Shares in med-tech developer Polynovo (ASX:PNV) have doubled in the past year, driven by surging sales in its patented Novosorb product. More recently, the company revealed its first “million dollar month”, with sales for April ostensibly bringing the business to break-even on a monthly basis.
What does the business do?
Following a business restructure in 2014, Polynovo is focused on developing its tissue scaffold technology “NovoSorb”. The Biodegradable Temporising Matrix, or BTM for short, is applied to a wound to act as a scaffold to aid in the regrowth of dermal tissue (the tissue under your skin) and blood vessels, then degrades over time.
With existing sales in Australia and New Zealand alone at more than $1m year to date, Polynova is focused on direct penetration in the US, and expect regulatory approval in the European Union in the near future.
Should you buy?
Medical technology companies tend to represent above average risk for investors. It generally takes years of research to sufficiently develop products, and then years more to successfully commercialise. Meanwhile, these companies can soak up big amounts of shareholder funds. Even if they do bring something viable to market, they tend to face very tough competition.
Nevertheless, those that succeed can yield huge returns for investors.
Polynova already has a demonstrated product, which looks to be getting real traction and is growing sales strongly. Indeed, first half sales were 330% above that of the previous corresponding period, and the company should be cash flow positive in 2-3 years if it can sustain its sales growth. It’s also encouraging to see various insiders of the business buying shares recently.
Polynovo has recently been climbing the Strawman rankings, and shares remain below the community’s consensus valuation. Click the button below to see the full report…
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