@Parko5 yes - I was not out quick with my note today, as I am in full pre-Christmas mode with the family. However, today's 5-month result was a disappointment for me. (It took 30 seconds to assess the result vs. my model!)

DW has shown his true colours - announcing a $10m record month, having led the investors through a dance-of-the-seven-veils, in saying that they were considering stopping that mode of reporting and sticking to regular 6-month reports. Now we know, there were no records being held back.

USA (In-line-to-soft vs. my view)

A maturing US is to be expected. They've been pushing hard there for 3-4 years, and have good coverage of the major accounts. I was expecting c. 25% in USA (although hoping for 30-35%!) - so that result was in line.

I don't think US sales re-accelerates from here. MTX will in part cannibalise BTM sales. Integra is returning to the market. $AVH has a full product suite and is getting into its stride (I know ReCell isn't a competitor, but the other dermal matrix $AVH has licensed in is, and it means $AVH reps can present a one-stop shop for their accounts. $ARX is also pressing ahead with comparative studies of its product suite against standard of care in trauma/complex would healing, which is where BTM seeks to expand. These are just a few of the main competitors.

While is appears the overall market is expanding, there is a lot of competition for the space. It seems that $PNV is now maturing in the US, albeit +27% is very healthy, and I will be interested to see whether it is maintained through to the FY.

RoW (Negative surprise vs. my view)

However, RoW is a marked slowdown. Recall FY24/FY23 RoW (outside of ANZ) was 93% with ANZ at 38%. So for RoW in aggregate for 5/12 months of FY25 to come in at +25.4% is underwhelming. It means that the major markets of ANZ, UKI and Germany are also maturing, and that this maturation is not being offset by the more recently-entered markets.

Now, FY24 was boosted by some large initial orders into conflict markets. Perhaps these have not yet been replenished? That would make a PCP comparison tough. But I thought the big orders were in H2, so that means the tough comparison may be yet to come?

Specifically, it means there likely isn't a material contribution coming through from India, despite 18 months of 20+ boots on the ground, and being admitted to public procurement lists. Japan and China remain something for the future - so we won't see much material here for 3-4 years. Now I recognise that clinician behaviour takes time to evolve, and spending budgets in the Indian public system are a small fraction per head than in the US. However, it looks like a material contribution from these markets will be a slower burn. Perhaps it will just take time, afterall, UKI took several years to get going.

But now my big question is: can RoW sustain 25% pa revenue growth? If so, I can still get to my $2.60 valuation case. If not, then $PNV starts to become fully valued.

Overall

Now to be clear, my thesis for $PNV was that the global rollout would sustain revenue growth well above market consensus. That high revenue growth would drive earnings, and provide the free cash for reinvestment in product developments and/or licencing-in complementary products. That thesis and the underpinning 3-year revenue CAGR (FY21 to FY24) of 52.4% led me to hold an outsized position for $PNV, because I felt that the risk to revenue growth was squarely weighted to the upside of what the market was seeing.

I haven't recut my valuation (expected value before today of around $2.60). But today's revenue number fundamentally resets the probability of the upside valuation cases. It was that assymetric risk-reward that was been central to my bullish thesis on $PNV. Therefore, I can no longer hold an outsized position. accordingly, today in RL I have sold 50% of my position, and on SM I have sold 1/3.

To be clear, I still believe the company can deliver good returns from today's share price. But it is a more evenly balanced proposition. For example, resource allocation into sales and marketing, overheads and R&D have a more significant bearing on the business's ability to generate cash. So, once more, I want to see the full 6-month result and recalibrate where I am at. It would be reckless to continue to hold such a large position.

I've been a super-bull on $PNV for a long time. But that view was always supported by the numbers. When the numbers change, I have to reconsider my thesis. It is as simple as that.

I consider a 3.5% RL portfolio weight is a more prudent holding given the new uncertainty for me about risk-reward.

Disc: Held in RL (3.5%) and SM

Hi @mikebrisy

Interesting comments and thoughts.

With respect to DW choosing to do this annoucement now.....IMHO, he wanted to put an announcement out to slow the downward SP momentum. And he was probably thinking that during the next month, when there is low liquidity, and easy for parties to use their manipulation techniques....put out an announcement to slow/halt that.

Some reasons why i'm not yet ready to sell:

• We are yet to see India...and I think the revenue will build strongly in the next year. From what we have been told, the bureaucracy is a nightmare....but once we are locked in..the revnue should be sticky. I think this will give the SP a bump up. Also it was the first 'captains call' that Swami did when he started. So i think it will be marketed quite widely and show he is a good CEO with good insights and execution.
• USA dollar will be much stronger going forward....giving our USA sales (and other sales in US dollars) a nice 5-10% boost.
• I think DW will lock in some of these charitie with decent sales in 2025...and these will be quite regular.
• What are your thoughts on BARDA and it's impact? I think having it finally complete will give give the SP another bump.

I think when the SP gets back to about $2.50 i'm going to sell a portion (maybe 50%).

What PNV really needs.....are some new products......

Also @mikebrisy

what do you think of Swami's quote:

CEO, Swami Raote said: “We continue to be grateful to our clinicians, our partners and our people, who are coming together to ensure that NovoSorb is rapidly embraced as a soft-tissue reconstruction platform of choice across Plastic and Reconstructive surgery. NovoSorb MTX our new monolayer product is on a steep adoption curve in US. It is satisfying to see our patient impact expanding at more than twice the rate of our revenue growth, to stand at 62,000 plus patients globally since treating our first patient.” 

I was interested in his words "steep adoption curve in US".

This is quite a strong statement. Swami seems to be quite a conservative guy.

Am i reading too much into this?

@Parko5 my reading is that as they extend into a wider range of indications and procedures, they are seeing smaller pieces of BTM being used.

Large scale burns or major trauma cases (e.g. large surface area debridments from mechanical damage to large areas of dermis such as can occur in industrial accidents or motorvehicle accidents) can use very large sheets of $BTM. These are markets appear quite mature for $BTM in the US.

So while the use in terms of numbers of patients is growing strongly, the volume of BTM being sold is growing less strongly.

That's my understanding of Swami's statement. He seems to be a strognly values-driven guy, and so he places a lot of value personally on the number of patients that $PNV is helping.

@Parko5 Reasonable views that I tend to agree with.

On BARDA I was surpised at the size in 5 months. If I've done my sums right, BARDA is the difference between sales and revenue. So Nov YTD was $5.2m or an annual run rate of $12.5m (I only had $5m in my model). Because BARDA is fully recruited, it must be wrapping up. But I don't know the profile of revenue in BARDA with respect to timing of enrolments. I'd have thought once a patient was enrolled, their treatment would take place over weeks or a few months. So, I'm being cautious and assuming a) the continued BARDA burst was due to the tail-end patients being treated and b) that this will not continue at nearly the same level in H2. But to be honest, I don't know, and I don't recall the revenue model for BARDA has ever been revealed.

I think $2.50 can be argued to be a reasonable price to lighten. I went earlier because.in RL, I am sitting on some very nice capital gains and a position size that was too big given my evolving view on risk-reward. I decided it was time to lighten my portolio exposure, because the slowdown in growth rate is pretty significant. (When I get round to updating my analysis I'll post some of the trend curves. For 3 years the $PNV revenue story has followed quite a consistent trajectory - albeing a bit noisey. According to my numbers, yesterday's update was a significant shift, that indicates we are on a growth curve that is far less optimistic than in my central case.)

Just to be clear, I still hold 3.5% in RL. which is the typical holding for me for a high-risk, moderate conviction stock.