Polynovo expects to be profitable this year as underlying loss deepens 16pc

After launching into new markets, the skin graft-focused biotech fell deeper into the red but expects to break even in the next 12 months.

Skin graft-focused biotech Polynovo has widened its annual underlying loss to $2.23m as it expands to Hong Kong, India and Canada. But the company expects to be profitable this year as it ramps up sales.

The entry into new markets sparked a 58.8 per cent surge in the company’s annual revenue to $66.54m, with the Port Melbourne-headquartered group also gaining US Food and Drug Administration clearance for its NovoSorb MTX product.

Polynovo, which has a market value of $1.02bn, ended the year with $46.8m cash, which chairman David Williams said would put it in a “strong position to fuel further global expansion” and reach profitability.

“In FY24 we expect to see strong revenue growth in direct markets particularly the US, UK and Ireland, ANZ, India, and Hong Kong. We also expect our key distributor markets of Germany and Canada will continue to perform well, and that of our recently appointed distributors in Spain and France will experience early sales,” Mr Williams said.

He said May was a standout month, with sales more than doubling to $7m compared with the same period last year, with the company expanding its US sales team from 54 to 93 staff and adding 110 more hospital customers.

The company has developed a synthetic skin for burns and soft-tissue regeneration, and in recent years has been used to treat Australian bushfire and New Zealand volcano victims.

The group’s statutory loss sank to $4.93m from $1.19m. This was largely due to the reversal of $4.7m in share-based payments in FY22, which the company’s former chief executive and chief operating officer forfeited on their resignations.

Excluding these payments, the company reported an underlying loss of $2.32m – a 16 per cent increase versus 2022.

After hitting $1.60 – a two-month high – in early trade on Wednesday, Polynovo’s shares closed 5.1 per cent lower at $1.48.

Wilsons analyst Shane Storey downgraded the company to underweight in May and has maintained that rating after it flagged that US sales of its NovoSorb BTM product were slowing, which he described as a “red flag” at the time.

“This segment of the burns market is already small, and without material indication expansion, BTM sales growth may continue to stall,” Dr Storey wrote in a note to investors at the time.

On Wednesday, Dr Storey said he was reviewing his investment view of the company, noting his last published price target was 90c a share.

“Opex was 4 per cent above estimates with significant uplifts in SG&A (selling, general and administrative expenses) owing to new market entries. Notably, the US sales team now stands at 93, adding an additional 39 reps during the year. This will impact PNV’s ‘sales efficiency’ as rep productivity builds up across FY24,” Dr Storey said.