ASX Announcement

Very odd announcement, entitled a repsonse to an article in The Australian, rather than what it appears to be .... CEO Swami's intended resignation, at the request of the Board (DW?).

Very odd indeed.

The language makes it clear that agreement on the separation has not yet been reached. So is the announcement a device to force the end?

As some of us have speculated here, given the rapid fall in growth rate including the lack lustre progress in India, it was looking increasingly likely that Swami's incentives are likely out of the money, and that his retention was also a potential issue. Now it looks like that rather than jumping, he is being pushed.

Margin call gave a different lens on this issue, focusing on the behaviour of Chairman David Williams.

Whatever the reality and the truth, it appears all is not well with management and the Board at $PNV.

Disc: Not held

Research update from Bell Potter received with morning from $PNV Investor Relations

TP upgraded significantly from $1.50 to $1.90.

(I had a few helpings yesterday, so I need to stop here to avoid indigestion.)

Polynovo (PNV)

Matrix Revelations

FY22 result. Record revenue of $41.9m represents a 42% increase from FY21 (BPe $43.0m). Operating expenses of $41.1m were 26% greater than FY21 (BPe $42.1m). Net loss of $1.3m reflects improvement since FY21 (net loss $4.9m). Adjusted NPAT of $0.2m accounts for the $1.4m impairment loss on the sale & leaseback of Port Melbourne facility. Capital expenditure of $0.5m (BPe $1.5m) and net cash outflow of $1.6m (BPe $0.9m). Cash position of $6.1m as at 30 June 2022.

Matrix expansion & strengthening portfolio. BTM sales recorded in new territories within Europe and follow-on sales in key markets (India, Taiwan, South Africa) within the burns & wound care sector. The new MTX product allows application in complex wounds over joints and ulcers (venous leg, diabetic foot). FDA 510(k) clearance is targeted in 1H23 with commercialisation in 2H23. R&D continues within breast & hernia and novel therapeutics including the BetaCell collaboration for treatment of Type 1 Diabetes.

Clinical trials update. Enrolment of 23/120 patients in the pivotal BARDA funded trial in full-thickness burns. SynPath diabetic foot ulcer trial has commenced enrolment in August 2022. Expected completion for both studies is 4Q23. Randomised controlled trial also underway with Flinders University in neuroischaemic diabetic foot wounds.

Investment view: Maintain Buy, Price Target $1.90. We increase our price target to $1.90. The valuation has been generated from a blend of two methodologies: DCF (WACC 10.5%, TGR 3%) and EV/Revenue (8.6x from comps). Key catalysts driving this upgrade include BTM expansion in the Asian market, greater penetration within the US market from existing & new accounts and launch of MTX during 2H23. Product pipeline with SynPath and the novel therapeutics also strengthen the longer term potential for Polynovo.

Recommendation:

Buy

Previous Close:

$1.64

Price Target:

$1.90

Bell Potter Securities Limited

Level 38, 88 Phillip Street,

Sydney NSW 2000 

www.bellpotter.com.au

Disc: Held in RL and SM