Israel held up free medical supplies from Melbourne biotech Polynovo in customs after attempting to charge VAT

The Israeli government tried to extract ‘tens of thousands of dollars’ in VAT before it would release an Australian biotech’s donated synthetic skin graft products from customs.

ASX-listed Polynovo has sent its lifesaving products to war zones, including Israel, but the supplies are yet to arrive in yet to arrive in hospitals after being held up in customs over unpaid VAT. (Photo by JACK GUEZ / AFP)

Medical supplies donated to Israel from skin graft-focused biotech Polynovo had been held in customs for the past three weeks after the Israeli government attempted to charge “tens of thousands of dollars” in value-added tax.

The products – developed in Port Melbourne – involve a foam used to treat burns and other wounds that disappears within four weeks, regenerating skin.

It has been used on Bali bombing and New Zealand White Island volcano victims as well as on the battleground in Ukraine.

The company – which is listed on the ASX with a market value of $1.1bn – donated stock to two major hospitals in Tel Aviv. But it was surprised to learn that the deliveries of the products, to help treat injuries from the Gaza conflict, had been delayed.

A spokeswoman for The Embassy of Israel in Australia said late on Friday that the situation had been resolved and Polynovo’s donations has been delivered via The Ministry of Health.

Asked about the delay, chairman David Williams said: “Sometimes it is not easy to help people”. The donation was understood to have been caught up in a war zone bureaucracy, with the Israeli government attempting to charge “tens of thousands of dollars” in VAT before the stock was released from customs.

Polynovo chairman David Williams in his Melbourne office. Picture: NCA NewsWire / Ian Currie

“We are getting asked for product sometimes before we are ready to go in to some countries … … and we have had cries for help from war zones where surgeons need product for soldiers with serious wounds and burns,” Mr Williams said.

“Accordingly, we have supplied free product to hospitals and surgeons in conflicts in Eastern Europe and in the Middle East, but also in Africa and domestically for bushfire victims.

“In some cases, we are seeing offers of help from local people or other countries to help further orders. This might be (say) Ukrainians abroad or other governments who want to support Ukraine. From my point of view, we are in the business of saving lives and supporting surgeons whoever or wherever they are.”

Polynovo’s product aims to save lives by providing an immediate barrier on a burn or wound. When trauma to the skin occurs, large portions of the surface of the skin and its deeper layers are destroyed. Its NovoSorb BTM product is used to temporarily close the wound and aid the body in generating new tissue.

“The product is a foam that disappears in four weeks and leaves a patient’s dermis rebuilt as good as a baby,” Mr Williams said.

The company supplies more than 700 hospitals, including all the major burns centres in the US, Australia and the UK.

In November, Polynovo generated $9.5m in revenue – a 110 per cent gain on the same month last year.

Mr Williams said while sales are strong he cautioned that the company would experience some turbulence as it enters India, Finland, Hong Kong, Turkey, and Canada.

“Sales are lumpy and will remain so as we expand our geographic footprint and surgeons explore different uses for NovoSorb MTX and BTM. Nevertheless, the direction of sales is

clear, and lumpiness is our friend because it reflects growth from $3.3m in June ’21.

“As impressive as sales growth is, it reflects the impressive growth in hospitals being supplied, surgeons using the product, patients being treated and the large number of surgeon initiated trials and publications.”

Chief executive Swami Raote said: “NovoSorb BTM continues to redefine healing across the world. Clinicians are taking advantage of its simplicity and versatility to manage complex wounds effectively”.

Wilsons analyst Madeleine Williams said Polynovo was entering 2024 in a “particularly interesting spot”, saying it was likely to surpass IART (Integra Lifesciences) as market share leader in the burns segment in the US, alongside their leading share in Germany and the UK.

“We have previously been concerned about Polynovo’s lack of ability to expand use-case outside of burns but assess that clinical evidence in trauma and new product filings/releases, potentially in hernia, could be pencilled for 2024,” Ms Williams wrote in a note to investors earlier this month.

“We see Polynovo’s expanding product suite positioning them as an attractive asset to larger players. However their valuation still sits on average, about 3 times that of peers.”