@Parko5 thanks for your thoughts on the drivers for valuation.

This is one business where I’m trying not to worry too much about valuation, and to let it run until our holding becomes a risk if things were to go wrong. My aim is to let the holding grow to 10% of our total IRL holdings.

My thesis is based on BTM products being adopted globally to aid healing of burns and other traumas that are still being explored. Polynovo has the potential to grow revenue exponentially with a huge gross margin. Net margins will improve as BTM becomes the gold standard in facilitating improved outcomes in healing serious burns and other traumas, requiring relatively less marketing costs when its use becomes ubiquitous. At least that’s my thesis for now!

I see the key risks to be adverse reactions to the product (so far it has shown to be 100% safe), competition from alternatives, poor execution decisions, poor capital management (so far this has been excellent), and expiry of the patent opening the market up to other manufacturers.

Management are executing global uptake very well with sales and support teams well established, and research into alternative uses being conducted by numerous organisations, encouraged and supported by Polynovo.

Last time Polynovo was trading at these levels I sold it all. I’m not planning on doing the same this time given how far the business has evolved since January 2023. I think we are on the cusp of a global giant.

Thats how I’m thinking, and how I intend to manage our holding until there is some adverse news that throws some doubt on my thesis, which of course is possible.

@Parko5 thanks for your thoughts on the drivers for valuation.

This is one business where I’m trying not to worry too much about valuation, and to let it run until our holding becomes a risk if things were to go wrong. My aim is to let the holding grow to 10% of our total IRL holdings.

My thesis is based on BTM products being adopted globally to aid healing of burns and other traumas that are still being explored. Polynovo has the potential to grow revenue exponentially with a huge gross margin. Net margins will improve as BTM becomes the gold standard in facilitating improved outcomes in healing serious burns and other traumas, requiring relatively less marketing costs when its use becomes ubiquitous. At least that’s my thesis for now!

I see the key risks to be adverse reactions to the product (so far it has shown to be 100% safe), competition from alternatives, poor execution decisions, poor capital management (so far this has been excellent), and expiry of the patent opening the market up to other manufacturers.

Management are executing global uptake very well with sales and support teams well established, and research into alternative uses being conducted by numerous organisations, encouraged and supported by Polynovo.

Last time Polynovo was trading at these levels I sold it all. I’m not planning on doing the same this time given how far the business has evolved since January 2023. I think we are on the cusp of a global giant.

Thats how I’m thinking, and how I intend to manage our holding until there is some adverse news that throws some doubt on my thesis, which of course is possible.

@Parko5 interesting question. I'm going to do a full update of my $PNV valuation at the FY results, so excuse the complexity of this reply.

For now, my adjusted last valuation is $2.25 ($1.90 to $3.50 range) ... or roughly in that ballpack by way of a manual adjustment to my model.

I've held $PNV since late 2019. The SP got a bit crazy in late 2020 as your graph shows, partly because of low interest rates, partly because of the huge relief rally during COVID, and partly because the echoes of Paul Brennan saying that sales could double each year for the next 5 years. I do seem to recall there was massive short covering in late 2020, but like you I don't have the data.

I decided $4.00 was just too rich, and I cashed out 100% of my position (transactions at $3.43 and $4.01)

By mid-2021 I started buying back in, starting at $2.41 and following the fall all the way down to $0.86 ($0.90 on SM) and then back up to $1.40. That was because the SP was WAY below my SP range (published on SM).

But I have steadfastly held on to ever share since then, simply because I have an eye on the asymmteric upside.

You see, the market is pricing in about 30% revenue growth over the next few years (partly because David and Jan subtly weave that into their remarks during investor calls - so these are no accidental remarks). However, in reality, current revenue growth is more like 50-60%.

My higher side scenarios have that carrying on for a while.

So, why will I not sell a single share below $3.50?

I don't care what the shorts do. But I do care about reducing my position and getting caught short. For example, any of the following could catalyse the next leg up with no notice:

1. New record month
2. A strong revenue beat on FY24 consensus (quite likley)
3. Announcement of a material tender in India - as the market doesn't know how to price that yet
4. Positive news on MTX adoption or other progress on the product portfolio
5. Announcement on BARDA and US full thickness burns indication - there is active and ongoing FDA/BARDA engagement on that

Apart from the "downside case" of revenue slowing in FY25 to +30%, or some other major problem (e.g. product recall), I find it hard to the SP falling back below $1.80 - although the $PNV rollercoaster does surprise us all!!

While my position size rules prevent me buying at this level ($PNV is back up to my biggest position in RL), it remains my highest conviction stock and I'd only trade it if the SP goes up over $3.50.

The shorts will do what they will do, but they don't have any bearing on the long term price in my view. BUt if we go back to $4.00 on a short squeeze,... then that's a different story.