Here are some details that really stood out from Aurora’s last earnings call.
-margins rose to 53% and should increase further with 3 new device products about to be fully launched. 1) DEXA-C(already FDA 510k approved) will be rolled out company wide in Q4. 2) Newly approved DEXA-L enters into a beta rollout(controlled rollout) in Q4. 3) ASG has patiently waiting for FDA approval for its new Silo TFX and expects to have it sometime in the next 30 days. They will have a beta rollout in Q4. Management believes Silo TFX is an industry game changer as it provides better fixation than their leading competitor products and is simpler to use.
-Currently ASG has 60 reoccurring monthly purchasing doctors/pain interventionalists. Management expects to train 200 more doctors in 2022 and will increase doctor training in 2023. Is it possible they train 600 as in 2022 they will train approximately 400. Remember there tends to be a delayed affect after training. Doctors may try to perform one or two surgeries and then will monitor their patients results before fully adopting. My thesis here is I believe at some point in the first half of 2023 ASG will have 120 doctors actively using Aurora products on a monthly basis.
So what does this mean????
Well let’s start off with what we know so far. First half revenues were $7.6m USD approx. I am assuming Q3 will match Q2 sales of just over $4m. Management spoke of how they feel Q4 could their breakout Q with the full DEXA-C rollout as well as beta rollout of DEXA-L and Silo TFX. They believe they could produce $5m USD in Q4. If so total 2022 revenues would be $16.6m off of 60 doctors. Keep in mind if more monthly doctors are added in 2H 2022 then the year end revenues could come in higher.
Now if by the first half of 2023 ASG were to have 120 doctors selling we could easily see 2023 total year sales double to $33.2m USD. Remember the doctor training program was providing a success rate of 20%. So if 100 doctors are trained then 20 should theoretically become an ASG customer. 200 doctors,pain interventionalists, neuro surgeons yet to be trained in 2022 and I am anticipating 300 in the first half of 2023. If you do the math that’s 500 more doctors trained or 100 new paying clients. Now not all will become monthly purchasing doctors but could we see half of them? Since ASG started training a little over a year ago we now have 60 so I believe this is very plausible. We also have to remember 200 doctors have already been trained in the first half of 2022 which come on as they become more comfortable with ASG’s implants coupled with patient’s positive outcomes.
In my opinion I believe Aurora Spine could see sales of $33.2M and I have yet to get into what we should expect from newly approved DEXA-C, DEXA-L and the new yet to be approved Silo TFX. DEXA-C as Sergio pointed out could see doctors perform 8-20 procedures a month. Let’s go with 10 procedures for easy math. I am also going to say the return for ASG is $3k USD. With 40 kits outstanding this easy to use device could return $30k/doctor/month or $1.2m/month. Let’s cut this number in half to be more conservative. $600k/month or $1.8m a quarter. DEXA-C by itself could be roughly 35% of ASG’s sales come Q4. Dexa-L is anticipated to be another highly sought after product. What if Dexa-L matches Dexa-C results? Remember in Q1/2022 ASG announced sales from just two doctors using This product of $280k USD. Keep in mind these were probably their best doctors who were also helping to promote it. The point is the sales from this DEXA line should really show with their full rollout.
Now for Silo TFX which is an easier to use implant that provides better fixation than from runners SI-Bone and Medtronic. In 2022 ASG’s older Silo implant saw sales of $1m for FY sales. Q1 2022 saw sales of $1m in Silo sales alone. What happens now with the new Silo TFX which by itself should attract newer doctors who want to use the absolute best SI Joint fusion implant on the market? Silo TFX is expected to be a company maker for ASG and I believe will drive more doctors, pain interventionalists, neuro doctors to use the new TFX but also to try out some of the other products.
So I am calling for a doubling of revenues off of the old business due to a doubling of doctors being added. I am expecting sales to double to $33.2M/USD for FY 2023. As for the newly approved devices I am going to underestimate the balance of the year anticipated revenues for the sake of being conservative and say we only see $6.8m. As you can see above DEXA-C could be returning $1.2m/Q after the full rollout. We can revisit 2023 expectations at the end of Q1/2023.
In my opinion ASG has the potential for 2023 sales to range from $40m to $60m depending upon doctor uptake and how well they rollout these new device/implants.
It’s also important to remember that a lot of expenses will drop off once the Silo TFX is approved. Filing fees, FDA cadaver labs, trial fees etc will drop off. Management stated that breakeven is $1.1 to $1.2/month or up to $3.6m/Q before these added R&D/FDA fees. If in Q4 ASG does $5m USD -$3.6 for breakeven with NO additional expenses for R&D. ASG has a current margin of 53%. 53% of $1.4m USD($5m less $3.6 break even) then it’s very plausible that Aurora earns $742,000 USD in Q4 2022.