Since reporting its last set of full-year results on July 10, the AIM-listed shares have rallied by over 38% in the past month to 3.65p currently, taking year-to-date gains to a third, although over a one-year view, the stock is still down around 25%.
The regenerative med-tech group saw its underlying losses (LBITDA) widen slightly in the 12 months ended March 31 to £1.58mln, up from a £1.26mln loss a year earlier.
The increase came after the loss of contracts with four key customers – valued at over £800,000 a year – meant its full-year revenue slipped by 6% to £3.83mln, down from £4.09mln in 2016/17.
The company still managed to bring on board 16 new customers and signed 14 new customer agreements during the year, while last month, it signed a “major” contract which will help the top line in the current year.
The firm closed the period with just over £5mln of cash in the bank, down from £9.0mln a year earlier, but to bolster that cash position, Collagen Solutions has been restructuring its business to improve margins and solidify the trajectory to profitability.
In a statement accompanying the results, chief executive Jamal Rushdy told investors: “On the one hand, we experienced a difficult year in terms of our sales performance and the necessity to mitigate several unexpected challenges in our core business.
“However, I am pleased that our global team, and highly supportive board, faced these challenges head-on and achieved several positive outcomes during the year.”
He concluded: “I am confident the operational improvements and new organisational appointments we have made has put the Company in a much stronger position.”
Collagen has also strengthened its board and executive team over the past year to help boost its commercial expertise, appointing Louis T. Ruggiero as its chief business officer with effect from 16 April 2018.
The firm said Ruggerio had helped the firm complete its comprehensive business review and during the process, he developed a solid understanding of the company’s opportunity for growth and path to execution.
Ruggerio joined Collagen from Pearson Clinical Assessments where he served as Senior Vice President of Sales. Previously, Ruggiero spent 10 years as a Senior executive and board director in the orthopaedic device industry.
The medical-grade collagen manufacturer said Ruggiero is a “performance-driven executive with proven success at all levels of sales and general management in healthcare and technology industries.”
Restructuring in China, New Zealand
The business restructuring moves saw Collagen end its joint venture in China with distributor Cre8ive in February, taking full control of the operations in the country to give it more flexibility.
Collagen also said it engaged a specialist in matching foreign medical device companies with first-tier distributors across China to help drive sales.
Then, at the end of March, the firm unveiled a restructuring of its New Zealand operation designed to see the division focused on tissue collection and processing, a segment estimated to be worth US$100mln.
The firm told investors that annual savings were estimated to be £200,000, balanced by one-off costs in the order of £150,000, with existing collagen production to be consolidated into Glasgow.
It said the restructuring meant it expects to reach “a profitable state more quickly than previously planned” in New Zealand.
On top of all the changes, Collagen has also made good progress on its projects, having announced successful results in February from an eight-year extension clinical study of 15 patients who received ChondroMimetic implants as a bone and cartilage scaffold for the repair of cartilage defects in the knee.
The positive results from the ChondroMimetic implants study saw the firm make an initial submission for a CE mark in Europe and provided a boost to the group’s share price.
With more than a million surgical procedures taking place each year in the US and Europe to treat cartilage defects of the knee, the market for ChondroMimetic is enormous; Collagen reckons at least 30-40% of these operations would be suitable for ChondroMimetic.
The group’s chief executive officer commented at the time: “We are excited by ChondroMimetic's progress and believe that Collagen Solutions is now in a period of solid progression which will provide future sustainable revenue generation.”
In a note at the time, ‘house’ broker Cenkos Securities pointed out that ChondroMimetic will be the start of a third leg to the business if approved.