AROA BIOSURGERY LIMITED — Investor Presentation 2021

Jul 28, 2021

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AROA CAPITAL RAISING
PRESENTATION
J u l 2 0 2 1 A S X : A R X
y |
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Unlocking regenerative healing for every body

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Important Notice and Disclaimer

This investor presentation ( Presentation ) is dated 26 July 2021 and has been prepared by Aroa Biosurgery Limited (NZ Company number 1980577 / ARBN 638 867 473) ( AROA , ARX or the Company ) in connection with a proposed capital raising and includes information regarding an institutional placement and share purchase plan of new fully paid ordinary shares in AROA ( New Shares ) ( Offer)

Summary information

The information in this Presentation is of a general background nature, is in summary form and does not purport to be complete. It does not contain all information relevant or necessary for an investment decision or that would be required to be included in a prospectus under the Corporations Act 2001 (Cth) ( Corporations Act ) for an offer of securities in Australia. It should be read in conjunction with AROA’s most recent financial report and other periodic and continuous disclosure announcements lodged with the Australian Securities Exchange ( ASX ) available at www.asx.com.au. The content of this Presentation is provided as at the date of this Presentation (unless otherwise stated). The information in this Presentation is subject to change without notice. No representation or warranty, express or implied, is made by AROA or any of its advisers as to the accuracy, adequacy or reliability of any information contained in this Presentation.

Not a prospectus or an offer of securities

This Presentation is not a prospectus or any other offering document under Australian law (and will not be lodged with the Australian Securities and Investments Commission ( ASIC )) or under the law of any other jurisdiction in which an offer of New Shares may be received. This Presentation is for information purposes only and is not an invitation or offer of securities for subscription, purchase or sale in any jurisdiction. The distribution of this Presentation outside Australia may be restricted by law. Any recipient of this Presentation who is outside Australia must seek advice on and observe any such restrictions. Recipients of this Presentation in Hong Kong and New Zealand, should carefully read the international offer restriction statements in this Presentation. This Presentation may not be reproduced or published, in whole or in part, for any purpose without the prior written permission of AROA.

Not for release or distribution in the United States of America

This Presentation may not be distributed or released in the United States of America or to any person acting for the account or benefit of a person in the United States of America. This Presentation does not constitute an offer to sell, or a solicitation of an offer to buy, any securities in the United States of America or any other jurisdiction in which such an offer would be illegal. The securities referred to in this Presentation have not been, and will not be, registered under the U.S. Securities Act of 1933 as amended (the Securities Act ) or the securities laws of any state or other jurisdiction of the United States of America and may not be offered or sold, directly or indirectly, in the United States of America or to any person acting for the account or benefit of a person in the United States of America, unless the securities have been registered under the Securities Act (which AROA has no obligation to do or procure) or are offered and sold in a transaction exempt from, or not subject to, the registration requirements of the Securities Act and any other applicable securities laws, of any state or other jurisdiction in the United States of America.

Each institution that reviews the information contained in this Presentation that is in the United States, or that is acting for the account or benefit of a person in the United States, will be deemed to represent (x) that each such institution or person is either (1) an institutional “accredited investor” or (2) a dealer or other professional fiduciary organised or incorporated in the United States that is acting for an account (other than an estate or trust) held for the benefit or account of persons that are not "U.S. persons" (as defined in Rule 902(k) of the Securities Act) for which they have, and are exercising, investment discretion, within the meaning of Rule 902(k)(2)(i) of Regulation S, and (y) agree that it will not forward or deliver this Presentation, electronically or otherwise, to any other person.

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Not financial or product advice

This Presentation does not constitute financial product or investment advice or a recommendation to acquire securities in AROA. It has been prepared without taking into account the objectives, financial situation or needs of individuals. Each recipient is solely responsible for forming its own opinions and conclusions on such matters and the market and for making its own independent assessment of the information provided. To the extent permitted by law, no reliance may be placed for any purpose whatsoever on the information included in this Presentation or on its accuracy or completeness. An investment in securities is subject to known and unknown risks, some of which are beyond the control of AROA and its directors, including, possible loss of income and principal invested. AROA does not guarantee any particular rate of return or the performance of AROA, nor does it guarantee any particular tax treatment. Prospective investors should have regard to the “Key Risks” section in this Presentation when making their investment decision. Cooling off rights do not apply to the acquisition of the New Shares.

Financial data

The historical and pro forma financial information provided in this Presentation is for illustrative purposes only and is not represented as being indicative of AROA’s views on its future financial condition and / or performance. Investors should also be aware that certain financial data included in this Presentation are “non-GAAP financial measures” under Regulation G of the U.S. Securities Exchange Act of 1934, as amended. The disclosure of such non-GAAP financial measures in the manner included in this Presentation may not be permissible in a registration statement under the Securities Act. These non-GAAP financial measures do not have a standardized meaning prescribed by New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) and therefore may not be comparable to similarly titled measures presented by other entities, and should not be construed as an alternative to other financial measures determined in accordance with NZ IFRS. Although the Company believes these non-GAAP financial measures provide useful information to users in measuring the financial performance and condition of its business, investors are cautioned not to place undue reliance on any non-GAAP financial measures included in the Presentation. All references starting with "FY" refer to the financial year for AROA ended 31 March in each year. For example, "FY2021" refers to the financial year ending 31 March 2021. Certain figures, amounts, percentages, estimates, calculations of value and fractions provided in this Presentation are subject to the effect of rounding. Accordingly, the actual calculation of these figures may differ from the figures set out in this Presentation.

Past performance

Past performance information given in this Presentation is given for illustrative purposes only and should not be relied upon as (and is not) an indication of future performance.

Future performance

The Presentation contains certain “forward-looking statements”. The words “forecast”, "expect", "anticipate", "estimate", "intend", "believe", "guidance", "should", "could", "may", "will", "predict", "plan" and other similar expressions are intended to identify forward-looking statements. Indications of, and guidance on, future earnings and financial position and performance are also forward-looking statements. Forward-looking statements, opinions and estimates provided in this Presentation are based on assumptions and contingencies which are subject to change without notice and involve known and unknown risks and certainties and other factors which are beyond the control of AROA and its respective directors and management and the Joint Lead Manager Parties (defined below), and may involve significant elements of subjective judgement and assumptions as to future events which may or may not be correct. This includes statements about market and industry trends, which are based on interpretations of current market conditions. None of the Joint Lead Manager Parties have authorised, approved or verified any forwardlooking statements. Forward-looking statements are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance. Actual results, performance or achievements may differ materially from those expressed or implied in such statements and any projections and assumption on which these statements are based. These statements may assume the success of AROA’s business strategy. The success of any of those strategies will be realised in the period for which the forward looking statement may have been prepared or otherwise. Prospective investors are cautioned not to place undue reliance on forward-looking statements. No representation or warranty, express or implied, is made as to the accuracy, likelihood of achievement or reasonableness of any forecasts, prospects, returns or statements in relation to future matters contained in this Presentation. The forward looking statements are based on information available to AROA as at the date of this Presentation. Except as required by law or regulation (including the ASX Listing Rules), none of AROA, its representatives or advisers undertakes any obligation to provide any additional or updated information whether as a result of a change in expectations or assumptions, new information, future events or results or otherwise. Indications of, and guidance or outlook on, future earnings or financial position or performance are also forward looking statements.

Disclaimer

No party other than AROA has authorised or caused the issue, lodgement, submission, dispatch or provision of this Presentation, or takes any responsibility for, or makes or purports to make any statements, representations or undertakings in this Presentation. To the maximum extent permitted by law, AROA (including its subsidiaries, related bodies corporate, shareholders, affiliates, advisers and agents):

• disclaims all responsibility and liability (including, without limitation, any liability arising from fault, negligence or negligent misstatement) for any loss arising from this Presentation or reliance on anything contained in or omitted from it or otherwise arising in connection with this Presentation;

• disclaims any obligations or undertaking to release any updates or revision to the information in this Presentation to reflect any change in expectations or assumptions; and

• does not make any representation or warranty, express or implied, as to the accuracy, reliability or completeness of the information in this Presentation or that this Presentation contains all material information about AROA or which a prospective investor or purchaser may require in evaluating a possible investment in AROA or acquisition of shares in AROA, or likelihood of fulfilment of any forward-looking statement or any event or results expressed or implied in any forward-looking statement.

Joint Lead Manager Parties

Neither Bell Potter Securities Limited nor Wilsons Corporate Finance Limited (the Joint Lead Managers ), nor any of their respective affiliates, related bodies corporate (as that term is defined in the Corporations Act), nor their respective directors, employees, officers, representatives, agents, partners, consultants and advisers (together the Joint Lead Manager Parties ), have authorised, permitted or caused the issue or lodgement, submission, dispatch or provision of this Presentation (or any other materials released by AROA) and, except to the extent expressly referred to in this Presentation, none of them makes or purports to make any statement in this Presentation and there is no statement in this Presentation which is based on any statement by any of them.

The Joint Lead Manager Parties take no responsibility for any part of this Presentation or liability (including, without limitation, any liability arising from fault or negligence on the part of any person) for any direct, indirect, consequential or contingent loss or damage whatsoever arising from the use of any part of this Presentation or otherwise arising in connection with it or the Offer. The Joint Lead Manager Parties make no recommendation as to whether a recipient or its related parties should participate in the Offer nor do they make any representations or warranties, express or implied, to any recipient concerning this Offer or any such information, and each recipient represents, warrants and agrees that they have not relied on any statements made by the Joint Lead Manager Parties in relation to the New Shares, this Presentation or the Offer generally.

Further, none of the Joint Lead Manager Parties accept any fiduciary obligations to or relationship with any recipient of this Presentation, any investor or potential investor in connection with the Offer or otherwise.

The Joint Lead Manager Parties may, from time to time, have interests in the shares or other securities of AROA, including by providing investment banking services to AROA. Further, they may act as market maker or buy or sell those securities or associated derivatives as principal or agent, and may earn brokerage, fees or other benefits from AROA. The Joint Lead Manager will receive fees for acting in their capacity as joint lead managers to the Offer.

Acceptance

By attending an investor presentation or briefing, or accepting, accessing or reviewing this Presentation, the recipient acknowledges and agrees to the terms set out in this section of the Presentation titled ‘Important Notice & Disclaimer’.

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AROA at a Glance

Well established high-growth soft tissue regeneration company

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NZ$30-33m product sales forecast for FY22[1]

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68% Gross Margin FY21, impacted by lower sales and FX

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4 million+ Procedures with AROA’s products

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AROA ECM™ platform Provides new products and line extensions year on year

6 patented Regulatory platform product families Approvals selling in United States in 49 countries 32 >US$2.5b[2] TAM ~170 Peer Reviewed Publications for existing products personnel[3]

1. Guidance subject to no resurgence of COVID-19 in the US, continued improvement in US medical procedure numbers & TELA Bio sales performance. It assumes an average $NZD-$USD exchange rate of US$0.72 2. SmartTRAK BiomedGPS data 2020; DRG Millennium Research data; Hernia Repair Devices, 2020, AROA management estimates; DRG Millennium Research, Breast Implants & Reconstructive devices, 2018 Market data was prepared before the onset of COVID-19, the economic effect of which is currently not possible to predict with any certainty. Consequently, while the Company has no reason to believe that the market data does not remain accurate based on the relevant markets operating normally, the impact of COVID-19 on the market data that is referenced is not possible to currently predict with any certainty and investors are cautioned against placing undue reliance on such data.

2. AROA NZ & US employees.

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June Quarter and Outlook

Product sales guidance reiterated of $30-33 million for FY22 (up 39-53% on FY21)[4] and gross margin above 70%

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Continued improvement seen in US medical procedure numbers

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New Myriad Morcells™product line extension launched at Society for Advanced Wound Care conference 10-14 May 2021

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Large retrospective Endoform™real-world study in diabetic foot ulcers concluded and submitted, with publication expected in September quarter

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AROA’s dead space management system targeting an unmet need with an estimated US$2.5 billion[5] market was previewed with investors and three further patents filed relating to key aspects of this technology

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Manufacturing construction progressing to plan to expand capacity from NZ$35 million to NZ$100 million in annual sales

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TELA Bio, (AROA US partner selling OviTex™and OviTex PRS™) maintains its total revenue guidance of US$27.0 million to US$30.0 million (48% to 65% over prior year period). With launch inventory levels now consumed, AROA expects ongoing shipments to TELA Bio to correspond with increasing hospital demand

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1. Guidance subject to no resurgence of COVID-19 in the US, continued improvement in US medical procedure numbers & TELA Bio sales performance. It assumes an average $NZD-$USD exchange rate of US$0.72 5. AROA management estimates

Offer Details

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Offer Overview

AROA is conducting a capital raising of up to approximately A$52 million via an institutional placement and share purchase plan at $1.165 per share

Placement	• Placement to raise up to approximately A$47 million (“Placement”) • Up to 40.5m New Shares under the Company’s existing placement capacity under ASX Listing Rules 7.1
Placement Pricing	• The offer price of A$1.165 per share (“Offer Price”) represents: o A discount of 1.7% to the last close of A$1.185 on 26 July 2021 o A discount of 4.6% to the 5-day VWAP of A$1.221 up to and including 26 July 2021
Ranking	• New Shares issued under the Placement will rank pari passu with existing Shares from their date of issue
Share Purchase Plan	• AROA intends to offer eligible shareholders an opportunity to subscribe for up to A$15,000 of New Shares under a Share Purchase Plan (“SPP”) at a price per share equal to the Offer Price • It is intended the SPP will be capped at approximately A$5 million
Joint Lead Managers	• Bell Potter Securities Limited and Wilsons Corporate Finance Limited

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Use of Funds and Balance Sheet

• Remaining Hollister debt of NZ$11m to be repaid from existing cash reserves – company will be debt free

• AROA will have pro-forma net cash of NZ$65m[1] post offer (net of debt repayment)

• Fully funded through to profitability

• • Investment in US commercial operations to take advantage of the market opportunity for AROA’s portfolio of products

• • Additional funds deployed to accelerate and broaden R&D pipeline to bring more products to market

Use of Funds	Amount
Investment in US commercial operations	A$15m
R&D and product pipeline	A$5m
Cash on Balance Sheet	A$25m
Costs of the Offer	A$2m
Total	A$47m1

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1. Assumes fully subscribed Placement. Does not include proceeds from SPP.

Offer Timetable

Event	AEST
Trading halt	Tuesday, 27 July 2021
Record Date for SPP	Wednesday, 28 July 2021
Placement announced & AROA shares resume trading on ASX	Thursday, 29 July 2021
Settlement of Placement shares	Tuesday, 3 August 2021
Allotment of Placement shares	Wednesday, 4 August 2021
Placement shares commence trading on ASX	Thursday, 5 August 2021
SPP offer period opens and SPP offer booklet dispatched	Wednesday, 4 August 2021
SPP offer period closes	Thursday, 19 August 2021
SPP results announced	Monday, 23 August 2021
Allotment of SPP shares	Wednesday, 25 August 2021
SPP shares commence trading on ASX	Thursday, 26 August 2021

The timetable is indicative only and subject to change by the Company and Joint Lead Managers

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About AROA
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Unlocking regenerative healing for every body

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Unlocking Regenerative Healing for Every body

AROA ECM technology offers leading regenerative performance at a significantly lower cost than other biologics enabling more patients to have access to the benefits of regenerative healing

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Price
Biologics
‘Regenerative but weak’
AROA
Synthetics Products
‘Durable & Strong’ Regenerative, cost
effective, +/- strength as
required
Healing impairment
& complexity
Note: AROA Management compilation based on peer reviewed publications.
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AROA ECM - An Ideal Foundation for Regenerative Healing AROA’s products utilise the proprietary AROA ECM, which is a unique Extracellular Matrix (ECM) platform technology derived from sheep forestomach

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Laminin
Collagen IV
Elastin
Vascular channels
Collagen I & III
GAG’s, hyaluronic acid,
heparin sulphate
Fibronectin
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Source

AROA ECM Technology (Structural and Biological Building Block)

Products

• Ovine Forestomach has natural characteristics that are desirable in a regenerative soft tissue technology

• Thick porous ECM with basement membrane

• Highly vascular

• Constantly renewing & growing

• AROA ECM (gently processed Ovine Forestomach Matrix) contains: o Native porous structure o Residual vascular channels

• 150+ signalling molecules and substrates known to be important in healing

• Clinically this translates to ready to use scaffold and biology which the body uses to direct healing

• All products that utilise the AROA ECM provide a short-cut to growing new tissue and an associated blood supply

• Each product is engineered for the challenges of a specific use case

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Substantial Growth Opportunities ~$2.5B[1] TAM

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Wound Care Soft Tissue Reconstruction
Total Addressable Market Total Addressable Market
$1.4B [1] USD $1.3B [2] USD
e.g. Diabetic Foot Ulcers, e.g. Trauma, tumour removal, e.g. Hernia repair, abdominal
Venous Ulcers, Pressure Ulcers, general surgery, inflammatory dehiscence, breast surgery
chronic wounds skin disease
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1. SmartTRAK BiomedGPS data 2020. AROA management estimates;

2. DRG Millennium Research data; Hernia Repair Devices, 2020. DRG Millennium Research, Breast Implants & Reconstructive devices, 2018.

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AROA PRODUCT RANGE

ADDRESSES A WIDE RANGE OF APPLICATIONS AND LARGE ADDRESSABLE MARKETS

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||||||||||
|---|---|---|---|---|---|---|---|---|
|US TAM|Sales|
|Brand name|Use case|FY’18|FY‘19|FY’20|FY’21|FY’22|FY23|Launch|
|(USD)|Channel|
|Endoform|
|Stalled complex|
|Natural &|$78m|[1]|AROA|FY’13|
|wounds|
|Antimicrobial|
|Ovitex|Hernia|$845m|[2]|TelaBio|FY’17|
|Dermal &|
|Myriad|implantable|$200m|[3]|AROA|FY’20|
|Reconstruction|
|Licensed to TELA Bio|
|Ovitex PRS|solely for Breast|$463m|[4]|TelaBio|FY’20|
|Surgery|
|Complex wounds|
|Symphony|$1.15b|[5]|AROA|FY’21|[6]|
|& Limb salvage|
|Dead Space|
|TBC|TBD|AROA|FY’23/24|[6]|
|Management|
|Sources: 1 & 5 SmartTRAK BiomedGPS data 2020, 2. DRG Millennium Research data, Hernia Repair Devices, 2020, 3 AROA|
|management estimates , 4. DRG Millennium Research, Breast Implants & Reconstructive devices, 2018.|Development Product|Regulatory clearance|Reimbursement|[*]|Commercial sales|
|6. Based on current project timeline but remains subject to changes in circumstances and regulatory clearances.|

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Sources: 1 & 5 SmartTRAK BiomedGPS data 2020, 2. DRG Millennium Research data, Hernia Repair Devices, 2020, 3 AROA management estimates , 4. DRG Millennium Research, Breast Implants & Reconstructive devices, 2018. 6. Based on current project timeline but remains subject to changes in circumstances and regulatory clearances.

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• *Note: Symphony requires a new reimbursement code, whereas all other products fall under existing reimbursement codes

Endoform Natural and Antimicrobial

A unique “Tissue Matrix” used to “short-cut” healing in complex wounds such as diabetic foot ulcers and venous ulcers

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Ovitex & Ovitex PRS

“Reinforced Bioscaffold” which combines layers of the AROA ECM reinforced with polymers for abdominal wall repair (hernia) & soft tissue reinforcement

Licensed to Tela Bio for Hernia

Licensed to Tela Bio for Breast Surgery

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Myriad Matrix

Engineered ECM containing layers of AROA ECM suitable for soft tissue reconstruction, both dermal repair and surgical implantation

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Myriad Morcells

A ‘Morcellized Bioscaffold’ suitable for a wide range of dermal reconstruction and complex wound repair procedures

• Deliver a bolus of the AROA ECM biology to help kick start & sustain healing

• Conforms to optimise contact with irregular wound beds

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Symphony

“Proliferative Bioscaffold” for use in patients with severely impaired healing such as Diabetic Foot Ulcers & Venous Leg Ulcers in the outpatient wound care center setting

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AROA Product Portfolio

Products to match wound type, stage & site of care

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Clinically effective wound products

Endoform demonstrates increased wound closure rates at 12 weeks in complex wounds compared to market leading biologics which lowers the cost of treating patients

Competitors (Tissue Matrix)

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AROA Competitors (Tissue Matrix)
100
Better clinical outcome at
90
a lower cost
80
70
60
US wound registry
50
Fife (2018) Real World
Data for Standard of Care
40 (DFUs, VLUs and PUs)
30
20
10
0
AROA Endoform® Acelity Promogran ™ Smith & Nephew Oasis ™ Cryopreserved Allograft Mimedx Human Amnion
% WOUNDS CLOSED AT 12 WEEKS
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BRAVO Clinical Study

91 patient multi-centre study with simple and complex ventral hernias in United States

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• 1.The level of recurrence at 90 days, 12 & 24 months are key metrics and have major cost implications for surgeons, hospitals, payors and patients.

• Hernia recurrence rate based on number of hernia recurrences reported in patients who completed follow up and patients who reported recurrent hernia before the specified follow up period. Other clinical literature and conference presentations were based on all patients treated including those who did not complete follow up.

• Data for first 50 patients at 24 months from BRAVO shows significantly better outcomes compared to market leaders

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• Full data for 24 months due H2 2021

Sales Channels

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Manufacturing and Production Well established commercial manufacturing facility

Unique process produces a high-quality product

• 12 successful Quality inspections since 2014

• 83 staff in Manufacturing and Quality Assurance

• 2 Sites – 5100 m2 total manufacturing floor

Efficient and low cost

• Purposefully designed gentle & low-cost process & equipment

• Controlled clean room environment built to pharmaceutical standards

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In-house manufacturing facility – Auckland, New Zealand

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Manufacturing Facility

Scalable

• Raw materials readily available in New Zealand

• Modular manufacturing design allows production to be easily scaled as sales volumes grow

• Production capacity in place to support revenue of up to NZ$35m. An investment of ~A$3 - A$4 million required to increase facilities capacity by approximately 3x (facilities supporting ~NZ$100m of revenue). This is expected to be completed end of 2021

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Management team

AROA is led by a highly experienced management team with long tenure

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Brian Ward CEO, Founder BVSc MBA

+11 years with AROA +25 years in life sciences

Commercial leadership roles including sales & marketing, strategy & corporate development

Previous experience: Baxter, Beecham, SmithKline Beecham

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James Agnew CFO BCom LLB

+6 years with AROA +15 years in finance

Corporate finance, investment, M&A, strategic & ops planning, contracting & tax

Previous experience: MXM Mobile, Hyperfactory

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Brad Adams

VP – Commercial (USA), MHA, BA

+10 months with AROA +20 years in life sciences

Commercial leadership roles – sales management, marketing, commercial strategy

Previous experience: Acell, Smith & Nephew, HealthPoint, J&J

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Simone Von Fircks

VP – Operations

+6 years with AROA +30 years in life sciences

Biologics development tech transfer, facilities and regulatory & quality compliant up-scaled manufacturing

Previous experience: Baxter, Mologen

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Dr. Barnaby May VP – Clinical Dev & Research, PhD

• 11 years with AROA +20 years in life sciences – research & development strategy, management and execution

Previous experience: UCSF & University of Canterbury

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Financial

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Product sales

Product sales (Reported)

Product sales (Constant Currency[1] )

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FY20: $21.9m FY21: $21.6m FY20: $21.9m FY21: $23.1m
up 17% YoY
up 6% YoY $13.9m
$12.6m
$11.9m $11.9m
$10.0m down 10% YoY $10.0m down 8% YoY
$9.0m $9.2m
H1 FY20 H2 FY20 H1 FY21 H2 FY21
H1 FY20 H2 FY20 H1 FY21 H2 FY21
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• Product sales for H1 FY21 of $9.0m down 10% on H1 FY20, reflecting the impact of the COVID-19 pandemic.

• Despite NZD/USD exchange headwinds, product sales recovered strongly in H2 FY21, increasing 6% on H2FY20 (17% in constant currency).

• Full year product sales of $21.6m decreased 2% on FY20, however increased 5% on a constant currency basis.

1 Constant currency ( CC ) removes the impact of exchange rate movements. This approach is used to assess the Group’s underlying comparative financial performance without any distortion from changes in foreign exchange rates, specifically the USD. The NZD/USD exchange rate of 0.64 has been used in the constant currency analysis, representing the average rate for FY2020.

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Financial Results

Normalised Profit or Loss[2]

Commentary

Product sales Other revenue Total revenue Gross profit Productgross margin % Other income Normalised sellingand administrative expenses4 Research and development expenses Total normalised operating expenses Normalised EBIT Add back: Depreciation & amortisation Normalised EBITDA Net finance expenses Normalised loss before income tax	Reported 2021 NZ$000 21,575 767 22,342 15,524 68% 2,682 (18,142) (6,425) (24,567) (6,361) 3,078 (3,283) (1,111) (7,472)	Reported 2020 NZ$000 21,924 3,152 25,076 18,737 71% 1,137 (15,401) (5,042) (20,443) (569) 2,741 2,173 (3,317) (3,886)	Reported YoY % (2) (76) (11) (17) (3) bps 136 18 27 20 1,018 12 (251) 67 92	CC3 2021 NZ$000 23,123 822 23,945 17,127 71% 2,722 (18,900) (6,425) (25,325) (5,476) 3,078 (3,613) (1,753) (7,229)	CC3 YoY % 5
					(74)
					(5)
					(9)
					0 bps
					139
					23
					27
					24
					862
					12
					(210)
					47
					86

• Product gross margin was impacted in H1 FY21 as a result of lower product sales but improved significantly in H2 FY21.

• Reduction in Other revenues represent one-off license fees in FY20.

• Normalised selling and administration expenses increased $2.7m or $3.5m in constant currency, reflecting increased investment in the US sales operations and increasing expenses from becoming a publicly listed entity.

• Research and development expenses increased $1.4m reflecting the increase in staffing on pipeline products.

• Normalised EBITDA loss of $3.3m.

2 The Normalised Profit or Loss is non-GAAP financial information, as defined by the NZ Financial Markets Authority, and has been provided to assist users of financial information to better understand and assess the Group’s comparative financial performance without any distortion from NZ GAAP accounting treatment specific to one-off, non-cash fair value adjustment of pre-offer shares issued in February and May 2020 and the one-off transaction costs associated with the IPO. The impact of noncash share-based payments expense has also been removed from the Profit or loss. This approach is used by management and the Board to assess the Group’s comparative financial performance.

3 Constant currency ( CC ) removes the impact of exchange rate movements. This approach is used to assess the Group’s underlying comparative financial performance without any distortion from changes in foreign exchange rates, specifically the USD. The NZD/USD exchange rate of 0.64 has been used in the constant currency analysis, representing the average rate for FY2020.

4 These items have been normalised by the amounts outlined within the ‘Reconciliation to NZ GAAP Profit or Loss’.

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Cash flows

ash flows
Cash flows from operating activities	2021 $000	2020
		$000
Net cash(outflow)/inflow from operating activities	(5,007)	1,660
Cash flows from investing activities
Net cash(outflow) from investing activities	(1,500)
		(1,870)
Cash flows from financing activities
Netproceeds from issue of equityand convertible debt securities Net repayment of borrowings/deferred consideration	50,426 (12,596)
		5,995
		(7,730)
Lease liability – Principal and interest Net cash inflow/(outflow) from financing activities5	(731) 37,099	(546)
		(384)
Net increase/(decrease) in cash on hand	30,592
		(594)
Effect of exchange rate fluctuations on cash and cash equivalents	939	(13)
TOTAL CASH ON HAND6	35,381	3,850

6 Cash on hand includes $20 million held on Term Deposit

Commentary

• Net cash outflow from operating activities of $5.0 million for FY21 compared to a net cash inflow from operating activities of $1.7 million in FY20, reflecting the increased investment in operating expenses.

• Purchases of property, plant and equipment remained modest.

• Net proceeds from pre-IPO and IPO placements of $50.4m.

• Repayment of borrowings of $12.6m.

• Cash (including short term deposits) on hand of $35.4m.

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5 Cash flows from financing activities excludes the transfer of $20 million from Cash to Term Deposits

Future

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Catalysts

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Post-COVID

Vaccinations expected to improve throughout CY2021

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Clinical Data

Endoform™, Myriad™ & Symphony™

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AROA Direct Sales

Fully dedicated field sales team. Myriad™ expected to drive growth.

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Reimbursement

Potential for changes in the reimbursement of cell and tissue products (Symphony) in outpatient wound centres

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TELA Bio[®] Momentum

Clinical outcomes & cost savings driving increasing adoption

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Pipeline Products

From AROA ECM platform & new single-use dead space management platform

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Product Synergies

Complementary products for every phase of healing & continuum of care

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Global Expansion

Regulatory approval in 49 countries

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AROA FY22 Outlook

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----- Start of picture text -----

NZ$30-$33m [1] GM
product sales FY22
improvement
39-53% higher than FY21
----- End of picture text -----

• AROA is well placed for FY22 following an improved second half of FY21 and sales transition

• Focused on building our US commercial operations over next 24 months to drive revenue growth to take advantage of the opportunities presented by our expanded product portfolio

• TELA Bio sales expected to deliver strong growth based on their revenue guidance of 48% to 65% growth in CY21 compared to CY20

• EBITDA will be negative (as previously forecasted) as a result of increased investment into its sales force (announced in February 2021)

• 1Guidance subject to no resurgence of COVID-19 in the US, continued improvement in US medical procedure numbers & TELA Bio sales performance. It assumes an average $NZD-$USD exchange rate of US$0.72

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CONTACTS

Simon Hinsley Investor Relations m +61 401 809 653 shinsley@aroabio.com

Matt Wright Media m +61 451 896 420 matt@nwrcommunications.com.au

Visit our website www.aroabio.com and find us on LinkedIn at www.linkedin.com/company/aroa-biosurgery-limited/

• 64 Richard Pearse Drive, Auckland 2022, New Zealand

PO Box 107111, Auckland Airport, Auckland 2150, New Zealand

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Unlocking regenerative healing for every body

? Q&A

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Unlocking regenerative healing for every body

Appendix

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Reconciliation of Normalised Profit or Loss to NZ GAAP

Reconciliation of Normalised Profit or Loss to NZ GAAP Profit or Loss

	Reported	Reported
	2021	2020
	NZ$000	NZ$000
Normalised loss before income tax	(7,472)	(3,886)
Share basedpayments	(2,010)	(418)
Transaction costs	(1,607)	(850)
Other losses	(8,013)	(1,006)
Loss before income tax (NZ GAAP)	(19,102)	(6,160)

Share Based Payments

Share based payments of approx. $2.0 million relate to the vesting of the share options issued to Directors and employees of the Company on IPO and certain employees in September 2020.

Transaction Costs

Transaction costs of $1.6 million relate to the costs associated with the IPO, including lead manager fees, legal fees, accounting and audit fees, ASX listing fees and road show expenses. Out of the total costs of $3.2 million incurred during the year ended 31 March 2021, $1.6 million was recognised against share capital, with the remaining $1.6 million recorded within operating expenses.

Other Losses

Other losses of $8.0 million are a non-cash, one-off expense attributable to the fair value adjustment of pre-offer shares issued in February and May 2020, which were classified as financial liabilities as opposed to equity in accordance with NZ IAS 32. During the reporting period, these financial liabilities at fair value through profit or loss were fully reclassified as equity, following the IPO.

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Risks[1]

Topic	Summary
Reliance on partners	A large portion of AROA’s revenue is reliant on its US sales and distribution partner, TELA Bio. TELA Bio is a US corporation listed on NASDAQ, whose business focuses on the sale, distribution and marketing of the OviTex product range. A slowdown, decrease in demand or failure to grow demand from TELA Bio could adversely impact AROA’soperating and financial performance.
Product acceptance	AROA’s growth and the commercial success of AROA’s products and future products is reliant on the acceptance of AROA’s products by healthcare professionals, including surgeons and wound care specialists. The acceptance of AROA’s existing products may slow, and planned future products may gain acceptance slower than planned or may not gain broad market acceptance by healthcare professionals which, should this arise, would impact AROA’s operating and financial performance
Competition	AROA competes against many existing and potential competitors with significantly more resources than AROA and with greater access to more markets. AROA’scompetitors may be able to increase market share through aggressive marketing campaigns, product improvements, acquisitions or price discounting which will affect AROA’smarket share and margins.
Product pipeline and development of new products	AROA’s commercial success is dependent on the continued improvement of existing products and the research and development of new products utilising the AROA ECM technology platform.Product development involves a high degree of risk, and there are no guarantees that new product development efforts will result in any clinically or commercially successful products.
Intellectual property	The value of AROA’s products depends in part on its success in obtaining and maintaining issued patents, trademarks and other intellectual property rights and protecting the Company’s proprietary technology. If AROA’s intellectual property and proprietary technology is not adequately protected, competitors may be able to use the technologies or the goodwill AROA has acquired in the marketplace and erode or negate any competitive advantage AROA may have, which could harm AROA financially.
Product liability	Any defects in AROA’s products may harm AROA and its customers’ reputation and business.AROA may also be subject to warranty and liability claims for damages related to defects in its products.
Manufacturing/production risks	AROA manufactures its products in a single location in Auckland, New Zealand and is exposed to risks of harm caused by natural or man-made disasters, or operation or human error, which may result in manufacturing disruptions or an inability to manufacture and produce its products for some time. AROA has formal commercial agreements in place for most of its critical suppliers eg Ovine rumen supplier. A limited number of supply arrangements are subject to course of conduct, rather than set out in written agreements. Whilst AROA considers this to be reasonably normal in the clinical/biosurgery industry. To the extent practicable, AROA has in place or has identified alternate suppliers. If alternative supply arrangements are not in place, this could result in manufacturing disruptions.

Topic	Summary
Supply of Ovine rumen	The ovine (sheep) rumen used in the manufacturing of AROA products is currently sourced from New Zealand sheep. Currently, New Zealand sheep are not known to carry any prion disease (progressive neurodegenerative disorders, including scrapie disease). However, the geographic concentration of AROA’s ovine rumen supply creates risks of disruption due to natural disasters, disease or other events.
Hazardous substances	AROA’s activities in manufacturing its products involve the controlled storage, use and disposal of hazardous materials. AROA is subject to laws and regulations governing the use, generation, manufacture, storage, handling and disposal of these hazardous materials. Although AROA’s safety procedures for handling and disposing of these materials and waste products comply with these standards, AROA cannot eliminate the risk of accidental injury or contamination from the use, storage, handling or disposal of hazardous materials.
Country/region specific risks	AROA has operations in the US and has to comply with a range of different US legal and regulatory regimes. As AROA expands the sales of its products geographically into new international jurisdictions, it is subject to the risks associated with conducting its business in the relevant countries, which include adapting to, and complying with, the differing laws and regulations, business and clinical practices, and patient preferences in foreign countries, developing and managing foreign relationships and operations and being subject to the political and economic climate of the various countries.
Macro-economic risk	The ongoing impact of the Coronavirus pandemic (COVID-19) on the Company’s operations is not currently fully ascertainable and may not be known for a period of time. Following COVID-19, the Company has experienced a reduction in sales of its products due to elective surgeries being cancelled and outpatient clinics being closed as a result of COVID-19. Whilst AROA has seen a continued positive trend in US medical procedure numbers to date, these are yet to return to pre COVID-19 levels.
Market conditions	In light of the COVID-19 pandemic, extra care should be taken when assessing the risks associated with investment. The rapidly changing COVID-19 situation is bringing unprecedented challenges to global financial markets, and the economy as a whole.
Reliance on key personnel	There is no assurance that AROA will be able to retain key personnel. The departure of key personnel may adversely affect AROA until suitable replacements are recruited.
Other risks	The above risks are a summary of some of the key risks, but not an exhaustive list of all of the risks associated with the Company or an investment in the Shares. Further details on the risks summarised in this Section and other key risks are included in Section 5 of the IPO Prospectus dated 22 June 2020, and investors should review all of those risks carefully before making an investment decision.

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Notes

1. This section is not intended to be a fulsome overview of key risks. For detailed information on the specific risks and general risks relating to an investment in AROA, please see section 5 of the IPO Prospectus dated 22 June 2020

Board of Directors

AROA has a highly experienced Board with healthcare, operational and financial experience

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Jim Mclean

Non-Executive Chairperson (Independent) BSc(hons)PGDA

Current

Chair of Prevar, RJ Hill Laboratories Ltd, Information Tools Ltd Previous

• •Ernst & Young

• •Genesis Research

Brian Ward

Managing Director (NonIndependent)

Per previous slide

Steve Engle

Non Executive Director (Independent) M.S.E.E., B.S.E.E.

Current

• •Prescient Therapeutics

Previous

• •Cohbar

• •Averigon

• •Xoma

• •La Jolla

• Pharmaceutical

Phil McCaw

Non Executive Director

(Non-Independent) BBS

Current

• •Movac Founding Partner

Previous

• •Deloitte

John

Diddams

Non Executive Director

(Independent) B.Com. FAICD, FCPA

Current

• •Volpara Health Technologies

• Surf Lakes Holdings

• CPA firm providing

• corporate advisory

Previous

• •Managed IPO process for >20 ASX IPO’s

John Pinion II

Non Executive Director

(Independent) B.S.

Current

• •Ultragenyx

Previous

• •Roche

• •Genentech

• •Baxter

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International offer restrictions

This document does not constitute an offer of New Shares of Aroa in any jurisdiction in which it would be unlawful. In particular, this document may not be distributed to any person, and the New Shares may not be offered or sold, in Australia or any country outside Australia (or in the case of the SPP outside Australia and New Zealand), except to the extent permitted below.

Australia

The offer of New Shares is being made in Australia only to persons who meet the requirements of section 708(8) or section 708(11) of the Corporations Act 2001 (Cth) as either a professional or sophisticated investor or the requirements of section 761G of the Corporations Act 2001 (Cth) as a wholesale client.

New Zealand

This document has not been registered, filed with or approved by any New Zealand regulatory authority under the Financial Markets Conduct Act 2013 ( FMC Act ). The New Shares are not being offered or sold in New Zealand (or allotted with a view to being offered for sale in New Zealand) other than to a person who:

• is an investment business within the meaning of clause 37 of Schedule 1 of the FMC Act;

• meets the investment activity criteria specified in clause 38 of Schedule 1 of the FMC Act;

• is large within the meaning of clause 39 of Schedule 1 of the FMC Act;

• is a government agency within the meaning of clause 40 of Schedule 1 of the FMC Act; or

• is an eligible investor within the meaning of clause 41 of Schedule 1 of the FMC Act.

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International offer restrictions (continued)

Hong Kong

WARNING: This document has not been, and will not be, registered as a prospectus under the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong, nor has it been authorised by the Securities and Futures Commission in Hong Kong pursuant to the Securities and Futures Ordinance (Cap. 571) of the Laws of Hong Kong (the “SFO”). No action has been taken in Hong Kong to authorise or register this document or to permit the distribution of this document or any documents issued in connection with it. Accordingly, the New Shares have not been and will not be offered or sold in Hong Kong other than to “professional investors” (as defined in the SFO and any rules made under that ordinance).

No advertisement, invitation or document relating to the New Shares has been or will be issued, or has been or will be in the possession of any person for the purpose of issue, in Hong Kong or elsewhere that is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to New Shares that are or are intended to be disposed of only to the persons outside Hong Kong or only to professional investors. No person allotted New Shares may sell, or offer to sell, which securities in circumstances that amount to an offer to the public in Hong Kong within six months following the date of issues of such securities.

The contents of this document has not been reviewed by any Hong Kong regulatory authority. You are advised to exercise caution in relation to the offer. If you are in doubt about any contents of this document, you should obtain independent professional advice.

United States

This document does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United States or any other jurisdiction. Any securities described in this document have not been, and will not be, registered under the US Securities Act 1933, as amended ( US Securities Act ) and may not be offered or sold in the United States except in transactions exempt from, or not subject to, registration under the US Securities Act and applicable US state securities laws.

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