Following the FY24 results, I have update my valuation for $PNV.

Result: $2.60 Range = ($2.30 - $3.50)

Method: 10 yr DCF

Key Assumptions:

• BTM/MTX only
• Market growing at 8% CAGR
• Assumes market share grows from 2.7% today to 15%/19%/22% by 2034 (Integra estimate of $2.5bn TAM burns & trauma)
• New products beyond BTM/MTX platform treated as a sensitivty to the Continuing Value Growth 5% instead of 4% base.
• %GM declines from 94% (2024) to 88% (2034) due to increasing mix of 1) developing markets, 2) complex product mix, and 3) large increments of capacity that will be under-utilised from time to time
• Capex to deliver just in time capacity: 1st $500m for $27m, 2nd $500m for $40m
• Range of expense/revenue ratios modelled from FY24 to reach reasonable benchmark for global medical device company by 2034.
• WACC 10%; Tax=30%
• Other minor assumptions for interest and working capital scale with revenue

Comments

Compared with my last detailed valuation from Sept-22, I consider the FY24 result puts a much firmer base under the low case.

@Parko5 my top end just hits your $3.50. This is worthy of a comment. There are plausible scenarios where I can get up to $4.00 without stretching my own belief, and so it's worth looking at what's not included (see section below). You'll also see that I contradicted myself a little about revenue growth in FY25. I do indeed model values ranging from 39% to 58%. The reason is a modelling convenience, as the market share increases linearly from today and I didn't break out BARDA. In practice, the "BARDA Effect" that I mentioned in the earlier post is a transient 1-year thing that hits 2025 disporportionately (I'm assuming). It has little consequence in the overall valuation, so I chose to ignore it, as my model is complex enough without adding more complexity!

What's Not Included

Upsides

1.   BARDA full thickness burns approval by FDA in 2025, driving "higher for longer" growth rates

2.   A strongly favourable IQVIA report in 2025/26 - showing economic and patient outcome advantages of Novosorb, leading to wide adoption by HMOs etc and accerlating market shift away from biologcs More "higher for longer". 

3.   Award of multiple Federal or State Government Tenders in India, leading to India rapidly taking off

4.   Early entry to China beyond Hong Kong (pre-2027)

5. New Products (i.e., beyond BTM and MTX variants) commercialised before 2028 and achieving significant revenues before 2030.

Downsides

6.   Emergence of alternative synthetics competitors eroding market share gains in the later years

7. Loss of momentum due to Integra-like product recall (These things happen in medical devices!)

1.& 2. can be argue to be contained within the high revenue growth assumptions. However, the impact could be more material increasing the 2034 market share by accelerating switching from competing treatments. They would also likley accelerate global adoption, particularly in countries without capacity to conduct their own trials.

Model Outputs and Inputs

(I can answer and provide more detail on methods used to get to each of the items below, if anyone wants.)

1. Valuation

2. Model Output Table

3. Input Tables

"i" related to FY24; "f" related to FY34 - model shows linead trend in expense ratios across 2024-2034

Disclaimer: This is intended for my personal use only. It is not advice and must not be used as the basis of an investment decision.