Restructured to satisfy product demand

Tissue Regenix (TRX) has a broad portfolio of regenerative medicine products for the biosurgery, orthopaedics, dental and cardiac markets. It has two proprietary decellularisation technology platforms for repair of soft tissue (dCELL) and bone (BioRinse). Following the acquisition of CellRight in 2017, TRX revised its commercial strategy, to service the strong demand for its products. However, this necessitated capacity expansion and realignment of its supply chain, which affected 2019 trading and forced renegotiation of its MidCap loan arrangement. In our view, the current share price reflects TRX’s need for a capital injection.

• Strategy: TRX is building an international regenerative medicine business with a product portfolio using proprietary dCELL and BioRinse technology platforms, underpinned by compelling clinical outcomes. It aims to expand its global distribution network, via strategic partnerships, to drive sales momentum.
• Forecasts: Sales forecasts have been revised to reflect the investment in new manufacturing capacity to satisfy demand. However, refinements in the commercial model, coupled with some cost savings, have limited the impact on operating losses. Gross cash at 31 December 2019 was £2.4m.
• Expansion: Extra staff were employed to enable two-shift manufacturing. However, training time, coupled with the natural business cycle, meant the tangible benefit of this only became apparent towards the year-end. Investment in an adjacent building in San Antonio will free up space for further clean rooms.
• Risks: Although demand for its products is very positive, the above has caused some challenges, notably reorganisation of the manufacturing facility – to the short-term detriment of BioSurgery sales. The current share price, in our opinion, is reflecting the urgent need for more capital.
• Investment summary: The strategy to focus on maximising sales potential has paid off through increased demand for products. However, this has resulted in the need for an expansion of capital. Two major shareholders have sold down their holdings recently, and the ex-Woodford holding has been temporarily transferred to Link Fund Solutions. The shares are trading at a discount of 87% to the £95.8m (8.2p per share) that has been invested in the company to date.