PolyNovo shares jump on sales update, key analyst advises caution

PolyNovo has almost doubled its sales in the financial year to date thanks to strong demand from the US and the UK.

Skin graft-focused biotech group PolyNovo has almost doubled its sales in the financial year to date thanks to strong demand from the US and the UK.

The Port Melbourne-based company emerged from a trading halt on Monday to release unaudited sales figures, which revealed total revenue had soared more than 92 per cent to $14.9m in the first two months of this financial year.

This compares with $7.7m in the same period last year. The US accounted for the lion’s share of sales, generating $10.6m — an 85.3 per cent increase on the previous year.

The update sent PolyNovo shares up 3.3 per cent to $1.26, valuing the company at $870m. It comes after a dismal year for investors in which the company has lost 38 per cent of its market value, diving below its $1bn market capitalisation at the start of this month.

While analysts welcomed PolyNovo for beginning to turnaround its fortunes, they have cautioned that its monthly sales remain lumpy – a fact chairman David Williams has acknowledged – and “selected” monthly data made it difficult to forecast its overall performance.

But Mr Williams said the results from the first two months of this year show the company’s future is bright, with Australian sales more than doubling.

PolyNovo 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 increase in sales albeit lumpy and off a low base is at once breathtaking but at the same time more of the same of what we have seen in the last three years,” Mr Williams said.

“The 150-plus per cent increase in the UK and other significant geographic growth, hides the new hospitals and new staff that commenced recently and are yet to show their full potential.

“In a high-growth company like PolyNovo, we want shareholders to see the extraordinary growth that we as a board are seeing and not have to wait for the usual reporting cycle.

“This growth is price sensitive and shareholders should see it more regularly than every six months.”

PolyNovo received $1.6m of its sales in August from the US government via the Biomedical Advanced Research and Development Authority (BARDA). This compared with BARDA revenue totalling $600,000 in the same month last year.

Chief executive Swami Raote said surgeons had “expressed their satisfaction with patient outcomes” with the company’s flagship Novosorb BTM product and were “actively championing its use”. “We are humbled to be able to provide better outcomes for patients, while being cost-effective for health systems,” Mr Raote said.

Wilsons analyst Shane Storey said BTM was “clearly resonating with surgeons across all markets” but did not upgrade his rating on the company’s stock. “At this time, we await further updates throughout the year before updating our forecasts, cognisant PolyNovo’s monthly results remain lumpy,” he said.

He said if the same run-rate was applied for the rest of the year, PolyNovo’s would generate $39m in annual product sales – $1.2m ahead of his estimates. But he said month data remained difficult to assess.

“We only have select months available, noting in June PolyNovo issued a trading halt to provide an update on their May sales. From our estimates it appears July-August was solid. The timing of this update is unexpected with only five trading days left in 1Q24,” Dr Storey said.

The update came a month after PolyNovo reported that it had widened its annual underlying loss to $2.23m as it expanded to Hong Kong, India and Canada. But the company expects to be profitable this year as it ramps up sales.