Tissue Regenix: Faster-than-anticipated recovery

Hardman & Co

Tissue Regenix Group plc (LON: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 marketed regenerative medicine products for the biosurgery, orthopaedics and dental markets. Interim results showed early signs of the benefits of its strategic activities over the past two years – the focus on commercial relationships, capacity expansion, restructuring to service demand, and recovery in elective surgeries after the pandemic. If the demand and sales progress continues, TRX will become EBITDA- and EBIT-positive in fiscal 2022.

  • Strategy: Tissue Regenix Group is building an international regenerative medicine business around its proprietary technology platforms, underpinned by compelling clinical outcomes. Expansion of manufacturing capabilities and some recovery in elective surgeries are driving sales momentum through distribution networks and strategic partners.
  • Interims: Underlying sales in 1H’21 were ahead of expectations, rising 21%, to £6.80m (£6.09m). Currency headwinds dented the reported numbers. Increased sales, coupled with restructuring benefits, resulted in a 45% improvement in underlying EBIT, to -£1.34m (-£2.42m). Gross cash at the period-end was £6.6m.
  • Outlook: Given the strong performance in 1H’21, coupled with increased manufacturing capacity and launch of new products, there is an understandable temptation to significantly upgrade forecasts. However, while underlying prospects are positive, our numbers reflect US COVID-19-related hospitalisations.
  • Risks: There has been some recovery in the number of elective surgeries in the US, but whether the pace of recovery can continue for the remainder of 2021 remains uncertain, especially given recent US data regarding COVID-19 infections and hospitalisations. Also, reported numbers will be impacted by forex headwinds.
  • Investment summary: Tissue Regenix Group has a portfolio of innovative regenerative products that are in demand from surgeons. Recent product launches and completion of Phase 1 of its capacity expansion programme will add to the positive momentum seen in 1H’21. TRX is extremely well-positioned to deliver sales growth, which is expected to result in further forecast uplifts and a re-rating of the shares when there is more certainty about the recovery in elective surgeries.
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