Chris Judd Interview - A must watch to get a detailed understanding of Polynovo. The interview shows a lot about David Williams' (Chairman) personality and what he thinks about the company. These are my initial thoughts of the Chairman:
- He has a comprehensive understanding of the product, competitors and customers (He knows what he is talking about. Especially insight on what customers want and what others are doing).
- He is an investment banker and talks a lot about share price (not a fan as I find my judgement gets clouded).
- The way he talks makes you think he can sell ice to Eskimos. He is very convincing at explaining the thesis, which can be good or bad. You cannot blindly take his word, and need to remain rational when he starts making claims.
- He has been with the company from very small company, so he has shown that he is dedicated. Now that is rare for an investment banker. Usually bankers run after making a 10x return. I have only just recently invested in the company, and there are shareholders in Strawman who have/are holding Polynovo for multtiple years. So, I am not the best person to judge character. I commend David for sticking with Polynovo, he can envision more growth ahead.
- He answers your question in great detail - very sharp with the explanation. This is the trait that gives me the tick of approval as most management fluff around their explanation. David first answers the question and then explain the surrounding context.
2020 AGM - The team works well together also interesting questions asked by shareholders. Paul Brennan (CEO) has deep technical understanding of the product and how the clinical trial is structured. Some notes from the AGM (November 2020):
- David Williams
- Novasorb BTM - very important product for the international market that can expand to more areas from burns.
- Employees from CSL willing to work for Polynovo.
- CSIRO spun out business. They have raised enough capital to commercialise the product.
- When a doctor is trialling the product, usually the success of sale = 100%.
- $1,900 per piece (10cm x 20cm dimension) very expensive product. It is less than 1/3 the cost of nearest competitor. However surgeons are not price dependant, they want the best product to save a patient's life. The gross margins will be great when they begin scaling to different markets.
- To make the most out of the business, hire more sales reps and get the product to the customer for trials.
- Medium term - more reps, more investment into R&D - new products for (hernia or breast)
- 80 staff and plans to grow larger
- Working board (very technical experience) - Phillip Powel (Audit with experience), Robyn Elliot (CSL in manifacturing), Christine Emmanuel (CSIRO work on IP protection)
- They took on board positions with much lower salary as they are enthusiastic with the product
- Paul Brennan
- Salesforce know where to go for the sale as the CRM is automated.
- Expanding geographic reach with new country heads to double the business by FY21.
- Region update
- US market is largest market and continue to grow despite covid. In US, states work independantly so there are 50 markets within USA. It is a challenge as you can't use the same strategy across states.
- Work with GPOs to sign agreements.
- Increase sales managers from 2 -> 4 per region in US so that they can train the next cohort of sales reps.
- The NZ volcano eruption was a catalyst as demand for the product increased.
- CE Mark in December 2019, entered Europe through Poymedics as distributor as they have good relationships with Key Opinion Leaders.
- Expansion accelerating in Europe.
- Korean market plans to enter
- Indian market looking for distributors
- African market difficult without reimbursement in private hospitals.
- Middle East looking for distributors
- Covid caused delayed in commissioning new machines for manufacturing
- BARDA trial will be long term but important for the business from my undestanding the stages are:
- Ethics committee approval
- Recruit patients (take 3 years to recruit 150 patients)
- Finalise contracts
- David Williams commentary
- Despite US being the largest market, Polynovo is a global company.
- Current pricing maybe too low
- Product adopted by major KOL with major hospitals (Mayo Clinic and Harvard)
- Ed Graubart (Senior VP of Sales in US)
- Doubled salesforce (small localised territory), reducing expense for travel.
- Key accounts have made BTM the standard of care. Surgeons are excited by the product.
- Slowdown in hospital approval due to Covid
- Hired experienced consultant for the military (BARDA trial)
- Plan to increase staff from 23 to 50.
- GPO networks have up to 1500 hospitals, very large market opportunity.
- Anthony Kaye (new COO only 5 days in at the time of the AGM)
- Worked 6 years for CSL
- He was a manufacturing lead there
- Initial training in synthethic organic chemistry that got commercialised
- Has experience with manufacturing complex pharma products.
- Way more things I can add here, however the straw would turn into a book. Bottom line: the board is experienced and new hires coming from reputable companies like CSL. The management can misinterpret their communication with investors- especially the recent half yearly update. They are overly optimistic with the forecast.
On a sidenote, I was second guessing myself before adding to the strawman portfolio. You could see it with the buy order, then the cancel and the buy again. When the market valuation dropped, I felt the growth opportunities is large enough to justify the high valuation and was second guessing the management. I am giving it a pass as the product is strong enough to expand their market share.
