Why Aroa is pushing ahead with its IPO despite pandemic – The Australian Financial Review

"When COVID came along we really weren't sure how things would pan out ... but we were less impacted than we thought we'd be ... in that sense there is ongoing demand, but we will have some lumpiness."

Aroa filed its prospectus to list this week, intending to start trading on July 30. The float is being managed by brokers Wilsons and Bell Potter.

We've been able to provide a leading biologic that's 20-60 per cent less expensive.

Brian Ward, Aroa Biosurgery CEO

The New Zealand company has created a biological scaffold from sheep forestomachs, which helps the body to grow new tissue that's been lost due to disease or injury.

The business gets access to the forestomachs from sheep that have been killed for food and the product would have otherwise gone to waste.

Its Endoform products are already in use in more than 600 hospitals and have been used in 4 million surgeries to date.

At the moment the company has scaffolds on the market that can be used to help heal diabetic ulcers, hernias and wounds.

In the year to March 31, the business recorded $NZ25 million ($23.4 million) of revenue and a loss after tax of $NZ6 million.

Mr Ward said the product's advantage over other biological scaffolds on the market was that they were cheaper but just as effective, if not more.

"We have a very efficient large-scale process that's able to produce the material very cost-effectively and in doing that, it's also just a really high-quality product," he said.

Mr Ward says Aroa's biological scaffolds are cheaper and at least as effective as any others on the market.

"We purify it in a gentle way that preserves the biology of the material, having invested significant time and resource into that process in the past 11 years.

"To date, other biologic materials have been limited because they're very expensive, but we've been able to provide a leading biologic that's 20-60 per cent less expensive, letting more patients get access to it."

To date the company has raised about $NZ30 million from venture capitalists and wealthy investors in New Zealand and Australia.

As part of the float, the company will issue 40 million new shares at 75 a share, raising $30 million, while existing shareholders will sell $15 million worth of shares.

After the float, Mr Ward will retain an 11 per cent stake.

Mr Ward started his career as a veterinary surgeon before moving into the life sciences sector, taking on roles with Baxter and SmithKline Beecham. He has also managed investments into New Zealand technology companies for the Foundation for Research Science and Technology.

After becoming interested in regenerative medicine, Mr Ward spent eight years developing the Endoform product before launching commercially in 2016.

Its products have been peer-reviewed and have regulatory approval in 37 countries. Its biggest market is the US, where it sells its products directly as well as through NASDAQ-listed TELA Bio.

The total addressable market for its current products is estimated to be $US1.5 billion ($2.2 billion), but it has more products in its pipeline targeted at things such as complex wounds and breast surgery that it expects will grow this by an additional $US1 billion.

Aroa competes with fellow ASX-listed biotech company PolyNovo, which in early 2019 traded at only 60, but now fetches about $2.45 a share and has a market capitalisation of $1.6 billion.

Mr Ward said the capital raised through the IPO would help it expand its commercial team in the US.

"We see a great opportunity for us to really develop a leadership position at the advanced end of this market," he said. "We believe we can be the leading regenerative medicine company."

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Why Aroa is pushing ahead with its IPO despite pandemic - The Australian Financial Review