight uptick in the recommencement of these procedures as the US vaccine roll-out continues and patient confidence returns, however, it remains difficult to predict at what pace a return to pre-pandemic procedure levels will occur.

The Group's joint venture, GBM-V, based in Rostock, has been impacted by the German lockdown restrictions that were in place for much of the last year, however, they have continued to service the cornea market where possible and maintained revenues of £2.1m, in line with the 2019 revenue figure (2019: £2.1m).

Furthermore, the Group has remained committed to appropriately sizing its overhead cost base and expenditure. To this end, further re-structuring of the US business was undertaken in January 2021 to rationalise resources across the business which is expected to reduce the overhead cost base by c.$700k on an annualised basis.

Operations

An important milestone for the Group during 2020 was the commencement of the manufacturing capacity expansion programme in San Antonio, as historically capacity constraints have impinged on the growth of the business. Phase 1 of the build out began in July and remains on schedule to come onstream during H1 2021. This will allow for a c.50% increase in the Group's BioRinse® (CellRight) processing capacity, as well as allowing improvements in the Dermis and Amnion throughput. Throughout the build process optimisations were identified and implemented meaning that some elements of the second phase of the expansion programme were brought forward where those elements could either reduce the capital outlay and impact on operations, or time requirements later in the project. This has not changed the overall budgeted spend however, it meant that there was an initial increase in the phase 1 costs of c.$700k which will be offset as the project continues.

The Group was able to successfully implement the required guidelines and protocols to prevent the spread of COVID-19 at the facility in San Antonio which meant that there was minimal direct impact on the ability to process the BioRinse®, DermaPure® and AmnioWorks™ product portfolios in-house. However, it did result in delays to the sourcing of donors required which was addressed through broadening relationships with donor sourcing agencies, taking into consideration aspects such as geography and recovery structures. These agreements will also be a key factor in the ability to ramp-up processing as additional capacity becomes operational and allowed for a 16% year-on-year increase in the processing throughput for the CellRight and BioSurgery sides of the business. Alongside this, processing for the Amnion product quadrupled in line with the growing market demand and increased private label agreements. With processing levels at the San Antonio facility successfully maintained, it is expected to meet demand once elective hospital procedure levels return. This production, coupled with phase 1 of the capacity expansion, will alleviate any near-term capacity constraints and will allow the Board to evaluate the timing of the commencement for phase 2 of the expansion, ensuring the efficient deployment of capital.

In the UK, the decision was made to relocate the manufacturing facility to smaller premises in nearby Garforth which was undertaken in October 2020 with many aspects of the OrthoPure® XT production process successfully outsourced, and it is expected this will provide annualised overhead cost savings of c.£400k. It is anticipated that the new facility will complete the regulatory audits and inspections required to become operational during Q1 2021.

Commercial

The Group was successful in securing a number of commercial opportunities throughout the year, most significantly in May, when a white label manufacturing agreement was concluded with a top 10 global healthcare company for the launch of a new soft tissue orthopaedic product. The initial feedback for this product has been very positive and it is expected that sales traction will increase throughout 2021 as levels of procedures begin to normalise. 

Alongside this, a number of additional, smaller private label agreements for the AmnioWorks™ portfolio were secured during 2020. This will diversify the spectrum of products available and enhance revenue generating opportunities for the Group as they are further commercialised during 2021 and beyond.

In Europe, the Group achieved CE mark approval for OrthoPure® XT, a decellularised porcine tendon for use in the repair or reconstruction of knee ligaments, and the first products were shipped in December 2020. Distribution partners have been secured in the UK and Poland and the Group is actively engaged in a number of discussions with partners in other key European territories which are expected to materialise during 2021.

Outlook

The Board and Executive Management team have undergone a number of changes in recent months to provide the leadership and experience required to guide the Group through the next stages of its commercial development.

Following the successful fundraise completed in June 2020 the Group has a strong balance sheet to support both working capital requirements and allow for future investment into the capacity expansion project when required. This coupled with successfully securing new strategic partnerships and distribution agreements throughout 2020, as well as maintaining a comparative revenue performance year-on-year despite the impact COVID-19 has had on the Global healthcare markets, allows the Board to have every confidence in the future prospects of the Group.

For more Information:

About Tissue Regenix (www.tissuergenix.com)

Tissue Regenix is a leading medical devices company in the field of regenerative medicine. The company's patented decellularisation ('dCELL®') technology removes DNA and other cellular material from animal and human soft tissue leaving an acellular tissue scaffold which is not rejected by the patient's body and can then be used to repair diseased or worn out body parts. Current applications address many critical clinical needs such as sports medicine, heart valve replacement and wound care.

In August 2017 Tissue Regenix acquired CellRight Technologies®, a biotech company that specializes in regenerative medicine and is dedicated to the development of innovative osteoinductive and wound care scaffolds that enhance healing opportunities of defects created by trauma and disease. CellRight's human osteobiologics may be used in spine, trauma, general orthopaedic, foot & ankle, dental, and sports medicine surgical procedures.