Trinity Delta New strategy delivering results

New strategy delivering results

Update | 4 February 2019

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Tissue Regenix Group grew underlying revenues by 47% to £11.6m, ahead of our forecasts. This was achieved through the efficient integration of CellRight Technologies and the benefits of the new commercialisation strategy. Tissue Regenix now has a more focused direct marketing approach and is leveraging the return on its research and manufacturing capabilities by entering into strategic partnerships, such as those signed with ARMS Medical and Arthrex, Inc. These new relationships should sustain the strong growth of Tissue Regenix. Our valuation is unchanged for now at 20.9p/share.

Year-end: December 31	2016¹	2017	2018E	2019E
Sales (£m)	1.4	5.2	10.8	16.3
Adj. PBT (£m)	(10.9)	(9.7)	(9.3)	(6.7)
Net Income (£m)	(9.9)	(9.4)	(8.6)	(6.2)
Adj. EPS (p)	(1.29)	(1.00)	(0.77)	(0.56)
Cash (£m)	8.2	16.4	7.0	1.3²
EBITDA (£m)	(10.8)	(10.1)	(8.0)	(5.2)

Source: Trinity Delta ¹11 months to 31 December 2016; ² The cash position in 2019 includes a capital raise of £2m. Adjusted numbers exclude exceptionals.

Strong revenue growth across all divisions Tissue Regenix has delivered sales of £11.6m in FY18, an increase of 47% in underlying revenues (after taking into account the purchase of CellRight in August 2017). This was achieved by the BioSurgery division, which sells DermaPure, growing sales by 79% to £3.4m, the Orthopaedic and Dental division increasing underlying sales by 31% to £6.4m, and GBM-v revenues by 64% to £1.8m. The growth is particularly notable, as it was achieved while Tissue Regenix was integrating CellRight.
Accelerating demand for DermaPure The company started 2018 by refining its marketing strategy for DermaPure, and the acceleration of growth from 53% in FY17 to 79% in FY18 shows the benefit. The direct marketing reps now adopt a ‘narrow and deep’ approach, driving advocacy and penetration by KOLs in targeted institutions. This is complemented by a strategic collaboration with ARMS Medical, a specialist distributor in the urogynaecology segment. Demand for DermaPure has meant that Tissue Regenix is planning to increase its manufacturing output by introducing a second shift at the San Antonio facility in Q119.
Major strategic partnership to underpin growth in orthopaedics Tissue Regenix signed an initial agreement with Arthrex for the distribution of select BioRinse products under their own brand ‘Allosync’ in the US, and expanded the relationship in November to include pan-European distribution of the BioRinse portfolio. These agreements with Arthrex, a global leader in the field of sports medicine, should lay the foundations for the sustained growth of Tissue Regenix’s orthopaedic division.
Valuation maintained at 20.9p/share We shall review our valuation and forecasts when Tissue Regenix reports its FY18 results in March, but for now maintain our valuation at £245m (20.9p/share) and our estimates. However, we note that sales were ahead of our estimate (£11.6m vs £10.8m) and tight control of costs, resulted in a stronger cash position at year-end than we forecast (£7.8m vs £7.0m).

Update

20 February 2019


Price	5.75p
Market Cap	£67.4m
Enterprise Value	£59.6m
Shares in issue	1,171m
12 month range	5.5-12.2p
Free float	14.4%
Primary exchange	AIM London
Other exchanges	N/A
Sector	Healthcare
Company Code	TRX

Corporate client	Yes

Company description

Tissue Regenix Group is a regenerative medicine company with a portfolio of soft tissue and bone products and two proprietary platform technologies, dCELL, and BioRinse. Applications include wound care/general surgery, orthopaedics, sports medicine, and dental. Commercialisation of the leading products are underway.

Analysts

Mick Cooper PhD
mcooper@trinitydelta.org
+44 (0) 20 3637 5042

Lala Gregorek
lgregorek@trinitydelta.org
+44 (0) 20 3637 5043

Exhibit 1: Summary of financials

Source: Tissue Regenix, Trinity Delta Note: Adjusted numbers exclude exceptionals. * FY15 refers to the 12 months ending on 31 January 2016; **FY16 refers to the 11 months ending on 31 December 2016 The short-term debt in FY19 and FY20 are indicative of the company’s funding requirement.

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Source: Trinity Delta 111 months to 31 December 2016; 2 The cash position in 2019 includes a capital raise of £2m. Adjusted numbers exclude exceptionals.

Exhibit 1: Summary of financials

Source: Tissue Regenix, Trinity Delta Note: Adjusted numbers exclude exceptionals. * FY15 refers to the 12 months ending on 31 January 2016; **FY16 refers to the 11 months ending on 31 December 2016 The short-term debt in FY19 and FY20 are indicative of the company’s funding requirement.

Source: Trinity Delta ¹11 months to 31 December 2016; ² The cash position in 2019 includes a capital raise of £2m. Adjusted numbers exclude exceptionals.