Aurora Spine is now a game changer (OTCMKTS:ASAPF)

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Aurora Thorn (OTCQB: ASAP) (TSXV:ASG: CA), is a minimally invasive spinal implant technology company that I featured at Seeking Alpha in this article. The stock price is around 40% lower since this article was released in May 2021, but the stock price is bouncing back and has gained 30% since my previous update published in June. The initial price decline was accompanied by unfavorable market conditions relative to microcap growth stocks and the recent uptrend reflects Aurora’s progress in its transformation from a third-party reseller to a market-changing organics company. given.

Investment thesis

The record revenues recorded in Q1 It was the first time the company had shown higher organic product sales than third-party sales. Since then, the company has won FDA 510(k) approval for two products, a second DEXA platform product and an advanced sacroiliac joint (“SI joint”) device. The DEXA platform and joint SI device are game changers, with a strong backbone provided by the company’s other two core products, SIP and SILO.

DEXA platform

Dawn patented DEXA technology is used to determine a patient’s bone density, which is then matched to the material of implant design to improve fixation and promote healthy bone growth, as described in this study. It’s important to note that doctors are very familiar with DEXA, but Aurora has acquired the patent and is the only company to offer bone-matching implantable devices.

The company has received FDA 510(k) permission for DEXA-C, a cervical cage, in August 2022. DEXA-C was introduced on a limited basis with only two doctors involved. The product introduction is now in beta with ten participating physicians and will enter full commercial phase this month.

The Company’s Second DEXA Technology Product, DEXA-L, a Lumbar Interbody Spinal Fusion System, Received FDA 510(k) permission in June. Each Aurora device requires a kit necessary for the preparation and installation of the device. Aurora said it now has 40 DEXA-C kits ready to ship, with the first DEXA-C procedure scheduled for December.

I expect DEXA-L to receive a similar market reaction to DEXA-C when introduced, gaining quickly 8% of Aurora’s total sales. The company plans to add additional products using DEXA technology, as well as license the technology to third parties for uses outside of its core spine surgery competency, such as for dental and replacement appliances. of the knee. I believe the DEXA platform will be Aurora’s flagship product and cross-sell its other products.

SILO TFX

Aurora’s Allograft-Free Titanium Device Named SILO TFX Obtained FDA 510(k) permission last month. SI-Os (SIBN) is currently the market leader in minimally invasive sacroiliac joint (“SI joint”) devices. The SI-Bone device requires three incisions and three devices. The SILO TFX is a game changer as it only requires one incision and one device. Fewer incisions reduce the cost, complications and time of surgery.

SI joint fusion is in the early stages of being established as a preferred solution treatment alternative to invasive surgery for back pain caused by a ruptured SI joint. SILO TFX patients are seen on an outpatient basis for a procedure that lasts approximately one hour. The patient is able to walk immediately after the procedure.

TFX will have a slower rollout than DEXA products because doctors are familiar with DEXA technology and don’t need training. Aurora hosts monthly physician training programs for its ZIP and Silo products and will now add TFX training. A DEXA version of the TFX device is expected to be introduced next year.

TFX sales will benefit from a new code for insurance reimbursement that requires transfixation of the SI joint. This will eliminate many competitive SI seal devices that do not meet this requirement. An explanation of how Aurora’s devices meet the requirement is included in this recent interview (approximately 8 minutes) with Aurora CEO Trent Northcutt.

ZIP*: ENGLISH

Aurora’s first biologic product, ZIP, received 510(k) clearance from the FDA in 2013 and became commercially available in 2014. The ZIP is a minimally invasive device, requiring no medical screws and a single incision. For a more detailed description of Zip devices, please see my previous articles or the Company Website.

ZIP was Aurora’s flagship product, accounting for nearly 31% of total sales in the second quarter. Aurora recently increased the total addressable market for ZIP by obtaining additional FDA clearance for the ZIP device, allowing physicians to treat patients with lumbar spinal stenosis with the ZIP implant device. ZIP sales are also supported by strong early results from a clinical study which demonstrated that the ZIP was effective in relieving pain in 64% of patients who received the device, exceeding the 50% success threshold.

SILO

It’s likely that TFX will cannibalize sales and eventually replace Aurora’s SILO-C, a allograft device that fuses the pelvis to the joint, requiring no screws. The TFX provides better fixation because it uses two screws and the titanium lasts longer than the allograft material. SILO-C accounted for nearly 24% of total sales in the second quarter.

BUZZ

In the interview quoted above Aurora CEO Trent Northcutt has revealed there is interest in his company’s products from industry giants who tend to acquire small companies with disruptive products, as well as the interest of some analysts. There is also a lot of buzz on social networks. Do a LinkedIn search on Aurora Spine and you’ll find recommendations from physicians who have attended an Aurora training session, gone home, become clients, and have endorsed Aurora Spine on LinkedIn.

The buzz is being generated because Aurora offers superior products in a fledgling industry. Aurore received the Best Spine Technology Award for its DEXA technology at the North American Spine Society’s annual event last week. Benefits of non-invasive benefits include less procedure time, less pain, fewer side effects for the patient and faster recovery time for the patient translate into the growth Surgical Centers in the United States Today there are roughly the same number of surgical centers as there are hospitals. Aurora Spine has already captured the largest pain surgery center in the United States, National Spine & Pain, as a client.

I included this section because where there is smoke, there is usually fire. Aurora is attracting attention from circles important to the success of its product as well as the success of the stock price.

finance

There are approximately 67 million shares outstanding. The market cap is around $27 million. The company recently reported approximately $1 million in cash and $3 million in debt, giving an EV of $29 million. There are approximately $4 million in accounts receivable reported at the end of the second quarter.

The company reported about $4 million in revenue for the second quarter and nearly broke even. Spending will now be reduced as the company currently has no products in the regulatory approval process and kits for its new DEXA product have already been paid for. Expanding the marketing of the two DEXA products and the TFX product should easily propel the business into profitability and, in my opinion, should at least double revenue over the next 12 months, which translates into a price ratio /futures sales of just over 1X ($32m revenue / $29m market cap).

Risks

The company has experienced delays due to supply chain issues, like many other companies. The supply chain bottleneck seems to be less prevalent, but the company could have a titanium supply problem in the future, as almost half of the world’s titanium comes from Russia and Ukraine. war-torn. The company bought titanium ahead of its needs to avoid a future supply problem, but there is no way of knowing how long the dispute between the two nations will last.

Collection turnaround time is a major concern for a company with as little cash as Aurora. The reported AR is significant and worth monitoring to see if the AR is reduced in the future. At this point, this is not a significant consideration because Aurora has not reported any outstanding accounts and because hospitals have been known to stretch payments due to low profit margins in the hospital industry.

Conclusion

Aurora posted record revenues before both DEXA products and the new TFX product were fully rolled out to the market. The investment thesis of this article is that these three new products are game changers. The company is on the verge of achieving profitability. The stock is selling at a modest valuation and is expected to revalue as new product sales increase.

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