@Parko5 be careful with the 93 number. I think that is a reference to the total staff complement in the US, which includes:

• CEO
• VP (Ed)
• HR, Finance, Legal, Marketing (x5), Regulatory, Clinical (more than one, running BARDA trial)

So I estimate at least 12-13 of the current US staff June-23 93 count are not Sales (and I can see them on LinkedIn). So, I'm picking US Sales are in the range 75-80 at the moment.

DW has in past talked about getting up to 150 in USA. But since Swami has joined he has been a lot less clear about where they are at. Hopefully, there will be a further breakdown of the numbers in Oct/Nov when the Annual report comes out.

Even if I am wrong, there is no way they'd throw 50+ new people at Ed in one year. It just doesn't make sense from an HR pespective. They probably couldn't recruit half that amount if they tried. I'll give you 20-25 tops.

My hypothesis is that, as they are expanding the sales footprint in the US, they are seeing diminishing returns. So Ed will be under instructions to drive sales force productivity by training, putting experienced staff to oversee/coach newbies, staff performance management, analytics around accounts (they have a finance analyst in Sand Diego), going deeper in each account etc. etc.

The big buyers will still be the specialist burns centres. They'll probably use 5-10x the amount of Novosorb of a general surgical unit. I know BTM does increasing work outside burns, but it is still the rich target for any Territory Manager. There are only 134 specialist burns centres across the US, and these are easily covered with a geographically distributed workforce of 50.

The other thing is that DW, Swami and Jan are under pressure to deliver a profit this year, and for FY25 to be a "breakout year" for NPAT. I think they'll be punished if they don't regardless of DW's bravado. That was the commitment at the capital raise and Jan repeated it at Q&A last week. They are going to be smart with adding headcount, which is why I think ANZ has plateaued around 6-7, with Valerie Young also in charge of Hong Kong and Taiwan,... its in her Job Title!

I'm surprised we aren't seeing more in UKI. By my reckoning the +165% UKI growth takes UKI up to around $3.5m sales in FY23, which is catching ANZ, which I reckon is about $4m.

UK sales force still looks like it is only 6-7. A sensible workforce would be: 3-5 covering Greater London and the SouthEast , 3-5 covering the Midlands, 1 in North East, 1-2 in Scotland, 1-2 covering Wales and NI. As a minimum UK should have 12 and up to 15 by this stage. I reckon if UKI is staff properly, they can quite quickly get to $10-12m sales. With the recent sales numbers out of the UKI, I think they will ramp up to that pretty quickly. I know Swami has been very focused on getting India going, but he has the experience to see that Europe is underserved. It is a high value market. Don't get me started on Europe!

Hi @mikebrisy I have done quick recut of my Sales Staff spreadsheet for the USA and I have around a $100-200k drop in Gross Revenue per Sales Staff.

I included Canada in the Revenue and Sales staff figures. Green are PNV stated facts, red are my estiamtes.

As you say in your post, maybe the 'low hanging fruit' burns hospitals have already been signed up. And the other hospitals will have lower sales volumes.

However, once PNV brings more and more products online, these other hospitals should increase in sales.

@mikebrisy how do you covert the Gross Revenue per Sales Staff member into a Net Revenue figure for NPV calcs? I did a reduction by about $250,000. This is quite a 'coarse' method.

Something I have also been trying to track/model is something that Jan the CFO from PNV said....that the % of Sales Staff to other Staff will increase. I have been using this graph to make sure this trend continues in my model.

@Parko5 The PNV accounts are less than helpful, and I don't like how they categorise things.

Also my remarks here are a mix of what I am doing at the moment, and what I am thinking about in my major model rebuild, which I am embarking on now. Whatever I do in how I structure things, I tune my model to the last three years of $PNV accounts, so that the answers make sense.

Overall, I do the following:

(A) Net Revenue = sales to customers including any discounts/promotions/freebies

(B) Cost of Sales = Cost of Manufacturing (excluding D&A) and logistics cost delivered to customer (minimal)

(C) Gross Profit = (B) - (A)

(D) Sales and Marketing Expense I include:

• Cost of Sales Rep
• Allowance for Super(401K) / Health Insurance/ Other Benefits
• Expenses (flights, cars, accommodation. subsistence) - make a judgement based on the market. 10-15% of cost of the rep. is reasonable.
• Marketing Expense (see below **)

(E) R&D Expense (Project forward % revenue, with operating leverage, benchmarked)

(F) G&A (Project forward % revenue, with operating leverage, benchmarked)

(G) D&A (from capex model - PPE and intangibles ... make sure that by the end of the explicit period I like Capex = D&A if ongoing growth is low, i.e., 3% nominal. If growth is higher, then you need ongoing increase in Invested Capital)

EBIT = (C) - (D) - (E) - (F) - (G)

In the Cashflow model, to calculate FCF I include a Change in Working Capital, which is driven by Change in Inventory and the difference between Receivables and Payables, which I simply project forward as a constant % of Revenue. It is important not to overlook this, because it does tie up some of the Free Cash Flow and can be significant over time.

With D&A stripped out, I otherwise assume that costs and revenues even out between the P&L and Cash Flow models, so adding D&A back to EBIT is a good estimate of EBITDA.

In calcuating D&A, I look at invesment patterns in capital equipment and intangibles (e.g. is R&D being capitalised). While D&A is a non-cash item, I like to also project NPAT so that I can see what my model is delivering in terms of Value/Earnings (a proxy for P/E). This can help detect errors in long run projections!

In terms of capex, we were told the new manufacturing and R&D facility will use $25m of the capital raise proceeds. I am cautiously going to allow $30m due to inflation and/or capex over-runs, which are common! I am going to phase this 65% in FY24 and 35% in FY25. We haven't been told the phasing.

** For marketing expense this includes promotions in trade journals, conference exhibitions, paying expenses of opinion leaders, and online and print materials, as well as the cost of the marketing staff.

Gross Margin at $PNV and Operating Margin

Historically they've been getting %GM anywhere from 93% to 96%. But they are undertaking a major expansion from $100m sales capacity to $500m sales capacity. In 2025 when the new facilites come onstream, %GM will drop significantly, as these facilities will increase the fixed cost of the manufacturing operations.Of course, over time %GM erosion due to this factor will improve. I think I will mark them down to 90% GM in FY25, and gradually build it back up to 95% by the time they get to $500m sales - but subject to correction for remarks on market mix that follow.

The other factor is market mix. Here, I think we have to be very careful on using a constant %GM.

The US market has the highest unit prices. A 10cm x 10cm square of Novosorb BTM sells for US$800-900 before the price rise announced. A 10cm x 20cm piece is US$1600 nad a large 40cm sheet is US$6,600. Prices in UK/Europe and ANZ are likely to be a bit lower than this, assume 80% of US prices.

However, emerging markets are another story altogether. So I am going to model a separate line item for revenue from India and, evenutally, China. I'll write a separate note on assumptions here when I have finished my work, but I believe it is likely that BTM will sell in emerging markets for perhaps only 30-40% of the US Price. Of course, this will still be attractive, because the cost of a sales rep in India (fully loaded cost) is only c. A$25-40k, vs. A$120-140k in ANZ+EU+UK vs. A$180-200k in USA.

While it is important to avoid meaningless complexity, it is important to recognise that the unit economics of $PNV are going to change significantly over the next 5 years.

Those are some thoughts. This is a work in progress for me, so the above is more me thinking out loud.