Thanks basiac, the article you provided contains plenty of meat for discussion.
The author (Rafael Mazuz) argues that the skin substitute (biologics / allograft /cellular and tissue-based products) segment of the Advanced Wound Care (AWC) market is highly competitive, with ~100 platforms/products on offer. Of these, he considers that just 5-10 companies have gained any significant commercial traction; one of them, arguably, being PolyNovo. Integra and Kerecis both make his shortlist; neither Avita nor Aroa do.
Mazuz states that Kerecis has been the fastest growing company in this segment for multiple years.
He states that almost the entirety of skin substitute usage today is in the United States.
He attributes lack of sales outside of the United States to factors including unwillingness to reimburse/pay out of pocket, lack of awareness of the products and regulatory, sourcing, logistical, and cultural challenges. He notes that some markets require human tissue products to be sourced from local populations, or to undergo a level of material safety processing/testing that offsets the product’s clinical effectiveness. In addition, shipping and storage of some skin substitute products can be complex or costly. Another consideration is that the source of the products (human- and animal-derived cells and tissues) may not meet local cultural or religious guidelines.
He believes that Kerecis’ pricing elasticity, regulatory, and sourcing characteristics (fish-derived) solve many of these issues.
He argues that, not only is Kerecis the fastest-growing skin substitute company in the US, but that the company has also uniquely been able to demonstrate at least some initial traction in ex-US markets, especially emerging markets.
He anticipates that reimbursement pressures on this segment of the market are set to grow in the US and predicts that any company without a viable, low-cost, moderate-to-high quality skin substitute that makes financial sense for customers will be in trouble.
Mazuz foresees potential disruption in this industry as pressure on US pricing happens at the same time that emerging and frontier markets gain increased purchasing power, infrastructure and wound care awareness.
So how does PolyNovo stack up in comparison to Kerecis?
Sales Growth
Sales growth for Kerecis in recent years has been impressive – the company had a compound annual growth rate of 94.6% between 2018 and 2021. Annual sales growth fell back to 50% in 2022/23 and is expected to be ~35% over the next 2 years.
In comparison, PolyNovo saw a doubling of growth in 2019/20, followed by a fall to 34% in 2020/21 (during the height of the Covid pandemic), ~ 48% growth in 2021/22 and 58% in 2022/23. Sales are on target to grow by a further 50%+ this financial year.
While Kerecis sales growth has outperformed that of PolyNovo, that growth came on the back of a greater range of products. These included a product for staple line reinforcement in bariatric, colon and colorectal, gastric and small bowel and lung surgeries that was FDA-cleared in 2016, a dental implant product cleared in 2020 and a hernia product in H1, 2021. The outperformance was also supported by a larger workforce. In mid-2023, Kerecis had a workforce of ~500, compared with PolyNovo’sworkforce of ~ 300.
While sales growth in the past few years has lagged that of Kerecis, growth for PolyNovo through product/indication expansion is still an opportunity waiting to be tapped.
Ex-US Market Penetration
Mazuz claims that almost all skin substitute products are sold in the United States and suggests that Kerecis has achieved more traction outside of the US than any other skin substitute company. With just 2% of Kerecis sales outside the US in 2022, compared with 22% for PolyNovo in 2022/23, I would disagree. And with more recent product sales into India, Ukraine and Israel, and a CEO whose slogan is “Accelerating Global Impact”, PolyNovo’s ex-US market penetration will only grow.
Breaking Down Barriers to Use
Mazuz considers Kerecis to be the most likely skin substitute product to break down the barriers to use outside of the United States. He cites the “pricing elasticity” and fish skin origin of Kerecis as features that uniquely provide that product with the edge to overcome issues such as payer pushback, shipping and storage issues and religious and cultural regulations and sensitivities.
While the price of Kerecis is unclear, it was stated in a paper to be ~ 2.5 x the price of BTM at one New York hospital. Elsewhere, it has been stated that the profit margin for Kerecis is ~85% (BTM’s is higher). Though room temperature storage and long shelf life are a feature shared by both Kerecis and BTM, BTM does not need to be hydrated in saline solution prior to use. And although fish skin is acceptable across religions and cultures, both fish product and silicone contained in Kerecis products are potential allergens to some people.
So, while Mazuz considers Kerecis to be well-placed, I consider Novosorb BTM to be even better placed to break down the current barriers to use.
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