REG - RUA Life Sciences - Trading Update

Rua Life SciencesAnnouncement

07/06/2023 07:00

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RNS Number : 8745B  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: +44 (0)1294 317073

Caroline Stretton, Group Managing Director
       Tel: +44 (0)1294 317073

 

 

Cenkos Securities plc (Nominated Adviser and Broker)      Tel: +44
(0)20 7397 8900

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-Eon(TM) 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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