Thanks for the reply @mikebrisy

I think the Integra story is yet to be played out. And I think it will be worse than predicted for them. And Integra in its update to the market said that it expects the recall situation to wipe $60m from its revenues this year, and predicts that it will take another $50m sales hit next year. So if even a quarter of that goes to PNV, that is a massive jump in revenue for PNV.

I also noticed that Integra recently released a study that said that PNV's BTM created a 'leathery' skin when compared to their product. However, this was not an independant study, or large sample size. Just their own internal analysis!!! For a company to release an undercooked study like this smells of desperation. The study can be found here: https://onlinelibrary.wiley.com/doi/full/10.1002/hsr2.1462

I think this would be a great opportunity for PNV to poach some of Integra's staff to hasten the transition to BTM product?

Yes I am looking forward to the annoucement tomorrow. But we just don't know what the shorters will do. I remember one PNV announcment which was great news, the shorters drove the SP down massively over the one hour that PNV were presenting.

Cheers

PS...agree 100% it is hard to determine the Sales Staff contribution/margins. My calcs I felt were a bit high...so i just culled it down. But Once we get some more data points I think I can get alot greater accuracy. And I think you could be right that the SP could be valued a bit higher. But i will stick with my calc for now.

Hi @mikebrisy

I am re-cutting my PNV Staffing model. And I am just wondering how you have dealt with the Distibutors for certain regions. Did you just assign them a couple of Sales Staff for each business?

Cheers

Parko

Yes @Parko5 . Generally for regions with distributors there is a small regional S&M team (unrelated to sales volume) to manage the contract, but also deal with local marketing and stakeholder management (e.g. regulatory compliance) issues. There is, in addtion, a sales and marketing cost for the agency which amounts to c.20-25% of the price in the market. (Typically, for high margin medical products, contract sales and marketing agents take anywhere from 15% to as high as 30% cut.)

However for modelling purposes, over time, I assume the business evolves to a 100% direct model.

Practically, both models appear in my Sales and Marketing expense line. From a valuation perspective, the model doesn't care if the costs are going to staff or a contractor. At this stage, I don't think we have the level of granular understanding to know the difference in economics between the two models, on the cost side.

However, the problem is on the revenue side. Selling $PNV's products is a "high customer contact" model. The reps don't just visit the hospital procurement office, they go into the surgical wards and meet directly with the surgeons and senior nursing staff, sometimes even discussing cases and observing procedures, particularly for new accounts.

DW, SR and Jan spend a lot of time telling us about the Gross Margin (93%, then 95%, and when the new facilities come on and emerging markets ramp up it will fall). However, in this business you don't have a business unless you can sustain high gross margins, because a lot gets chewed up in expenses of which S&M is a major bucket.

The problem with the distributor model is that most distributors will stop only at the hospital procurement desk. They might have a bunch of products from different companies on their list, and they will most likely focus on the biggest selling ones that drive their incentives most favourably. This, combined with the need for a "high contact" model is problematic for $PNV, which I believe is why we have been seeing anaemic sales growth in the distributor territories.

DW has said Canada will be different. They have a contract agency, however, DW has said they have a dedicated team of known-named reps who $PNV in the US treat as an extension of their organisation. So I am watching carefully for any newsflow from Canada. So I think Canada Sales Agency reports into Ed in the US, but the numbers flow into RoW.

The result from Germany was, therefore a surprise. +192%. And I think you are right in that this is still the agency. But it could be that it was a very low base. I'm glad they are setting up a team there, because German surgeons have been leaders in innovative use of BTM if you look at some of the publications and webinars.

UK which is $PNV S&M was +169%, but that was from a much higher base, with UK/I having a team of 9-10 by now I think.

This is my understanding from piecing together what the team has said over the years. To be honest, I am a little surprised they haven't appointed an EU/UKI Sales VP as this kind of thing is hard to manage across the timezones. Maybe the UKI lead has an oversight role? Maybe something to ask at the AGM. Or maybe I missed it. I did ask DW about this a couple of years ago and also at SM meetings, and he said he was looking at it and that there were different views on the Board.

All that said, I am confident SR will turn to this. He is highly experienced in international medical devices S&M management. EU/UKI is a major, high-value market.

So, to be honest, I have stopped worrying about it.

Hope this helps.

@Parko5 I gleaned some further insights while trawling LinkedIn.

As I suspected might be the case, $PNV has a UK based "Commercial EMEA Lead" (since Jul-20) as well as a "Marketing Manager EMEA" (since Mar-20) based in the UK.

Judging by the CV, I think the Commercial Lead EMEA is the senior $PNV person for UKI Sales, EU S&M Contracts and ME S&M Contracts.

So you don't have to have any headcount in Europe or the Middles East at the moment, as these two individuals will manage the contracts.

There are no employees showing up yet in continental Europe that I can see,

The robustness of the search can be assessed by the following:

Actual Staff at June-30 = 218

LinkedIn Staff at 28-Aug = 211 including 5 Board = 206 Employees

We know there are 22 in India, but only 11 show on LinkedIn, which explains the lion's share of the gap. Also allow for some data integrity issues (e.g., people often don't update LI until they have their next job.)

Overall breakdown of LinkedIn Numbers:

• 101 Australia (includes 5 Board)
• 87 USA (Includes CEO, US VP Sales, probably 6-8 non S&M staff, and 3-4 marketing) = 12-13 + staff w/o LinkedIn. Means current US Sales is c. 75-80.
• 11 India (we know the actual number is 2+20)

I thought is was worth checking in detail. My earlier reply was generic, and not $PNV-specific. It was also biased by my big-pharma background, rather than considering the practical challenges of a small cap medical devices company.

The UK-based Commercial Lead would easily have the capacity to manage half a dozen contracts. The heavy lifting of managing the UKI Sales Team would be the responsibility of the UKI National Sales Manager. This individual looks pretty experienced with over 25 years medical sales management experience across a range of companies focused on medical devices, haing risen through the ranks over a period of 21 year within one company.

It looks like for any regulatory issues management, they'll refer back to the Mothership in Melbourne, where there is a small team.

Hope this helps!

Hi @mikebrisy

That is really useful. Thank you.

I am going to recut my Sales Force spreadsheet. Because It just wasn't making sense with Europe.

One thing with your numbers above....what about Canada? In the 22 Nov 2022 Presentation - Slide 10 it says 7 staff. Have you included them in USA numbers?

@Parko5 Again, mixed messages here from DW over time. About two years ago he said they'd signed an agency and identified 12 people. Then, as you say, most recently he mentioned 7.

7 makes sense. Its about what they have in ANZ, and the Canadian market is about the size of ANZ. A logical allocation would be two in Toronto and one each in Montreal, Calgary, Ottawa, Edmonton and Vancouver.

But these are not staff, they are contractors and Ed oversees them .... based on my piecing things together.

This aligns with LinkedIn which does show any Canadian staff.