Aroa Biosurgery Delivers $8.9M Cash Swing and First Profit: Buy the Biotech Turnaround?

Aroa Biosurgery (ASX: ARX) just crossed a critical milestone, reporting its first profitable half-year result. The business swung to a NZ$1.8 million EBITDA profit from a NZ$1.5 million loss in the same period last year, while operating cash flow improved by NZ$8.9 million to reach NZ$4.0 million. This marks the fourth consecutive quarter of positive operating cash flow, suggesting the turnaround is genuine momentum rather than a one-off accounting win.

For investors who watched Aroa burn through cash like most early-stage biotechs, this result proves the company’s bet on its Myriad product is paying off. The question now is whether this profitability shift is sustainable or just a strong six months.

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Myriad Product Powers 33% Growth as Surgeons Adopt Complex Wound Solution

Aroa’s products use biological material from sheep tissue that acts as a scaffold, helping the body regenerate damaged soft tissue. Surgeons use these products for complex wounds in trauma cases, limb salvage procedures, and tissue repair where traditional options typically fail.
Myriad revenue jumped 33% to NZ$19.7 million, now representing 38% of total sales and making it Aroa’s biggest product. This matters because when a medical product consistently grows at this pace, it signals doctors are moving beyond trial use and making it a standard treatment option. With 85% gross margins, every dollar of Myriad growth drops heavily to the bottom line, explaining how Aroa reached profitability despite modest overall revenue.
The company targets the US$730 million complex wound market, with plans to expand into diabetic foot ulcers and leg wounds that could increase its opportunity to US$1.8 billion. We believe this growth looks sustainable given the consistent quarter-over-quarter momentum and expanding adoption among surgeons.

Operating Leverage Delivers $8.9M Cash Swing and Debt-Free Balance Sheet

The NZ$8.9 million improvement in operating cash flow, from negative NZ$4.9 million to positive NZ$4.0 million, shows Aroa’s business model is working at scale. Four straight quarters of positive cash flow suggest the company has reached the point where revenue growth outpaces expense growth.

The financial transformation is clear:

• Operating cash flow: NZ$4.0M positive (was -NZ$4.9M last year)
• EBITDA: Swung from -NZ$1.5M loss to +NZ$1.8M profit
• Cash position: NZ$23.4M with zero debt
• Gross margins: 85% maintained

With NZ$23.4 million in cash and no debt, Aroa has roughly 12-18 months of runway if needed. But with positive cash flow now established, the funding pressure that kills most biotechs has disappeared. This means the company can execute its growth plan without diluting shareholders through emergency capital raises.

High margins plus positive cash generation mean earnings could grow much faster than revenue over the next year or two, which typically drives share price re-ratings.

The Investor’s Takeaway

Bell Potter’s A$0.85 price target, set in May 2025, was based on Aroa reaching profitability and proving sustainable cash generation. This result delivers exactly that. At today’s price around A$0.51, Bell Potter’s target implies 66% upside, a call that looks increasingly realistic if momentum continues.

Management reaffirmed full-year guidance of NZ$92-100 million revenue and NZ$5-8 million EBITDA profit, signalling confidence that the first-half strength will carry through. The implication: the second half should be even more profitable given typical seasonal patterns and ongoing operating leverage.

The investment case depends on execution. If Myriad keeps growing 30%+ annually while cash flow stays positive and margins hold above 80%, the current valuation appears attractive. For growth investors comfortable with biotech risk, Aroa offers a newly profitable, cash-generative business with strong margins and a clear opportunity.

Conservative investors might wait another quarter or two to confirm durability, though that means potentially paying more for reduced uncertainty. In our view, four straight positive cash flow quarters and profitability ahead of expectations suggest this inflection is real.