On pathway to sustainability

Tissue Regenix (TRX) is focused on the development and commercialisation of two proprietary processing technologies for the repair of soft tissue (dCELL) and bone (BioRinse). It has a broad portfolio of commercial regenerative medicine products for the biosurgery, orthopaedics and dental markets. 2021 results contained the early benefits of TRX’s strategic activities over the past two years – the focus on commercial relationships, capacity expansion, restructuring to service demand and recovery in elective surgeries. On the basis of continued sales progression, TRX is forecast to become EBITDA-positive in fiscal 2022 and cash-generative in 2023.

• Strategy: TRX is building an international regenerative medicine business around its proprietary technology platforms, underpinned by compelling clinical outcomes. Phase 1 of its manufacturing capacity expansion programme came on-stream in 2021 to satisfy demand from distribution partners for its innovative products.
• 2021 results: Sales in fiscal 2021 were marginally ahead of our forecasts, at $19.75m, up 20% from $16.47m in 2020. The leverage effect of a strong BioRinse sales performance (+33%) saw a marked reduction in EBIT losses in 2H’21. Gross cash at the period-end was $7.7m.
• Outlook: The 2021 performance was achieved despite the continuing impact of COVID-19 and some unforeseeable headwinds; this augurs well for the future. Progress is forecast to continue in 2022, resulting in 22% sales growth, which will drive margin expansion towards profitability by the end of 2022.
• Risks: Early signs of recovery in the number of elective surgeries in the US were dented by the delta variant, and the emergence of another variant remains a possibility. Forecasts suggest that TRX is nearing profitability and cashflow breakeven, which would eliminate any lingering concerns about the need for a capital increase.
• Investment summary: TRX has a broad portfolio of innovative regenerative products that are in demand from surgeons. Completion of Phase 1 of its capacity expansion programme has comforted distribution partners and provided positive momentum. We believe TRX is well-positioned to deliver strong sales growth, which will drive margin expansion and highlight the low rating of the shares. An EV/sales multiple of 4x 2023E sales generates a valuation of $120m/£92m.