Ann: Appendix 4D & 1H FY25 Report, page-125

I gotta head out for the rest of the day, but here's some initial notes:

Strengthening moat:

• 330+ independent articles and abstracts
• BARDA Trial Complete - The Company has met the trial enrolment target of 120 patients and has sufficient data to submit an application for PMA approval and is in the process of compiling the material required. Once PMA approval is granted, PNV will be one of only three companies selling dermal matrices with PMA approval (the other being Integra Life Sciences, and another company that produces Stratagraft). This is significant in two ways. First, it provides a stronger basis to convince surgeons to adopt or switch to Novosorb. Secondly, it will support PNV to achieve better pricing and reimbursement from insurers. While there is plethora of biological matrices in the market, there are only three with PMA approval, and only one that is synthetic.

Diversifying sales:

• Geographically, PNV continues to increase sales from the ROW. This is often most challenging for companies to achieve because global markets are quite fragmented. However, the company has demonstrated that it can quickly penetrate new markets, to quickly become the market leader in a short period of time. The company also reported revenue from India of $544k, and is preparing to launch in Japan and China.
• Product mix: achieved $2m sales of MTX for 1H25. The CEO says MTX is likely to overtake BTM in 3-5 years.
• Procedures: BTM is continuing to be used more and more in a range of indications. It is not just a burns company. While sales growth was up 28%, orders were up 58% and unit growth up 62%.

R&D

• Prototypes for Hernia repair & Plastic and Reconstructive mesh products have entered the pre-clinical stage with regulatory submissions expected in Q3FY26. I’ve seen estimates of the market for hernia mesh devices range from $4-6 billion USD. Even just moderate success in this market is likely to be company makers in their own right. I’d like to see them also focus on mesh

Summary:

While sales growth is important, what I think has really been overlooked is how Polynovo is strengthening its moat. It is being used in more and more procedures, and PMA approval will make it even easier to sell and push through price increases.

With more products in the pipeline, when they are introduced to market, I think it will be a much easier sell, and will grow much faster than Novosorb - because devices like SynTrel (hernia repair), will be sold from a company to surgeons that are already using Novosorb. Distribution is going to be so much easier and cheaper than building out a sales and distribution operation from scratch which it has been doing for the past seven years.

This is a company that is going to continue to deliver compound returns for much longer than analysts estimate, and the markets it already operates in continues to be underestimated. What has become really clear to me, is that outside of the U.S - the market for dermal matrices has not been very well developed, and it appears that PNV is the company that is building out the market in these countries. This is no easy task, but I think being the one to do this will just entrench its moat is the standard of care in those countries.

Finally, don’t forget that the cost of producing Novosorb is very cheap, so while the company continues to reinvest in R&D and growth, you will not see much profits for the next few years, because the high rates of return makes it a no-brainer to continue to reinvest. It will however, get to a point where more cash will come in than it will know what to do with it.

I don’t know what the share price will do in the next 12 months, or when exactly it will reach that tipping point, but I have a high confidence about the moat the company is building and the growth it can achieve geographically and product wise as it applies its technology into new markets and that the returns will be massively outsized relative to the current share price.