Tissue Regenix Group plc

('Tissue Regenix', 'Group' or the 'Company')

Final results for the year ended 31 December 2022

Annual Report and Notice of AGM

Tissue Regenix (AIM: TRX), the regenerative medical device group, announces its audited results for the year ended 31 December 2022, having delivered on its strategy for growth whilst achieving strong commercial traction. Across the period Tissue Regenix has improved margins, recorded over 20% revenue growth and reported positive Adjusted EBITDA for the first time in the fourth quarter of 2022, illustrating it is well positioned to drive profitable and sustainable growth.

Financial Highlights

·    Group revenues increased by 24% to USD24,476k (2021: USD19,746k)

o  BioRinse^® increased 26% to USD16,049k (2021: USD12,711k) driven by growth across the allograft segments

o  dCELL^® increased 25% to USD5,301k (2021: USD4,246k) as the effects of the commercial reorganisation in 2022 gained traction

o  GBM-V increased 12% to USD3,126k (2021: USD2,789k) (24% constant currency), driven by increased donor tissue supply

·    Gross profit of USD11,258k (2021: USD8,476k). Significant improvement in gross margin - 46% (FY 2021: 43%) due to a price increase in the BioRinse segment and further efficiencies

·    Positive Adjusted EBITDA for fourth quarter of 2022 due to sales growth and tight expense management

·    Cash position at 31 December 2022 of USD5,949k (2021: USD7,709k) to support the current business growth plan

Operational Highlights

·    Addition of VNEW™ Fascia Lata product for the Group's Urological/gynaecological partner ARMS Medical

·    Distribution agreements and initiation for OrthoPure^® XT in Italy, Germany, and agreement for China and Hong Kong (post-period end)

·    Increased efficiencies in donor processing provide for a c. USD10.0m additional sales revenue potential from the Group's existing footprint. Phase 2 expansion now not required until 2025

·    124% more donors sourced to increase supply and meet the needs of the Group's commercial partners

·    Commercial reorganisation of dCELL division has begun to show benefits with renewed sales growth, as well as 41 new distributors hired and trained

·    Identified and are in the process of establishing a third-party logistics provider to provide distribution services to the European Union and the UK

Post-period Highlight

·    The Group revised and expanded its credit facility to USD10,000k (from the current USD5,000k), and the credit facility term has been extended to 2028

Jonathan Glenn, Chair of Tissue Regenix, commented: "During what has been a year of immense progress with some notable milestones achieved, we have continued to demonstrate and realise operational and commercial growth. This has been the result of our continued focus on our 4S strategy - Supply, Sales Revenue, Sustainability and Scale. We have experienced over 20% revenue growth across the Group, resulting in a positive adjusted EBITDA for the fourth quarter of 2022. Execution of this strategy will continue to provide us with the opportunity to build shareholder value as we broaden our opportunities in regenerative medicine, addressing many critical unmet clinical needs around the globe."

Annual Report and Accounts and Notice of AGM

As part of the Company's move to electronic reporting, the Annual Report and Accounts, notice of AGM and accompanying form of proxy, will be available later this morning on the Company's website, www.tissueregenix.com, in accordance with AIM Rule 20. For those who opted to receive hard copies of the Annual Report, these will be posted today.

The Company's AGM will be held at DLA Piper, 160 Aldersgate St, Barbican, London EC1A 4HT, on 27 April 2023 at 1.00 pm. Shareholders are invited to ask the Board questions about the Accounts or the AGM by email emailing Walbrook PR at [email protected]. 

The results of the votes on the proposed resolutions will be announced by RNS as soon as practicable after the conclusion of the AGM.

Proposed Share Consolidation

The Company currently has 7,035,794,890 Existing Ordinary Shares of 0.1 pence each in issue. The middle market share price of each Ordinary Share as at close on 20 March 2023 was 0.605 pence, giving a market capitalization of £42.57 million. The Directors consider that the number of Existing Ordinary Shares is not only unwieldly in volume for a company of Tissue Regenix's market capitalisation, but when combined with the prevailing share price, is not conducive to an orderly market. The Directors believe that both these factors may have the potential to cause a de-stabilising effect on the share price due to small trading volumes having a disproportionate effect on share prices.

The Board believes that a consolidation of the Company's Ordinary Share Capital will result in a more appropriate number of shares in issue for the Company. Accordingly, the Board has proposed a capital reorganisation in early 2023, which will result in shareholders holding one new Ordinary Share for every 100 existing Ordinary Shares ('the Consolidation').

The Board anticipates that the Consolidation may also help to make the Company's shares more attractive to investors and may result in a narrowing of the bid/offer spread, thereby improving liquidity.  

For the avoidance of doubt, there is no present intention to raise any equity capital or issue any further shares in relation to our growth plans as Tissue Regenix is more than adequately funded to execute on its strategy.

Investor Briefing

Daniel Lee, Chief Executive Officer, and David Cocke, Chief Financial Officer, will host a live online presentation relating to the final results via the Investor Meet Company platform at 1.30pm on Thursday 23 March 2023. The presentation is open to all existing and potential shareholders.

Investors can sign up to Investor Meet Company for free and register for the presentation here: https://www.investormeetcompany.com/tissue-regenix-group-plc/register-investor

Investors who already follow Tissue Regenix on the Investor Meet Company platform will be de facto invited.

For more information:

About Tissue Regenix (www.tissueregenix.com)

Tissue Regenix is a leading medical device Group in the field of regenerative medicine. The Group's patented decellularisation technology ('dCELL®') removes DNA and other cellular material from animal and human soft tissue, leaving an acellular tissue scaffold which is not rejected by the patient's body and can then be used to repair diseased or damaged body structures. Current applications address many critical clinical needs in sports medicine, foot and ankle and wound care.

In August 2017, Tissue Regenix acquired CellRight Technologies®, a biotech company that specialises in regenerative medicine and is dedicated to the development of high quality, innovative tissue scaffolds, which can enhance healing opportunities in defects created by trauma and disease. CellRight®'s human tissue products may be used in spine, trauma, general orthopaedic, dental and ophthalmological surgical procedures.

Joint Chair & CEO Statement

2022 performance          

2022 has been a solid year of growth, marked by achieving several new milestones for the Group. As we had forecast, our top-line revenues exceeded the prior year and continued a positive growth trajectory. Our three main business units all demonstrated growth building on the strong and sustainable market position we have built for our company. As a result, the Group has demonstrated sales growth greater than its peers over the past three years and succeeded in meeting market expectations. This is despite the significant headwinds faced by commercial healthcare organisations in 2022. We are pleased that the Group continued to execute on its plans to deliver further operational and commercial growth. We have continued to expand our distribution network with new products and increased the number of strategic partners and distributors we work with to broaden the adoption of our innovative products. All of this could not have happened without the talented and dedicated employees of the Group, which we would like to thank for their hard work.

Strategy

Our focus remains on the 4S strategy which continues to be the foundation for how we operate, execute and drive our growth:

·    Supply - highlighted by the fundamental ability to source donor tissue and having the capacity to produce various graft products

·    Sales Revenue - to distribute the finished grafts to the clinicians and institutions that need these products to treat patients

·    Sustainability - to manage sales revenue along with expenses to be a profitable entity that does not need additional external capital to operate

·    Scale - to utilise the first three S's to continue to invest in and grow the business, license or acquire new products, technologies and companies

We believe any significant issues with tissue supply are now behind us and have stabilised, given that capacity has been increased to service our needs through to 2025. Our sales growth continues across all divisions, highlighted by achieving an important milestone for the Group of an adjusted EBITDA profitable fourth quarter of 2022. Sustainability remains a key focus and by delivering this we will create new opportunities for the Group with respect to scale, internally and externally.

BioRinse

Through a primary focus on the United States ('US') orthopaedics and dental markets, our BioRinse portfolio reported a strong performance in 2022 with sales of USD16,049k (2021:USD12,711k). The 26% growth was led by confidence in our ConCelltrate® demineralised bone matrix, and AmnioWorks™ birth tissue product families. Our strategic partners continue to have confidence in the superior performance of our products and our ability to deliver products in the required quantities and timeframes due to our elevated processing capacity. Since the completion of the Phase 1 expansion, we have been able to supply products and adjust to unanticipated customer needs in half the amount of time. Achieving these service levels with our partners and distributors across all the surgical specialties we serve (orthopaedics, sports medicine, spine, dental, trauma, others), has earned us a solid and much improved reputation in the industry. Our growth rate is above the market rate for the period (see Market Overview for more details on underlying market growth rates), with our top five product families demonstrating a greater than 18% year-on-year revenue growth. We believe we are taking market share, with the opportunity to deliver further significant and sustainable growth in the years ahead. 

Our additional capacity provides for further opportunities both in the US and the rest of the world. In the period, we began our discussions and efforts to distribute allograft tissue outside the US, identifying target markets and distribution partners. We also engaged a third-party logistics partner and began the required regulatory approvals to expand into Europe. We expect to initiate commercial distribution in select markets in 2023 and are excited about the opportunities that we can see.

dCELL

In 2022, the dCELL commercial business was restructured to bring our commercial leadership closer to our customers, distributors and clinicians. One objective was to increase our distribution footprint in areas where we had established business by adding a further 32 distributors. We exceeded that goal by adding 41 distributors by the end of the calendar year, and as a result sales revenue for this division was USD5,301k (2021:USD4,246k) an increase of 25%. The demand for dCELL products with our urological/gynecological partner increased during 2022 driven by continued market penetration of Dermapure, non-oriented DermaPure and increased utilisation of the pre-shaped VNEW product. We launched VNEW™ Fascia Lata in late 2022 and anticipate this product will develop significant traction in 2023.

During the period, the market for elective surgeries in the EU rebounded, so our efforts to set up distribution of OrthoPure XT started to gain momentum. OrthoPure XT is the only non-human biologic tissue graft available to the market for certain anterior cruciate ligament reconstruction procedures. This product was introduced into Italy and Germany in 2022 and we expect more significant revenue contributions in 2023.

Advancing the clinical science of a new and novel product such as OrthoPure XT provides benefits to growth in the product's life cycle. In April 2022, the four-year clinical experience with OrthoPure XT was presented at the 20th European Society of Sports Traumatology, Knee Surgery & Arthroscopy Congress in Paris. The continued positive long term safety and performance of OrthoPure XT has important implications in this high demand application. A manuscript on the five-year clinical experience is in preparation and planned for submission to a major European publication.

GBM-V

The GBM-V joint venture operates in a Good Manufacturing Practices facility which has been producing commercial corneal products since 2016. In 2022, the combination of increased supply and yield improvements resulted in the achievement of a record year of distributed corneal grafts, with revenues up 12% (up 24% at constant currency) to USD3,126k (2021: USD2,789k).

New strategic partners and distributors

We continued to meet operational milestones, support the growth of our commercial partners and secure additional strategic partnerships or distributorships in 2022.

For BioRinse, our top customers change annually due to market dynamics but we continued to bring on additional strategic partners and distributors, signing 10 agreements in 2022, for specialties such as spine and dental. Across the BioRinse portfolio we experienced a 5% increase in the number of orders we processed.

For dCELL, we increased the number of distributors, substantially ahead of our internaltargets. Overall revenue was up 25% versus prior year and neared the levels seen pre-pandemic. Orders for dCELL products increased by 20% versus the prior year which translated into 29% more units shipped. The addition of new distributors also enabled us to penetrate existing accounts more deeply, with revenue up 80% in some existing hospital systems.

In 2022, we introduced VNEW Fascia Lata produced for our Urological/gynaecological partner ARMS Medical. The fascia lata tissue is underutilised so this product enabled us to use tissue which would otherwise be discarded and meets with our mission of maximising the gift of human tissue donation whilst also helping us to improve our gross marginThis type of tissue is used as a sling in stress urinary incontinence procedures, which affects about 10% of the female population. We currently await the introduction of two other new products through our strategic partners.

The pandemic impacted the launch of OrthoPure XT into the UK and selected European markets, however the market for elective surgeries in the EU has rebounded since, and our efforts to setup distribution of the product has started to gain momentum. In March 2022, we signed an agreement with Geistlich Biomaterials Italia, a subsidiary company of Geistlich Pharma AG, which included a commitment to advance the clinical science for OrthoPure XT. Sales and clinical use of OrthoPure XT have begun in Italy and initial feedback has been positive. In November 2022, we signed an agreement with 2Med GmbH to be our exclusive distributor in Germany and we filled an initial stocking order. To aid us in bringing on distribution partners as part of our European growth strategy, we have engaged a seasoned sports medicine commercial consultant to identify these partners for OrthoPure XT.

Post year end, we signed an agreement with Kingsung Medical Group ('Kingsung') for the exclusive distribution of OrthoPure XT into China and Hong Kong. As part of the agreement, Kingsung will share the cost to obtain regulatory approval in China. It is estimated that the current market for ligament reconstruction procedures in China and Hong Kong is approximately 200k - 250k procedures and growing. This opportunity compares favourably to the size of the United States market, with ligament reconstruction procedures there estimated to be in the range of 250k-400k.

Further product line extensions or product improvements are anticipated during 2023 which will continue to drive our organic growth, efficiently utilising our facility and tissues and supporting the commercial efforts of our organisation and strategic partners.

Operations

2022 was a successful year for the Group following the completion of the Phase 1 capacity expansion programme in San Antonio in 2021, which provided additional space for donor storage, processing and production, and distribution and laid the foundation for future growth.

To meet the need of our commercial partners and our focus on supply, in 2022 we sourced 124% more donors overall. Though we processed fewer Musculoskeletal donors in 2022, our capacity shifted to the fluctuating demands for Dermis and Amnion where processing increased by 135% and 130%, respectively.

The additional capacity for storage has alleviated our concerns for tissue supply for use in producing products. In 2022 we implemented a programme to help us manage the inventory of released donor tissue by making some of it available to other processing companies, subsequently establishing a number of ongoing relationships with other tissue processors. This programme aligns with our responsibility to honour the gift of tissue donation through utilisation in a timely manner for products that can help patients.

Following the addition of two sterile packaging rooms at our San Antonio facility, we have realised some unanticipated gains to our overall capacity for processing and production. This additional capacity is estimated to add c.USD10 million of revenue generation potential. This has effectively delayed our need for the 10 additional clean rooms in the Phase 2 expansion from 2024 until 2025. The expansion has also provided more flexibility in terms of how we can schedule processing and production. As a result, we have been able to respond to orders or unanticipated changes in almost half the amount of time required prior to the Phase 1 expansion.

All of the Group's tissue operations in the US are regulated by the Food and Drug Administration ('FDA') and need to comply with American Association of Tissue Banks ('AATB') certification requirements. Following reinspection by the AATB, we received recertification in December 2022 till March 2025.

Our UK Operations in Garforth received ISO 13485 recertification in January 2022 and also completed a surveillance audit by our notified body. As a result of a change in medical device regulation in the European Union from the Medical Device Directive to the Medical Device Regulation ('MDR') our UK team submitted our MDR update in mid-2022 and have been informed that review will not begin till mid 2023 due to the backlog created by the MDR requirement. The team has processed and shipped the OrthoPure XT device to meet the commercial demands of our European partners.

The impact of the pandemic

The prolonged effects of the pandemic are evident and we still see issues with staff shortages at healthcare institutions impacting elective procedures and we are still seeing component and material supply chain issues affecting our operations or those of our material or equipment providers due to global supply issues. These supply chain issues have indirect effects as they have also lengthened the timelines of our third party vendors and services. Wage inflation and the tight labour market have made it competitive for all to retain or recruit talented personnel. Our resilience and resourcefulness will continue to minimise the impact of any lasting pandemic related issues.

Organisational changes

In January 2022 Kirsten Lund was appointed into the Europe, Middle East and Africa ('EMEA') Business Director role and remains as our Corporate Secretary. Capitalising on her experiences within the organisation, Kirsten will coordinate and drive our efforts to establish commercial distribution focused in the EMEA region.

We will continue to invest in resources which will grow our organisation across all divisions. Additions to our commercial team in BioRinse and dCELL will bring further opportunities to our organisations and spread our footprint in the US and the rest of the world.

Outlook

We will continue to build on our 4S Strategy to provide a solid foundation for the future, with sales revenue and sustainability becoming the priorities in 2023. The Group is well prepared for additional market fluctuations as markets continue to normalise post-pandemic.

The BioRinse products will remain the dominant revenue contributor in 2023 whilst growth will come from existing and new partners as well as new products. We anticipate significant growth from our dCELL as we continue to invest and expand into markets which historically have been underrepresented, while our GBM-V joint venture consistently identifies opportunities to increase its tissue supply or other opportunities to maintain growth.

Our geographic outreach with our human tissue dCELL and BioRinse portfolios will expand as we sign agreements with additional distributors. Alongside this, OrthoPure XT will be introduced into additional EU and other markets in 2023.

In 2023, we aim to pursue the commercialisation of those products which utilise our core technology platforms, provide product line extensions that are fast to market, and address a specific clinical or commercial need. Whilst we will continue to assess when we need to invest in further capacity expansion, we will develop further efficiencies and be creative in our business practices, whilst looking at all opportunities to scale the business for additional longer term growth.

A combination of the team that we have in place; the products we currently have and the pipeline of new products we are developing; the commercial relationships we have and the distribution base that we have established all give the Board optimism about the future, both short and long term, for the Company. We believe that we are extremely well positioned to take advantage of the opportunities in front of us and to create a profitable, sustainable, cash generative company for shareholders.

We are all excited by the significant opportunities.

Jonathan Glenn

Chair

Daniel Lee

Chief Executive Officer

20 March 2023