Trading Update

RUA Life Sciences PLC

07 June 2023

 

07 June 2023

RUA Life Sciences Plc

("RUA Life Sciences", the "Company" or the "Group")

March 2023 Full Year Trading Update

RUA Life Sciences plc (AIM: RUA.L), the holding company of a group of medical device businesses focused on the exploitation of Elast-Eon™, the world leading long-term implantable biostable polyurethane, is pleased to provide an update for the year ended 31 March 2023, ahead of the publication of the Group's audited final results for the year ended 31 March 2023, which are expected to be released mid-July 2023.

This period has been one of sales and profitability growth in the mature business segments of Contract Manufacture and Biomaterials whilst further development and regulatory progress has been made in the Vascular and Structural Heart segments.

Trading update for the 12 months to 31 March 2023

The Group is expected to report year on year revenue growth of 34% with consolidated revenues of £2,179,000 generated from Contract Manufacture £1,625,000 and Biomaterials £554,000. Segmental reporting of the Group is now focussed on the underlying business units and it is pleasing to report underlying net profit margins (before amortisation and taxation) of 55% for Contract Manufacture and 89% for Biomaterials. Unaudited R&D expenditure of the Group is expected to be £1,070,000 (2022: £887,000), an increase of £183,000 over the preceding year, demonstrating continued investment in this area.

Overall, loss before tax for the period is expected to be similar to last year at around £2.3 to 2.4 million.

Cash resources have been prudently managed, and the balance sheet is expected to show a cash balance at the period end of £1,484,000 (2022: £2,963,000) with the cash burn reduced by the receipt of R&D Tax Credit payments which are accounted for on a cash basis.

The Annual General Meeting (AGM) is planned for Tuesday 22 August 2023. A further notice of meeting announcement will be made in due course.

Business Segments

The two core technologies of the RUA group are implantable textile expertise and the Intellectual Property within the ElastEon family of biomaterials. The business is managed on a portfolio basis with four operating segments each of which is exploiting one or both core technologies.

RUA Biomaterials

RUA Biomaterials continues to enjoy steady growth with unaudited revenues increasing 14% to £554,000. Revenues are derived from royalty and license fees associated with the Elast-Eon technology. Direct costs within this business are minimal and the business segment enjoyed high net margins of 89%. RUA considers the cash flows from the business segment as a "growing perpetuity" which at a discount rate of 12% and growth of rate 5% would value this business segment at around £7 million.

RUA Contract Manufacture

This business segment represents the third-party contract manufacturing activities acquired with RUA Medical in 2020. This business has enjoyed very good growth during the year with unaudited revenue increasing 43% to £1,625,000. Net profit margins of 55% are generated within the business unit and it continues to meet and exceed customer expectations for quality, efficiency and value for money. New and existing customers are actively reviewing projects with RUA that could double the current scale of the business over a two-year period. For review and investment purposes, management value this business on an EBITDA multiple having observed the very attractive multiples that medical device contract manufacture commands.

RUA Vascular

As previously reported, RUA has been undertaking a "pre-sub" with the FDA and RUA is delighted to report that agreement has very recently been reached with the FDA on protocols for a GLP animal trial and a human clinical trial of the RUA vascular graft. This has been a lengthy process but felt to be worthwhile as it limits the risk of the FDA asking for additional information or testing after submission. During this period of discussion with the FDA, RUA has taken the opportunity to undertake additional development and testing on the graft range with a view to improving performance and maximising manufacturing yields. A detailed work plan has been prepared for the agreed testing regime and quotations received from third party test houses for the required work. The clinical study will involve around 120 patients and further details regarding the costings and timings of this work will be announced in due course.

The other major development in the period was signing the distribution agreement with Corcym allowing direct hospital sales to be made on regulatory approval.

RUA Structural Heart 

The objectives for RUA Structural Heart for the period was to evaluate heart valve leaflet material and compare the performance of 100% polymeric valves with a novel composite developed by the Group. The computational modelling of the composite material at the design stage suggested that its mechanical properties would be ideal for heart valve leaflets and that there should not be a risk of delamination. The team within the Structural Heart business segment has very recently achieved the initial milestones set for the composite material.  The Structural Heart team has achieved the initial milestones set for the composite material and we are delighted to report that after 200 million cycles the material shows no signs of delamination and cut edges remain unchanged as a result of flex fatigue. From a performance perspective, the composite material is very thin and flexible and little energy is required to open a valve and once opened does not restrict blood flow with a good EOA (Effective Orifice Area). Testing has also demonstrated that the properties of the composite restrict crack growth even in damaged leaflets.

100% polymeric valves rely in part on the leaflet design to reduce stress and operate within the performance window of the polymer meaning that polymer would not work in all designs. The composite material retains the blood contacting properties of Elast-Eon but is significantly stronger. This creates the opportunity for RUA Structural Heart to become a supplier of heart valve leaflets to other companies to incorporate in current designs.

Bill Brown, Chairman of the Company, commented: "RUA has a portfolio of four businesses, all of which have made good progress during the period. The mature businesses are growing revenue and generating attractive net margins and the development business segments of Vascular and Structural Heart have made good regulatory and technological progress respectively on relatively low levels of investment."

Caroline Stretton, Group Managing Director, added: "This period has seen continuing sales growth from our two cash generative and highly profitable business units, RUA Biomaterials and RUA Contract Manufacturing, which underpin current Group valuation. We have continued to de-risk the regulatory process and formalised the route to market for RUA Vascular's graft range, and identified additional positive properties within RUA Structural Heart's polymeric heart valve technology platform"

For further information contact:

RUA Life Sciences

Bill Brown, Chairman                                                           Tel: [phone]  

Caroline Stretton, Group Managing Director                          Tel: [phone]

Cenkos Securities plc (Nominated Adviser and Broker)      Tel: [phone]

Giles Balleny/Max Gould (Corporate Finance)

Michael Johnson (Sales)

About RUA Life Sciences

The RUA Life Sciences group was created in April 2020 when RUA Life Sciences Plc (formerly known as AorTech International Plc) acquired RUA Medical Devices Limited to create a fully formed medical device business. RUA Life Sciences is the holding company of the Group's four trading businesses, each exploiting the Group's patented polymer technology.

Our vision is to improve the lives of millions of patients by enabling medical devices with Elast-Eon^TM, the world's leading long-term implantable polyurethane. Whether it is licensing Elast-Eon^TM, manufacturing a device or component, or developing next generation medical devices, a RUA Life Sciences business is pursuing our vision.

Elast-Eon™'s biostability is comparable to silicone while exhibiting excellent mechanical, blood contacting and flex-fatigue properties. These polymers can be processed using conventional thermoplastic extrusion and moulding techniques. With over 8 million implants and 15 years of successful clinical use, RUA's polymers are proven in long-term life enabling applications.

The Group's four business units are:

RUA Contract Manufacture:	End-to-end contract developer and manufacturer of medical devices and implantable fabric specialist.
RUA Biomaterials:	Licensor of Elast-EonTM polymers to the medical device industry.
RUA Vascular:	Commercialisation of open surgical vascular grafts and patches
RUA Structural Heart:	Development of polymeric leaflet systems for heart valves.

 

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