1H’18 preview: organic plus inorganic growth

TRX has a broad portfolio of regenerative medicine products for the biosurgery, orthopaedics, dental and cardiac markets. The company has two proprietary decellularised technology platforms for the repair of tissues and bone. 2017 was a dynamic year for the group, growth being boosted by the acquisition of CellRight Technologies in August, which was borne out by the 2017 full-year results. In anticipation of the 2018 interim numbers, expected in September, we outline our forecasts for reported and pro forma sales growth. This is intended as a preview for investors, to clarify the impact of both organic and inorganic growth.

• Strategy: To build an international regenerative medicine business with a portfolio of products using proprietary dCELL and BioRinse technology platforms, underpinned by compelling clinical outcomes. TRX is looking to expand its global distribution network, via strategic partnerships, to drive sales momentum.
• Interims preview: Reported group sales are forecast to grow 273% in 1H’18 to £5.1m (£1.4m), with all three business areas contributing to growth. On a pro forma basis, as if CellRight had been acquired on 1 January 2017, the underlying growth rate is forecast to be a very respectable 33%, from £3.9m in 1H’17.
• EBITDA: Although the new management team is continuing to focus on controlling costs, a full six months of CellRight costs are included in 1H’18 and the 1H’18 SG&A number includes potential legal fees. Consequently, the EBITDA loss will rise (in 1H’18 only) to an estimated -£4.9m (-£4.8m).
• CFO: In July, TRX confirmed the appointment of a new CFO. Gareth Hywel Jones (start date 30 November) will take over from Paul Below, who is the current interim CFO. Mr Jones is joining from Applied Graphene Materials and brings a great deal of experience from UK and US listed businesses, and private equity.
• Investment summary: TRX is building commercial momentum through three value drivers: sales of BioSurgery products in the US; expansion of combined CellRight and TRX technologies in Dental, Orthopaedics and Spine; and preparation for OrthoPure XT launch in the EU in 2018. Early signs of the benefits derived from CellRight are apparent, which should hasten the time to reach sustainable profitability