Why fund managers call Aroa Biosurgery a rare cash-generative biotech

Aroa Biosurgery's sheep-tissue wound care products are already generating close to NZ$100 million a year, with fund managers pointing to its direct US sales channel as the next growth leg.

31 Mar 2026 · 5 min read

Wound care and surgical scaffold maker Aroa Biosurgery has been winning over small-cap managers as a rare New Zealand biotech that already generates real cash. Forager Funds' December 2025 Quarterly Report made the point plainly: Aroa is not a typical early-stage biotech, but instead looks a lot more like the industrial businesses the fund likes to invest in, with approvals already in place for its major products and revenue of nearly NZ$100 million a year.

Two distribution channels, one operating leverage story

Aroa's products, made from processed sheep forestomach tissue, are sold through two channels. Forager's December 2025 report detailed the older of the two, a relationship with US-listed TELA Bio that distributes Aroa's hernia-related products and reached NZ$40 million in revenue last year, a very high-margin stream since Aroa supplies product without funding the sales force. Growth there has moderated to 4% year-on-year, but the newer, costlier direct distribution network for Aroa's trauma-related products saw sales jump 33% in the same half, as a maturing US sales force lifted procedure volumes and hospital utilisation.

It's one of the most industrial-like companies on the ASX and definitely within the biotech industry. It's a real business, high gross margin, and really good incremental profitability as its new product lines start to come online.

— Forager Funds, Presentation, January 2026

Jencay Capital's quarterly updates through the period have tracked the company's cost and quality advantage from its proprietary tissue processing technology, noting in March 2026 that Aroa's three-year sales compound annual growth rate stood at 27%, with the stock trading at 2.4 times EV/Sales, implying an EV to FY28 estimated EBITA of 6.6 times once research and development spending is included, or 4.8 times excluding it. Jencay also flagged a tailwind from changes to US skin-substitute reimbursement rules, expected to remove a perverse incentive for hospitals to use the most expensive product rather than the most effective one.

What managers are watching next

Management reaffirmed full-year guidance at its December 2025 half-year result, with Forager noting conservative assumptions baked in for TELA Bio sales alongside continued direct product momentum. With the company having crossed into free cash flow profitability and accounting profitability expected this financial year, Forager's view heading into 2026 was that the operating leverage from direct sales representatives, who take time to mature but then drive meaningful revenue with a lag, still has further to run.