$OCC have concluded their $30m institutional placement at $1.30 for 23.076m new shares, adding to the existing 247.863m shares - a dilution of 7%.

I'll overlook the usual irritation that there is no opportunity for retail holders to participate, and that the new shares at $1.30 are offered at lower than my weighted average RL cost of $1.35,

There are in addition some 24m options on issue, as well as 4.65 million retention and performance rights. To these, more are added today: Canaccord Genuity were issued 1.5m options, at strike prices of $1.625 (0.5m) and $1.95 (1.0m) as part fees for being Lead Manager.

ASX Announcement

As we speculated here earlier, the funds create the capacity for $OCC to accelerate its development on multiple fronts. They've cited the following areas:

• accelerate the US roll out of the Company’s flagship nerve repair product Remplir
• undertake clinical studies to commercialise the use of Remplir in the significant prostate cancer surgery market
• advance commercialisation of pipeline products in tendon and ligament repair
• expand capacity at Orthocell’s existing manufacturing facilities
• invest in new applications and technologies in the regenerative medicine sector.

There is no reference to the Remplir expansion being to new markets (I had speculated Japan and EU/UK), so it will be worthwhile clarifying the approach at the forthcoming AGM. That said, in my view USA and Canada represent more than enough to be getting after, and there is merit in seeing what traction can come from these markets before going even wider.

With well over $50 million in cash now, and FY25 FCF of -$9,2m set to increase now (I expect) in FY26, if the company pushes ahead on all fronts, by my reckoning, the strengthened cash pile should give the firm 3-4 years of runway, by which time operating cashflows from Remplir in North America should be material.

There are arguably only two new elements in the announced program:

1. Expansion of Manufacturing Facilities: I am slightly surprised that expansion of manufacuting facilities has been flagged. With current capacity of around 100,000 units pa, by my reckoning that sufficient capacity for $50m - $100m annual sales, which is still some years off. Of course, this is a relatively capital light business, and it is as well to have expansion plans developed and in progress well before they are needed. For example, if the product goes gangbusters in the US, it would not be a good thing to be caught short!

2. Clinical Studies on use of Remplir in the Prostate Cancer Surgery Market: Following the earlier reported promising results of using Remplir in post-prostate cancer surgery nerve repair, it is no surprise that the company will formally pursue this indication for Remplir in a clinical trial. It will be good to hear more about this in due course.

I also hope we will soon learn more about the product development in tendon and ligament repair, and also the ideas being explored in the R&D program.

My Overall Assessment

While dilution is rarely cheered, it makes sense for the business to ensure it is well-resourced at this pivotal stage in its growth. Its technology platform offers the promise of many valuable products, with both Striate and Remplir already available in multiple markets globally, and building a promising track record, with strong y-o-y revenue growth.

Despite all these moving parts and potential opportunities, for me, the key driver remains what Remplir can achieve in North America. For my thesis to remain intact, I want to see strong revenue in North America, and the two indicators of this will be 1) sustained strong growth trajectory in the now established ANZ markets to indicate the kind of penetration that might be possible and 2) early leading indicators in the US (# surgeons using, # procedures conducted, # account approved, replishment volumes from distributors).

For now, I will continue to HOLD my current position (RL 2.9%) and await evidence of successful execution.

I have been continuing a deep dive into $OCC and will in the coming weeks post some findings, including a better stab at valuation. (I think my current placeholder is probably a bit too optimistic!)

Disc: Held in RL and SM