Dr Boreham’s Crucible: PolyNovo

Small Caps | Jul 06 2023

Skin repair specialist PolyNovo remains confident in its firm growth path ahead.

By Tim Boreham

ASX code: ((PNV))

Shares on issue: 690,232,751

Market cap: $1.04bn

Chief executive officer: Swami Raote

Board*: David Williams (chair), Dr Robyn Elliott, Christine Emmanuel-Donnelly, Leon Hoare, Bruce Rathie, Andrew Lumsden

* Dr David McQuillan resigned from the board in September 2022 and became chief technology and scientific officer

Financials: (December half 2022): revenue $29.5m (up 63%), underlying net loss -$3.8m (previous -$2.5m deficit), cash of $50.5m (previous cash of $3.3m)

Identifiable major holders*: David Williams 3.1%, Lateral Innovations 1.65%, Kittel Family super account 1.22%, Simone Maree Beks 0.63%, Paul Gerard Brennan 0.63%, CSIRO 0.62%

* Apart from Mr Williams, these numbers are from the company’s 2022 annual report and ahead of the $53m capital raising.

When he was tapped for the top job at Polynovo a year ago, Swami Raote had a clear vision of where the wound care house should be headed.

“I saw an amazing technology that really needed to reach many more patients as quickly as possible,” the Florida-based CEO says of Novosorb, the company’s bio-resorbable lattice for complex wounds, burns and reconstructions.

Mr Raote certainly knows a good medical device from a dud, having had a 30-year career at Johnson & Johnson in roles including over-the-counter goods and pharmaceutical products and devices.

He most recently headed J&J Vision Care, where he boosted revenue by 30% and profits by 50% over four years. He is also a senior advisor supporting the rollout of a digital health platform to Indian citizens.

“Work is not work, it is a joy,” Mr Raote says.

It is a case of so-far-so-good for Mr Raote, with the company recording its highest monthly product sales of $7.2m in May.

In September last year, the US Food and Drug Administration (FDA) approved the company’s treatment for soft tissue regeneration, Novosorb MTX, under the 510(k) pathway.

The long-awaited approval expands the application of Novosorb from the company’s core burns-oriented Novosorb BTM (as in biodegradable temporizing matrix).

More specifically, this global masterplan involves lessening reliance on the US market and expanding from burns to other forms of trauma.

Not-so-great moments in sport

In its previous iterations, PolyNovo has been involved in some great - or infamous - moments in sporting and biotechnology history.

PolyNovo evolved from companies known as Calzada and, earlier, Metabolic Pharmaceuticals.

Metabolic owned AOD9604, a peptide that failed a large and very expensive obesity trial and then played a bit part in the drug scandal engulfing the Essendon Football Club in 2013.

The Novosorb technology itself was developed by the Commonwealth Scientific and Industrial Research Organisation and spun-off in 2004 as PolyNovo Materials, in a joint venture with Xceed Biotechnology.

Metabolic bought 60% of this venture in 2008.

In 2009, Metabolic changed its name to Calzada and moved to full ownership of Polynovo in 2010. Calzada appointed David Williams, first as a director, and shortly afterwards as chair and changed its name to PolyNovo in 2014.

Mr Williams runs his advisory company Kidder Williams and until recently was on the board of the pain-relief house Medical Developments.

Mr Raote replaced Paul Brennan, who over seven years built the company from a $30m market cap minnow to a peak valuation of $2.7bn.

He also navigated the company through the Covid shoals, but according to chair David Williams’ unusually frank disclosure, the departure resulted from “increasing differences with the board in relation to Paul’s interaction with the company’s senior management team and his management style”.

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