Tissue Regenix Group Plc (LON:TRX) is no longer an R&D play. Its dCELL® technology enables production of ‘like-for-like’ tissue specific, structure-preserving scaffolds that have been validated in multiple clinical settings. Following the US launch of DermaPure®, we expect a series of further product launches over the next two years in Orthopaedic Sports Medicine and heart valve replacement, substantial markets with significant unmet medical need. The company continues to build long term value despite short term monthly cashburn of ~£0.8m. An NPV of 42p is driven by 3 core product areas; the true value of the platform & product streams has still to be elucidated.
► Strategy: To build a regenerative medicine business with a portfolio of products using the dCELL platform, underpinned by compelling clinical and economic outcomes designed to drive higher adoption rates, whilst retaining the strategic and corporate flexibility that the four therapeutic corporate entities provide.
► Commercial traction building: Primary focus is on the commercial roll-out of DermaPure in the US although near term catalysts include the 2016 launch of OrthoPure XM/XT for the treatment of meniscal tears and tendon repair in Europe as well as the US launch of OrthoPure human tissue variants.
► Valuation: Key milestones driving near-term valuation include the 510(k) approval of SurgiPure XD, evidence of revenue momentum and surgeon adoption of DermaPure as well as the EU launches of OrthoPure XM/XT and CardioPure HV with commercial partners.
► Risks: Clinical and regulatory (three outstanding clinical trials in order to achieve approvals), financial (further funding for OrthoPure US trial costs but these could be through partnerships) and commercial (rollout of DermaPure in the US) but mitigated by hybrid sales strategy.
► Investment summary: TRX is building long term value with three clear value drivers: wound care in commercialisation, sports medicine in regulatory phase, and cardiac in late clinical, all the time de-risking the business for the investor as well as any potential acquirer. As with many technology rich/platform companies, the inherent value lies in terminal value of such cashflows. The probability adjusted NPV is 42p.
