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Overvalued by
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#ASX Announcements
Added 5 months ago

Two million dollar month

Polynovo announced today that it had recorded its first ever $2m dollar month in December, with revenue from BTM sales unaudited sitting at $8.57m for H1FY20. The increased revenue represents a 129% lift on the prior corresponding period, and signals an impressive full year result ahead. For context, $8.57m is about $1m shy of FY19 total sales.

Despite a similar announcement on the exact same day last year, I have to admit being slightly annoyed. It's unclear to me why management feel compelled to issue sales udpates before releasing the audited accounts. After all, the sales figure I had in mind for H1FY20 was ~$9m (based off of commentary at the AGM that the annual runway was sitting at >$18m) so this shouldn't have come as any real surprise for people paying close attention. 

People have also been speculating as to the contribution the White Island tradegy may have had on the December result, which to my mind is a distraction. Not only are the prices here in ANZ much lower than in the US, but the cycle time to booked revenue probably isn't as short as what is being implied. I don't know the exact lag, but I can imagine it's longer than 30 days, which means that it would not have even come in yet given the incident occured in early December.

In any event, the market clearly liked the news, with the share price rising 12% at the time of writing.

What will be more interesting is the pending announcement concerning the expected impact the CE mark will have post authorisation. I have perhaps calculated this higher than most people in my valuation, but as David Williams has said in today's announcement, there is plenty of latent demand so that should help drive it quickly into something meaningful.

No change to my valuation just yet – I'll be waiting on the audited results, expected CE contribution and confirmation of BARDA pivotal trial contract revenue. All of which should appear between now and the end of Feb.

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#ASX Announcements
Last edited 4 months ago


Interview with Alan Kholer

This is the 3rd interview with Alan, and I *believe* the only one that got an ASX mention (as price sensitive no less!). 

This and other recent price sensitive announcements makes me suspect they are looking to cap. raise in the not-too-distant future to fund growth.

A cap. raise wouldn't necessarily be a bad thing – dilution at around $2.50-3 would be relatively small on say, a $50m raise – because they could quickly finish the refurb of next door at Pt Melbourne, accelerate breast and hernia R&D, hire more boots on the ground in the UK and US and reliably never raise again (for cash flow purposes).


The interview itself gives nothing new away, although some (like Alan himself) might be surprised to learn a) BTM still needs a closing graft and b) Avita are not competing.

In any case, the biggest take away personally is that Paul is still the right man for the job.

I've said it before in another straw, but his gutsy switch to be CEO in 2015 coupled with heavy investment in the business at great personal stress, means he is acting like an owner operator; carfeully considering the best use of capital, and looking longer term than a buyout play. The interview just made this more obvious to me.

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#H1 FY20 Results
Added 3 months ago

Good set of numbers out today, in line with my expectations. BTM growth from the PcP was up 127% to ~$8.6m, with BARDA revenue slightly lower at $1.6m for a total of $10.2m.

These top line numbers are tracking very well, and the company expects to easily surpass $20m in revenue this FY thus avoiding any R&D rebates. There was no mention of a potential positive earnings result for the full year in this report, but they will come very close I think for FY20, especially if the pivotal trial reimbursement from BARDA dramatically steps up as I think it might in the half, though this may be next year, and they maintain some cost discipline.

The only niggle – which I had previously factored in to my valuation – was that they will probably to do a cap. raise in the next 6 months depending on how aggressively they pursue extra sales staff and expansion, which looks to be high. Cash balance remained at ~$8m with receivables at $4m so it may still be longer off, but they will do one, I’m sure of it. Either way, dilution shouldn’t be an issue above $2.

Some pundits may be looking at the drastic reduction in cash on hand from this time last year, but when you account for the Pt Melbourne facility purchase expense, and total outflows of just $2.5m, the balance looks like it could carry them on this next half with the uptake in sales likely to occur as well. My guess is that they will resist until the SP creeps back up to lofty heights on the back of more positive announcements in the coming months.

On that note, the CE Mark burn trial results which have been flagged in the report for a March release may help with a spike in surgeon uptake in Europe and the UK. Somecould be waiting for further clinical evidence, and this is what they will look to for validation to start using BTM, in tandem with the pivotal trial pathway.

I was hoping we would have more concrete BARDA reimbursement numbers for the pivotal burn trial in this report, but at least we have some idea of patient recruitment beginning in June/July, and commentary that the reimbursement will be increased from the previous feasibility study. I would expect it to at least double the revenue number, perhaps even triple, given the additional patients to be treated. 

Overall, a very solid set of numbers to my eye, with plenty of opportunity for margin expansion through production upgrades, revenue growth through expanding markets, uptake and new products, and finally sufficient evidence that profitability is just on the horizon. 

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#Investor Update
Added 4 months ago

20th January 2020

Regulatory approvals


Class III Medical device

  • US FDA 510(K)
  • CE Certification Europe, UK, Ireland
  • TGA Inclusion
  • NZ MedSafe
  • South Africa
  • India
  • Malaysia
  • Singapore
  • Israel

In Progress

  • South Korea
  • Taiwan
  • Mexico
  • Kuwait

Clinical Trial update

CE Burn trial is complete with final publication of results due by end of March 2020

  • BARDA funded Feasibility trial results will be published ~ March 2020 sites were

– Wake Forest Baptist Health, Winston-Salem,

– University of Tennessee Medical Centre, Memphis

– University of California Davis Medical Centre, Sacramento

– Tampa General Hospital, Tampa

– Arizona Burn Center, Phoenix

– Lehigh Valley Hospital, Allentown

  • BARDA funded Pivotal burn trial will commence once US FDA approves protocol recruitment commencing ~June 2020.
  • Granted US FDA opening “Break through technology” assessment pathway for  NovoSorb BTM which will accelerate US FDA feedback, guidance and support of the trail program

Pipeline Development

NovoSorb BTM is currently on sale

  • Unique biodegradable purely synthetic
  • Market expansion for the use of dermal scaffolds

Pipeline development – a platform technology

  • Hernia devices preparing for manufacturing scale up with equipment deliveries in progress and factory build, complete factory May 2020 US entry early CY2021
  • Breast products advanced design and preliminary commercial manufacturing process mapping
  • Drug Elution 5 drugs at initial exploration stages for mix/extrusion/consistency. Output is good, requires further R&D resources to develop robust elution test data. Accelerate development in FY21
  • Beta Cell Technologies Diabetes treatment with islet cell implants into a BTM dermal depot. BTM works well in pig studies with Islet cells secreting insulin. Stem cell derived Islet cell testing nearing completion with human trials anticipated in CY2020.

Production Capacity

  • Have run 2 shifts to build inventory
  • Currently hold 6 months forward inventories on a rolling forecast basis
  • Capacity increase through:

– Centralised larger polyol reactor in combined Hernia/BTM facility (unit 1)

– Centralised Foam production in dedicated room (particle reduction) for Hernia and BTM

– Centralised semi-automated packaging machine for all products, ordered and awaiting delivery

– New cutting machines significantly lift production rate and capacity

– Waste reduction program

– mixing process for foam, tighter production timelines and flows

– Improvements to QC testing regimes now that we have higher levels of data to support processes

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#Corona Virus Update
Added 3 months ago

11 March 2020

Coronavirus: Little impact on PNV

PolyNovo wishes to inform  the market that the coronavirus is unlikely to have a direct impact on its business or sales going forward. In particular, the Company:

  • does not source raw materials from China and it has multiple supplier redundancy built in to our supply chain
  • does not, therefore, anticipate any significant supply chain disruption
  • has enough raw materials to run two shifts of production and we anticipate running two shifts from April 2020. The inventory build that will result from this is in response to the anticipated product demand for the remainder of the year
  • has sufficient inventory of finished product on shelf in the US and Melbourne, New Zealand, and adequate stocks in the UK/EU to meet anticipated sales for a significant period
  • does not sell into China and our major customers are based in the US, Australia, New Zealand, UK and Western Europe.
  • anticipates surgeries will continue in a virus challenged world as most of the procedures are not elective surgery. The majority of BTM use is in emergency, trauma or extensive surgery applications
  • sees little reason to change its view on anticipated product demand going forward
  • is developing  a comprehensive digital marketing program to maintain our surgeon reach which should mitigate to some degree any conference cancellations or if hospitals impose restrictions on sales representative access. The Company will have regard to this when conside ring additional sales headcount going forward
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#UK/Europe Sales
Added 4 months ago


A couple of encouraging progress reports out of the UK and Europe in the last two weeks which suggest sales over there are going to do OK this FY.

Clearly it's too early for them to give exact sales numbers or estimates, but it looks very likely based on their commentary that 2H FY20 will be significantly better than the first.

Immediate surgeries and a second order from their German-Based distributor PMI implies that the significant time and investment preparing the way in advance of the CE paperwork was probably worth it. Moreover, the additional staff hires for the Direct UK sales channel might suggest stronger than anticipated demand.

I previously estimated ~$10m in BTM sales over there this FY, which is unfortunately looking unlikely given the longer than anticipated CE mark delay and lack of hard numbers in these announcements. It's impossible to pin down a range at this stage, but if I had to guess, I'd say maybe $2-4m, possibly 5, based on the rapid implementation we’re being told is happening.

However figures aside, my biggest take away from these two announcements is the continued doctor/surgeon enthusiasm coupled with the speed of uptake for BTM in clinical practice. Because BTM has such a niche target market – highly skilled surgeons – any further praise they heap upon BTM adds another nail in the coffin of the collagen-based competitors such as Integra.* 

Their enthusiasm for the product not only drives immediate sales, but it also steadily builds a strong moat for synthetics, encourages other surgeons to try the product, and reduces the need for excessive marketing. 

Valuation is getting hard to wrap my head around, but if surgeons take to Novosorb breast and Hernia products in the coming years as quickly as they seem to do with BTM, then frankly it could still be considered cheap via DCF. 

*(Integra incidentally gave an update on their anticipated results earlier this month and it wasn’t great: revenue at or near the lower end of guidance and organic growth in the low single digit range. Press release here).



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#CE Approval
Added 6 months ago


After a long wait, the paperwork for CE approval has finally arrived.

Although expected, this is fantastic news as it means BTM can now be sold throughout Europe and the UK, adding significant long-term revenue streams.

Already there has been significant investment in the UK and Germany preparing the direct and indirect teams for sales ahead of this announcement, so they will be champing at the bit to get going. A number of hospitals across Europe have been waiting to evaluate BTM as part of their clinical practise, and with the advent of CE approval, they no longer have to wait.

CEO Paul Brennan said, "This is a watershed moment for Polynovo. Our global regulatory approvals have expanded significantly with this certification. Our early preparedness in UK/Ireland and DACH should mean a shortened timeline to booking our first sale. We also believe CE approval will fast track regulatory approval in a number of other countries including several in South East Asia."

Well done to all who bought into the recent dip and any brave souls who topped up!

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Added 3 months ago


Polynovo is proving itself to be a truly disruptive company on the cusp of tipping (finally) into profitability. I think my valuation deserves a revist.

Moving to a DCF model permanently now and using some fairly aggressive assumptions over a 5 year period. FY20 1st half unaudited revenue was sitting at ~$8.5m – and before the CE mark was given – so I’m going to assume a better second half for $25m in total BTM revenue for the full year including BARDA, which has historically been about $4m p/a.

I’ve made some basic assumptions about the timing of Breast and Hernia product entries, whilst ignoring the drug eluting partnership revenue with Beta Cell, since that’s a long way off and a little unknowable at this stage. 

Huge investment into the facility in Pt Melbourne makes it a little more certain that these products are going to become commercially available – and remembering that these are based off the same Novosorb platform – so I don’t anticipate any real regulatory complications. 

I’m going to assume a cap. raise of say, AUD $75m in the next few months at about $3.50, which dilutes the share count by about 21m, raising the total count to 682m. 

In FY25 I’m forecasting (in AUD) $150m in BTM revenue, $17.5m revenue for the Hernia product, and AUD  $1.5m revenue for the breast sling, as I’ve assumed that only comes online in that year. These assumptions are based loosely on the historical growth of BTM, and allows the hernia product 4 years of relatively modest market penetration. I suspect it could be double, but I don’t want to get too carried away.

I’ll also assume that the staff count triples, R&D spend triples, corporate costs double and inventory quadruples, and gross margins stay roughly at 90%. 

Gives an EBITDA of roughly ~AUD $86m. Apply a 25% tax rate and ~$1m in A&D expenses, for NPAT of ~AUD $65m. 

P/E is the difficult part.

In FY25, I estimate the company will be growing its earnings by about 30-40%, with a long runway of growth remaining for the breast and hernia products, as well as continued growth in BTM. I think the 30% number could be sustained for a few more years after this with minimal effort.

Given its biggest competitor, Integra, is currently on a p/e of about 88 (wow!) at the time of writing and is more or less at maturity (only growing it’s bottom line this year [before tax benefits] at about 5%), a p/e of 50 seems fair for a much higher margin business growing its earning at a higher rate. 

50 might seem rich until you consider that the bottom line growth of 20-30% is probably going to be sustained over FY26 and FY27 if breast and hernia products perform well. IF that happens, it would come down to a much more conservative number. I'm comfortable with that assumption.

Putting it all together we get:

An EPS of .095c in FY25, applying a p/e of 50, and discount back 10% each year to the end of FY20, gives an IV of $2.80.

Upside to this is if BTM sales drastically come in higher than I anticipate in the next two years, Breast and Hernia products go to market sooner than expected, gross margins somehow improve from 90%, or the eluting polymer comes to market in that time with significant royalties from Beta Cell.

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#ASX Announcements
Added 4 months ago

22 January 2020

  • First product order from PolyMedics Innovations (PMI) for Germany, Austria and Switzerland
  • First patient treated in Germany
  • Several surgeries planned this week and next

PolyNovo has received its first orders of BTM from PMI for use in Germany, Austria and Switzerland. The first orders for NovoSorb BTM were shipped to hospitals in preparation for the first surgery.

PolyNovo is pleased to announce the first surgery in Europe using BTM occurred on Sunday in Germany. There are a number of surgeons planning on using BTM this week and the coming fortnight.

At the launch of BTM at the 38th Jahrestagung der Deutschsprachigen  Arbeitsgemeinschaft für Verbrennungsbehandlung (DAV) Burns Conference in Austria last week, numerous surgeons made clear their intention to use the product in the near future. That is now happening.


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#ASX Announcements
Added 2 months ago


Polynovo announced a trading update today detailing continued strong growth in BTM use and sales, with unaudited revenue for the March quarter at ~$4.49m (I suspect in AUD) representing a 166% increase on the prior corresponding period. 

The trading update also detailed some anecdotal evidence that hospitals are pivoting to BTM over collagen based products, because of the reduction in surgery times and hospital resources. This point is especially crucial. In the midst of this crisis – particularly in the US – where most ICU beds across the nation are already at capacity, hospitals are probably pressuring surgeons to be time conscious and frugal. 

It’s by no means the ideal way to change minds or clinical practice, but out of necessity the current situation seems to be driving uptake in BTM use, evidenced by commentary that sales saw a stronger uptick in late March (when it started to become clear that the US was in trouble). 

They also announced a $9.3m Debt facility with NAB, primarily for capital investment in accelerating the Hernia profit to market. Lots of rumours were circulating about a cap. raise today, but with overheads likely reduced because of this crisis, coupled with increasing sales and a heavily discounted SP, I would have looked on such a move very poorly. I don’t doubt that management would have baulked at the idea, and am pleased they didn’t do it.

I estimate they have enough working capital (~$7.4m) and growing sales to manage through this crisis without getting into trouble, so this facility looks to me like a strategic investment to accelerate the hernia product to market, given cost of borrowing is as low as it may ever get in this country. 

I’m hopeful that an extension to our BARDA funding will be announced soon as well, further reducing the need for a raise. According to the original agreement, which I managed to track down, the extension to the initial 3-year contract is for two further years and to the tune of ~USD$18m to facilitate a pivotal trial. This should come into play this FY once the scope of the trial is finalised as part of the FDA fast-track program. It was due late last year, but the fast track status – oddly enough – delayed it.

All said, Polynovo looks on track to possibly deliver a maiden break-even result. It will be close!

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Added 2 months ago


It's still unclear what impact the virus will have for Polynovo over the next 6-12 months, but in the long term I don't think much has changed to the businesses ability to grow substantially. In fact, there's good reason to think it could rise from the ashes of this catastrophe bigger and better than ever.

Although there may well be some short term disruption to BTM use, stock levels are bound to be much greater than their competitor Integra, who have a wider and more extensive manufacturing process which is absolutely being impacted. With inventory prior to COVID-19 at capacity, there should be zero supply issues over this period.

Coupled with the fact that the manufcaturing is only done in Pt Melbourne (not yet under lockdown), and that they could make the decision to continue manufacturing under strict, sterile conditions – which they do anyway – means we could be about to see an enourmous 'land grab' in the states.

Not only that, but margins for BTM are over 90%, meaning aggressive price reductions could further strip demand from Integra, as by all accounts they are close to only breaking even on their already drastic price reductions for their colagen-based products.

Combine all of this with enourmous director buying at levels way above where we are now (and another $150k from Chair David Williams today) suggests they sense an opportunity. 

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Added 3 months ago

26 February 2020

BTM sales up 129% H1 FY20, AND run rate accelerating

PolyNovo said today that NovoSorb BTM sales for the half year were 129% higher than the same period last year. However, the Company said the rate of increase in sales is growing in existing markets and should grow further as new markets come on stream. BTM sales in January 2020 were more than three times the sales in January 2019. While this is encouraging, especially in the US which had the largest month on month growth of any region, as previously advised we expect sales to be  lumpy as each market develops. Based on year to date performance the company now expects that NovoSorb BTM sales for FY20 should comfortably double FY19.

PolyNovo’s CEO, Mr Paul Brennan said,“The past half year has been exciting for all of us because many areas of our business are experiencing rapid and dynamic growth. My personal highlights for the first half,apart from the sales growth referred to above include:

  • CE Mark approval with a quick entry into the UK/Ireland and DACH region quickly followed by first patients
  • Awarded breakthrough technology status by US FDA which will assist our BARDA PMA burn study
  • Continued expansion of the sales teams in Australia, US and UK
  • Our response to the White Island tragedy in New Zealand and bush fires in Australia
  • Commenced the build of the hernia/breast cleanroom facility and delivery of manufacturing machinery
  • Appointment of Dr. Robyn Elliott as Non-Executive Director bringing extensive global experience
  • Completed the expansion and refurbishment of the head office to accommodate a growing team
  • Expansion of the US office to accommodate more support staff for our sales team.”
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#ASX announcement
Added 4 months ago

28 January 2020

UK/Ireland first NovoSorb BTM Surgeries

PolyNovo is pleased to announce NovoSorb BTM been applied to the first two patients in the UK. One patient was treated for Necrotising Fasciitis in an English NHS hospital. A second patient was treated for a scalp defect. Several other NHS hospitals are in the process of selecting patients for surgeries.

In anticipation of the launch in the UK/Ireland, PolyNovo had stock on the ground in England.

Over the past 14 months PolyNovo has been establishing a direct sales infrastructure and business processes in the UK to be ready for the anticipated demand for NovoSorb BTM.

We are pleased to announce the appointment of two additional sales staff for the UK and Ireland and the recruitment of a Marketing Manager for UK and Europe who will be based in England. The new staff are being inducted and trained and expected to be in the field by March.

Further update on Europe

As a further update on Europe, further surgeries have happened in Switzerland and Germany since our release on 22 January. Our distributor, PMI, has also placed a second order.

PolyNovo’s CEO, Mr Paul Brennan said,“We have now achieved first surgeries in England, Germany and Switzerland. Last week I visited several surgeons with our UK Sales Manager and I was impressed by the excitement that NovoSorb has generated. The first surgeries in England so soon after registration are a reflection of doctor enthusiasm.”

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#NovoSorb BTM News
Last edited a month ago

23-Apr-2020:  First BTM use in Canada

PolyNovo is pleased to announce the first use of NovoSorb BTM in Canada. This case was initiated by one of Canada’s leading surgeons who is a key opinion leader in this field. 
PolyNovo has not yet applied for regulatory clearance in Canada as the country has some unique requirements compared with the US, Australian and European regulatory processes. PolyNovo is working towards a Canadian regulatory filing in CY2021. 
Product for this first case was supplied under an exemption scheme made on an individual case by case application.  Health Canada’s Special Access Program (SAP) allows doctors to gain access to medical devices that have not yet been approved for sale in Canada. Special Access is requested in emergency use cases or when conventional therapies have failed, are unavailable or are unsuitable to treat a patient. All medical devices that have not been approved for use in Canada, require special access authorization prior to being imported and/or sold in Canada. 
This first case was a child with extensive burns. PolyNovo is very pleased we could assist in the care of this child and from all reports the child progressing well. The  PolyNovo family is proud to be able to improve the outcome for all patients but particularly when a child is involved. 
PolyNovo’s CEO, Mr Paul Brennan said “Our US team have worked closely with the Canadian surgeon and the hospital to get NovoSorb BTM into Canada for urgent use last week and over the weekend. Canada is a very important market for us in the near term and seeing demand for our product in advance of market entry is a reflection of the strength of the global key opinion leader network and the high regard for NovoSorb BTM.” 

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#ASX announcement
Added a month ago

21 April 2020

PolyNovo is pleased to share the summary of results for the CP-002 Feasibility Study to assess the safety and effectiveness of NovoSorb®Biodegradable Temporizing Matrix (BTM) in the treatment of severe skin burn injuries. This trial was a prospective, multicentre, single-arm, open label, traditional feasibility study conducted in the USA, where NovoSorb®BTM was used under an FDA Investigational Device Exemption (IDE).

This 12-month clinical study recruited 15 subjects with burns within the range 10%–70% total body surface area (TBSA) across four leading burn centres:

  • University of CaliforniaDavis (Sacramento),
  • University of Tennessee (Memphis),
  • University of South Florida (Tampa) and
  • Wake Forest University (Winston-Salem)

Fourteensubjects (aged 21–67 years, mean 45.1% TBSA deep dermal/full-thickness burns) had BTM applied to treat thermal/contact burns. One subject consented but was deemed ineligible during screening and did not have BTM applied. The first subject was enrolled in March 2017 and enrolment ended in August 2018.

Seven subjects completed their 12-month follow-up assessments and seven subjects were withdrawn: two subjects died due to serious adverse events unrelated to BTM, one subject was withdrawn by the investigator, and four subjects were lost to follow-up.

The co-primary effectiveness endpoints were BTM ‘take’ rate assessed after integration at the time of sealing membrane removal, and split-thickness skin graft (SSG) ‘take’ rate at 7–10 days after application. The results available for 12 subjects indicate that BTM provided effective temporary wound coverage and integrated into the wound bed with a mean BTM take rate of 95.22%, median of 98.89%,and a range of 78% to 100%. Similarly, SSG take rates available for 11 subjects were high with a mean of 97.53%, median of 100%, and a range of 75.0% to 100.0%.

Wound closure was assessed at various intervals after skin grafting. Mean wound closure rates at 1 month varied across anatomical locations in a range from 94.8% to 100%, increasing to a range of 99.8% to 100%at 3 months, demonstrating success of the skingrafting procedures used to provide definitive wound closure in these large wounds.

No new risks related to the use of BTM were identified in this study. Infections were common and occurred in 12 of 14 (85.7%) subjects, with 7 subjects (50%) experiencing wound infections at BTM-treated sites. These rarely resulted in removal of BTM, which occurred in 2 subjects (14.3%).

As a consequence of these results, PolyNovo anticipates our Pivotal Study IDE to be approvedby the US FDA in June 2020.

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#Reports & Presentations
Added 3 weeks ago

05-May-2020:  PolyNovo presents at Macquarie - presentation slides

That link is to the 28 page presentation to be given by Paul Brennan at the Macquarie small and mid-cap virtual investor forum today, Tuesday 5 May, 2020.

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Last edited 5 months ago

PolyNovo is the commercial spin-off/arm of a CSIRO R&D project that began in 2004, with a mission to find superior polymers for medical use. Their flagship range of products, under the umbrella name, 'NovoSorb', are a series of non-toxic synthetic polymers that biodegrade in the body over time via hydrolysis. 

Crudely speaking, the NovoSorb 'BTM', or 'Biodegradable Temporising Matrix', acts as a sort of 'scaffold' for damaged tissue to rebuild itself into over time. Common applications range from severe burns to wounds where significant tissue and skin has been lost. It has the desired effect of creating a more supple and elastic skin once fully healed, with a noticeable reduction in scarring.

Polynovo have created an animated video that explains their product in greater detail here:

Since a restructuring in 2014, management have been steadily kicking goals getting the product to market, and revenue is starting to really take off. PolyNovo are close to breakeven on a month-to-month basis, with lumpy revenue just about ironed out via an ever-increasing customer base and repeatable orders when inventory is low. 

R&D spend is looking to extend their product into a wider variety of uses, such as hernia, breast and diabetic applications as well, with trials well underway.

Feedback from surgeons in Australia and the US is very positive, with great clinical trial results and numerous approvals.

The majority of revenue is presently from the US, where they have recently secured a Dept. of Defence contract, however the AUS/NZ and 'Rest-of-World' component is rapidly increasing as well, with direct sales teams and distributors in place across the globe.

They face some fierce global competition, but arguably have a much better product which is showing early signs of supplanting the current animal matrices from large competitors such as Integra. 

With a lot of the speculative elements off the table now, and if management can execute sales and production capacity well in the coming years, expect PNV to do very well.

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#Market Opportunity
Last edited 6 months ago

-Sales realised in the USA to date

-Given the wide variety of clinical cases that require dermal regeneration I am guessing the application of NovoSorb is expansive (Dont have a market size in terms of $$$ yet)

-Currently approved in the USA, Israel, AUS, NZ, South Africa, Saudi Arabia

-In process of gaining approval in Europe and entering market

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Last edited 6 months ago

-PolyNovo is a medical device company whose current activities are focused around commercialising its patented tissue scaffold technology "NovoSorb"

-NovoSorb is a polymer (kind of like a plastic or fibre) that is used to assist in tissue repair following injury

-NovoSorb is applied to a wound to act as a scaffold to aid in the regrowth of dermal tissue (the tissue under your skin) and blood vessels, then degrades over time.


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#Value Proposition
Last edited 6 months ago

-PolyNovo claims to have an edge over competitors because they can design NovoSorb to have varying lengths of degradtion rates depending on what is required by the clinical case

-Generally speaking, once a medical product gains ground, medical professionals are very relucantant to change due to the risk of a new product failing, thus if NovoSorb gains ground it will have quite a defensive revenue stream


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#Growth Drivers
Last edited 6 months ago

Macro Level

-Health care industry continues to grow as the world progressively becomes more affluent meaning more people can access healthcare, ultimately increasing demand for medical device products

Business Level

-Increased adoption by surgeons for use on patients will drive revenue growth in the mid-term

-Approval of NovoSorb by regulatory bodies

-Entry of NovoSorb for dermal regeneration into new geographic markets

-Success of clinical trials testing the application of NovoSorb in new clinical cases, currently have a trial for tissue repair following burns

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#Bull Case
Last edited 4 months ago

I think Chagsy raises some interesting points in the recent Bear case straws, and I thought I would address them as best I could since they are legitimate concerns.

The second which concerns BARDA is a little more straightforward to address because BARDA isn’t ‘sales’ as such - it’s a contractual reimbursement for the cost of the trials plus a fixed fee. The two ‘million-dollar months’ in a row from recent market updates aren’t attributable to BARDA in that sense, so a significant uptake in hospital purchases is more likely the cause. Add back in the fantastic HY sales, and I think we're looking at a significant reduction in the revenue attributable to BARDA this year from 60% down to something more like 20-30%.

Nevertheless, BARDA revenue will continue to be significant in the next two years as they are about to begin funding the pivotal trial which is much larger, which brings us to TAM and what we consider an 'expensive' product, and what a small but expensive market is.

To begin to understand where the TAM begins, we should look at the main competitor, namely Integra Life Sciences. They currently have a m/cap of ~$4.5b US, have been around for decades, and have the incumbent products to which NovoSorb is the disruptor. Surgeons have been using their product for over 20 years and are familiar with the procedure.

Last qtr, their equivalent revenue was about $125m and growing at a modest 3.7% on the previous equivalent qtr. At about half a billion revenue per year, that’s nothing to sniff at. 

NovoSorb is currently about half as expensive as Integra’s product (See my product costs straw), so let’s halve that to $250m revenue per year, if we can capture all the market Integra currently holds. Of course we won’t, but we could capture a significant chunk within the next 5 years on the current run rates being reported recently. Bear in mind too, NovoSorb is only really expensive in the US; in the AUS/NZ for example, it’s x2.5 cheaper, and the price varies per market and distributor. This plays out well in those countries that may have trouble justifying the high prices (see my Geographical revenue straw for information on market penetration). NovoSorb is also on a 90% margin in the US before operating costs, so there is a huge profit margin involved, and plenty of room to compete on price.

The breast sling and Hernia products currently in development are worth consideration too when considering TAM, and if we were feeling optimistic, we could take at face value what PolyNovo have previously said in the chart here on page 6, which adds $5b to that number in future. I’m really interested to see what the insulin secretion and drug elution products could add to this as well, though it's completely blue sky right now. These are all some years into the future of course, but the parent polymer (NovoSorb) already has FDA approval, so a great deal of the risk has been removed.

Not being a surgeon, I can’t speak as to the reduced frequency of burns and heroic surgery in the developed world as you claim, so I’ll take you at your word that it’s declining, despite the increases in Integra revenue. I would be interested in hearing what the patient outcomes are for those undergoing chemo immunity and radiotherapy, and specifically, if they provide a better patient outcome over the long term than a BTM application with skin cultures. If it's clear those procedures provide a better result than a BTM, then it would be worrying. 


TAM for NovoSorb is by chipping away at Integra’s established revenue short-term (and other animal base competitors) + product pipeline longer-term.

BARDA revenue is likely to be an insignificant amount once Integra TAM is partially realised, probably in FY22 onwards. The pivotal phase trial (which BARDA will continue to fund over the next two years) is highly likely to be successful based on the available evidence (though I agree that anything going wrong with it would constitute a broken thesis).

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Last edited 4 months ago

There are some distinct risks to the PolyNovo thesis that I can see. These are in no particular order, though they primarily centre on Integra.

  • Integra moderately cuts their prices and makes it harder for NovoSorb to compete in the near term, stunting NPAT and putting pressure on the balance sheet for more cap raises to support our expansion.
  • Integra aggressively cuts their prices and makes it difficult for NovoSorb to grab market share for many years, draining the balance sheet and patience of investors. Integra has the balance sheet and the brand to do this if necessary, though it might prove futile ultimately.
  • Integra (or another big pharma competitor) makes an offer for Polynovo before it can penetrate the market to any great extent. Unlikely given Paul Brennan has expressed distaste for this in the past, and there is a nucleus of high-profile Adelaide holders that are really proud of what's been achieved thus far. I wouldn't vote in favour, put it that way. The price offered would need to be minimum x4-5 current m/cap to account for the (now) obvious lack of risk in using NovoSorb and high probability of market grab potential. Very unlikely IMO.
  • Integra sales continue to remain strong for the next 2 years. My valuation is dependent on NovoSorb aggressively eating into their revenue over this period. Improved Integra sales would indicate loyalty to an inferior product against firm clinical evidence. This would be a result of either a poor sales effort in the states, or Integra pursuing an intensive campaign to maintain customers. The later is preferable if sales don't materialise, though both would be worrying.
  • The CE Mark approval in Europe is extensively delayed, or doesn’t come through this CY19 or before the halfway mark in CY20, without a reasonable excuse that isn't anti-NovoSorb. 
  • The upcoming ‘Pivotal phase’ of the BARDA trial, scheduled to commence later this year, either fails to materialise, produces adverse results or reverses the FDA approval. Instant sell.
  • Hernia and/or Breast sling products fail to achieve FDA approval, though this is a concern for FY22, and wouldn't affect the standard BTM sales. Low risk at this stage.
  • A competitor produces its own distinct synthetic polymer to compete with NovoSorb, though Paul Brennan (CEO) isn’t aware of any such patent/product, and this seems very unlikely. Would likely take years to get to where NovoSorb is, and may not even be as good.
  • A competitor bypasses the need for a BTM with a superior and novel product that produces far superior results. Unlikely in the next 10 years, and would require the same intensive approval hoops.
  • Possible as-yet-unknown side effects that lead to crippling litigation. Instant sell. 
  • Production capacity is currently only in Pt Melbourne (I believe). I would like to see this extend to a second location at some stage to diversify the risk of supply issues in the rare case of fire/flood/theft. 
  • Distributors do something to adversely affect our reputation or product, leading to loss of sales. (US is direct, so not an issue).
  • Sales growth slows or stagnates before significant market share is achieved. Growth in BTM sales needs to remain strong until Qtrly revenue hits $50m+ (HY $100m). Looking at FY22/23 here is my best guess.

Of all the listed risks above, I'd say that Integra cutting their margins by a moderate or aggressive amount represents the biggest near-term risk to PolyNovo. It's conceivable that they will begin to slash their prices this FY (if they haven't already), as they grapple with the disruptive threat of NovoSorb.

Look for the Integra FY results scheduled for release to the market in the US on or about the 24th July – the Orthopedics and Tissue Technologies segment will likely improve on a yearly figure, but the Qtrly revenue figure should ideally be coming down or remain steady. It wouldn't be too troublesome to see it grow modestly, but it would be a little disappointing. Ideally, no more than ~3% growth qtr on qtr. 

Should become available here

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#Scientific Community response
Last edited 5 months ago

There are plenty of anecdotal and scientific studies that espouse the efficacy and quality of NovoSorb, giving the product a strong potential moat. 

Below are a few samples from scientific papers.

Early study on mice – comparison with major rival Integra

Favourable results achieved, but notes there was an increase in an inflammatory response compared with Integra.

Study 1 Early 2016 study with promising results, Royal Adelaide Hospital

Very early trial with 3 patients:


"Our results demonstrate that using BTM is a novel, viable approach to the management of acute burn injuries involving major joints as well as reconstructing burn-related joint contractures."


Study 2 – January 2018

This study was conducted as an early follow up to Study 1, with 5 patients who suffered significant burns from various sources. The results warranted changes to the BTM which included the addition of the top layer to reduce the fail rate to near 0% levels. Some graphic images in this study, but the 365-day results seem remarkable, even with the unfinished product being used here.

Key Points:

  • Notes that PolyNovo's BTM  has several advantages over current treatments (such as collagen, glycosaminoglycan or combination dermal matrix bonded to a silicone ‘pseudoepidermis’.) The biological origin of such matrices makes them costly and may encourage infection.1 (They are referring here to the synthetic, and thus highly replicable and cost-effective, nature of our BTM over incumbent practices.)
  • This study had a fail rate of <7% for the BTM, with subsequent reapplication of BTM 100% successful. All 5 subjects survived. NOTE: After this initial study the top layer of the BTM was introduced to deal with the <7% fail rate, with two further studies of 10 and 15 patients proving the undeniable efficacy of the product with no more mention of a fail rate.2
  • From the conclusion: "In each case, our experience of its application, evaluation of integration and split skin graft application, along with the management of complications such as sub-seal infection and haematoma, has steadily increased our confidence in its use with lessons learned applicable to subsequent cases.3

1. Section 1 –Introduction


3. Section 6 – Conclusion

Disclaimer: 2 of the authors, John Greenwood and Marcus Wagstaff, were shareholders of PolyNovo as of January 2018. They work at the Adult Burn Service, Royal Adelaide Hospital, and the Department of Plastic and Reconstructive Surgery, Royal Adelaide Hospital, respectively.

I would be put off by such a conflict of interest normally, but in this case, their endorsement of the product has the reverse effect on me, given their expertise.


Study 3 – Ongoing

Ongoing trials of targeted 30 patients with results due soon. As yet unpublished in peer-reviewed papers. Study involves 4 Australian hospitals and 1 in France.


Study 4 – Australasian Journal of Plastic Surgery, March 2019 (warning: graphic medical imagery).

From the conclusion:

"Necrotising soft tissue infection is a devastating disease that often leaves a patient with large full-thickness skin loss. SSGs provide a reliable and functional reconstruction, but have numerous shortcomings. The synthetic dermal template NovoSorb™ is a product that offers a two-staged reconstruction for complex skin defects. We demonstrated its successful application in treating a large soft tissue defect that contained exposed tendons and presented a high risk of infection. It has the potential to offer a thicker, more durable and more mobile skin reconstruction when compared with SSG alone."



Finally, here is an extract from a recent ASX Announcement from Chairman, Mr David Williams on Nov 18, in which he touches on the two surgeon/shareholders that unertook initial studies (Studies 1 and 2 above):

"I would like to emphasise the wonderful support we are getting from surgeons in all the markets we enter. I would also like to acknowledge and thank Drs John Greenwood and Marcus Wagstaff from Royal Adelaide Hospital for what they do representing us around the world. I am happy to report that both are large shareholders."


My own conclusions

Demonstrable early and ongoing success with NovoSorb in both burns treatment and soft-tissue plastic surgery. Industry specialists seem to be approving of the product wordlwide, with more results due in soon from Study 3. Indeed, many of them are acting as pseudo salespeople at conferences where they present their findings.

The scientific consensus seems to be extremely positive so far, and in my mind, very minimal risk seems to be present in the BTM product.

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Last edited 5 months ago

Recent presentation at Macquarie showed parents will start expiring from 2023. That’s only 4 years of exclusivity, then competitors may copy product and eat away at market share. However, there may be some significant “know how” and trade secrets required to reproduce NovoSorb. 


Potential for future patents around method of use in new indications/treatments eg Hernia, Brest Surgery

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Last edited 6 months ago

-Always the possibility that complications/adverse events from use of NovoSorb may arise as more patients are treated with NovoSorb. Whilst clinical trials are meant to mitigate this risk, the increased sample size following entry to market of a medical device is the real test of safety

-Approval by regulatory bodies removed or not granted

-My sense is that medical professionals are risk adverse meaning they are reluctant to try new products on patients, consequently penetration into the market is always slow with new medical devices. Risk is that PolyNovo can not convince surgeons to adopt the use of NovoSorb

-Facility to manufacture NovoSorb is likley highly sophisticated meaning NovoSorb can not be produced anywhere and destruction of the facility by fire for example would cripple the supply chain 

-NovoSorb likely needs to be sterile, contamination of the product and subsequent infection of the patient would critically wound PolyNovo

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#ASX announcement
Last edited 5 months ago

"A trading halt is requested in respect of verifying final sales results for December 2019 half year period and finalising an announcement regarding the significant uplift in sales. Unless otherwise requested by the company, PNV requests the trading halt to remain in place until the earlier of the release of an announcement or the morning of Wednesday 8 January 2020".

Sounds promising- what is everyone's thoughts?


PNV's first $2m month. Very impressive uptake, they also note that their first $1m month was only May 2019. The announcement does note that the sales might be lumpy going forward so good to see they aren't overpromising.

Overall I think a very good announcement but keen to hear any further thoughts.

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#Analyst Coverage
Last edited 6 months ago

Maquarie Wealth Management has initiated coverage on the 31st of May with a 12m price target of $1.5

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