Company Reports

Polynovo’s strategy revolves around expanding its geographical footprint to increase access to its products and open new hospital accounts. With its geographical reach the firm estimates its products are available to 800 million people as of fiscal 2023, but highlights the global market is underserved. The firm entered several new markets in fiscal 2023 including India, France, Spain, Canada, and Hong Kong, Polynovo intends to enter more geographies with new regulatory approvals, particularly with a focus on China and Japan through distribution partners. While the US market is key for Polynovo, representing roughly 80% of sales in fiscal 2023, new geographies would diversify the sales mix.

No-moat Polynovo’s fiscal 2024 sales rose 54% to AUD 92 million, with 75% stemming from the main United States market. This increase largely reflects 197 new US customer accounts opened in the period to a total of 496, effective marketing featuring. The underlying group EBIT of AUD 1 million was close to our AUD 2 million forecast.

No-moat Polynovo’s fiscal 2024 sales rose 54% to AUD 92 million, 2% ahead of our forecast, with 75% stemming from the main United States market. We raise our fair value estimate by 5% to AUD 1.05 primarily due to the time value of money and slightly higher revenue forecasts. Our forecast five-year revenue compound annual growth rate increases to 26% from 25%. We expect the firm’s bolstered sales team to support market share gains.

Polynovo’s strategy revolves around expanding its geographical footprint to increase access to its products and open new hospital accounts. With its geographical reach the firm estimates its products are available to 800 million people as of fiscal 2023, but highlights the global market is underserved. The firm entered several new markets in fiscal 2023 including India, France, Spain, Canada, and Hong Kong, Polynovo intends to enter more geographies with new regulatory approvals, particularly with a focus on China and Japan through distribution partners. While the US market is key for Polynovo, representing roughly 80% of sales in fiscal 2023, new geographies would diversify the sales mix.

No-moat Polynovo’s sales growth momentum is slowing markedly. Sales in April 2024 were AUD 9.2 million, with 74% stemming from its primary US market. Monthly sales increased 4.5% on November 2023 monthly sales, implying a CAGR of 11%. This compares with November 2023 monthly sales increasing 22% on May 2023, indicating a compound annual growth rate of 49%. With sales broadly tracking to our expectations, we maintain our full-year fiscal 2024 revenue forecast of AUD 100 million, implying 53% growth on last year. We keep our AUD 1 fair value and earnings estimates.

No-moat Polynovo’s first-half fiscal 2024 sales rose 55% to AUD 42 million, with 76% of group sales stemming from the main US market. This was primarily driven by 223 new hospital accounts opened in the period to a total of 861, reflecting effective marketing. Our earnings estimates are broadly unchanged, and we maintain our AUD 1 fair value estimate. Our full-year fiscal 2024 revenue forecast of AUD 100 million includes AUD 10 million in government funding and implies 53% revenue growth on last year. The group is also now profitable, with a net profit after tax of AUD 3 million versus a loss of AUD 4 million last year. We estimate earnings per share growth of 18% at midcycle based on 10% revenue growth and margin expansion from operating leverage.

Polynovo’s strategy revolves around expanding its geographical footprint to increase access to its products and open new hospital accounts. With its geographical reach the firm estimates its products are available to 800 million people as of fiscal 2023, but highlights the global market is underserved. The firm entered several new markets in fiscal 2023 including India, France, Spain, Canada, and Hong Kong, Polynovo intends to enter more geographies with new regulatory approvals, particularly with a focus on China and Japan through distribution partners. While the US market is key for Polynovo, representing roughly 80% of sales in fiscal 2023, new geographies would diversify the sales mix.

We maintain our AUD 1.00 fair value estimate for no-moat Polynovo. First-half fiscal 2024 sales rose 55% to AUD 42 million with 76% stemming from the main U.S. market. Our earnings estimates are broadly unchanged. We maintain our full-year fiscal 2024 revenue forecast of AUD 99 million, including AUD 9 million in government funding, implying revenue growth of 52% on the previous corresponding period.

Polynovo’s strategy revolves around expanding its geographical footprint to increase access to its products and open new hospital accounts. With its geographical reach the firm estimates its products are available to 800 million people as of fiscal 2023, but highlights the global market is underserved. The firm entered several new markets in fiscal 2023 including India, France, Spain, Canada, and Hong Kong, Polynovo intends to enter more geographies with new regulatory approvals, particularly with a focus on China and Japan through distribution partners. While the U.S. market is key for Polynovo, representing roughly 80% of sales in fiscal 2023, new geographies would diversify the sales mix.

We keep our AUD 1.00 fair value and earnings estimates for no-moat Polynovo. While acknowledging sales are lumpy, the firm disclosed sales in November 2023 were AUD 8.8 million with roughly 70% stemming from its main U.S. market. November 2023 sales are up 22% from May 2023, implying a CAGR of 49%. We maintain our full-year fiscal 2024 forecast of AUD 99 million, implying sales growth of 52% on the previous corresponding period.

We initiate coverage on Polynovo with a fair value estimate of AUD 1.00 and with shares currently appearing overvalued, trading at a 26% premium. We suspect the market is likely too optimistic on the speed and extent of Polynovo’s commercial rollout and is underestimating competitive pressures. We think the market is also overly excited about potential new indications of Polynovo’s NovoSorb technology. While broader indications including hernia repair and breast augmentation and reconstruction are being considered and would expand Polynovo’s addressable market, these are still very early in the development phase. Our Uncertainty Rating for Polynovo is Very High, and we assign a Standard Capital Allocation rating.

Polynovo’s strategy revolves around expanding its geographical footprint to increase access to its products and open new hospital accounts. With its geographical reach the firm estimates its products are available to 800 million people as of fiscal 2023, but highlights the global market is underserved. The firm entered several new markets in fiscal 2023 including India, France, Spain, Canada, and Hong Kong, Polynovo intends to enter more geographies with new regulatory approvals, particularly with a focus on China and Japan through distribution partners. While the U.S. market is key for Polynovo, representing roughly 80% of sales in fiscal 2023, new geographies would diversify the sales mix.