CellRight: Transforming US growth prospects

TRX has a broad portfolio of regenerative medicine products developed from decellularised human and porcine soft tissues for the wound care, orthopaedics, and cardiac markets. Since launch of DermaPure, the focus has been on increasing penetration of the US woundcare market to access both in- and out-patient populations, via GPOs and Medicare, respectively. To accelerate growth in the US, TRX has announced the acquisition of CellRight Technologies, which has a synergistic regenerative technology based on bone. To fund the acquisition and provide more working capital, the company has raised £40m (gross) of new capital.

• Strategy:  To build a regenerative medicine business with a portfolio of products using the proprietary dCELL platform, underpinned by compelling clinical and economic outcomes to drive higher adoption rates, whilst retaining the strategic and corporate flexibility that the three therapeutic corporate entities provide.
• CellRight:  TRX has announced the acquisition of CellRight Technologies in San Antonio, Texas, for $30m/£23m, providing immediate and greater exposure to the US orthopaedic market. TRX is paying 4.4x and 12.5x prospective sales and EBITDA, respectively, for a business that has been trading profitably since 2014.
• Capital increase:  Concomitantly, TRX has raised £40m of gross new funds via an institutional Placing and directors’ Subscription @10p per share in order to make the acquisition and to fund its working capital requirements for the next 15 months.
• FY 2016 results:  TRX has changed its accounting reference date from January to December to be in line with its international MedTech peers. Recent results were the first since the change, covering the 11 months to end-Dec’16. Sales were driven by DermaPure in the US, which grew an estimated +79% pro forma.
• Investment summary:  TRX is building commercial momentum through three clear value drivers: sales of DermaPure in US; regulatory submission of OrthoPure XT in EU; and agreement of a joint venture for commercialisation of woundcare and cardiac products in Europe. Pro forma comparisons with and without CellRight, and likely reported numbers including CellRight, are provided.