Continuation of the positive momentum

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 regenerative medicine products for the biosurgery, orthopaedics and dental markets. 1H’23 results highlighted the benefits and efficiencies being derived from investment and reorganisation in manufacturing capacity, with the first underlying EBITDA-positive reporting period. With further strong growth forecast in 2H’23, TRX is on the cusp of achieving profitability. Phase 2 of its capacity expansion programme is now expected to be completed in 2025.

• 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.
• 1H’23 results: Underlying sales rose 19%, to $14.1m ($11.8m). Growth was derived from its core BioRionse and dCELL divisions. Operating efficiencies and tight cost control saw TRX become EBITDA-positive in 1H’23. Gross cash at the period-end was $4.1m.
• Outlook: These results demonstrate the success of TRX’s “4S” strategy to drive sales growth and sustainability. Although the main focus remains the US, TRX is looking to extend its geographical reach through commercial distribution agreements elsewhere, making the company profitable and cash-generative.
• Risks: There remain localised issues with respect to the number of elective surgical procedures, staff shortages in healthcare institutions and supply chain issues, although investment in capacity by TRX has mitigated some of these risks. Also, TRX is not immune from global economics and wage inflation.
• Investment summary: TRX has now been EBITDA profitable over the past 12 months. Continuing the positive momentum will see the company report its first full year of EBITDA profitability in 2023, which will be a significant milestone. Three more six-month periods of consecutive growth will generate overall profitability. An EV/sales multiple of 4x 2024E sales generates a valuation of $138m/£110m, which suggests significant upside potential.