Macquarie released the following today:-
PolyNovo (PNV AU)
Blazing into 2H22
Key points
Exit rates for BTM into 2H22 appear positive, with increasing sales via GPO
networks and an expansion of customer numbers.
Our forecasts imply an increased cash position by Jun-22, supported by
improved operational performance and a property sale and leaseback.
We remain positive on the medium- to longer-term outlook. Retain O/P.
Event
• PNV’s 1H22 result.
Impact
• BTM momentum positive in the US: PNV recorded BTM sales of A$16.3mn
were recorded in 1H22 (pre-announced), of which the US accounted for
A$14.2mn. In the US, momentum improved through the half, with 2Q22 sales
up +31% vs 1Q22 (A$8.1mn in 2Q22 vs A$6.1mn in 1Q22) and record
monthly sales of A$3.7mn in Jan-22. In addition, GPO network sales (10% of
US revenue) rose +68% in 2Q22 vs 1Q22. Looking ahead, our revised
forecasts imply US BTM sales of A$19.1mn in 2H22E (A$23.5mn globally).
• Cash flows weaker in 1H22, but improvement expected: Cash flow from
operations declined to -A$3.3mn (from -A$1.4mn in 1H21) in 1H22, reflecting
an increased investment in sales reps, R&D staff and business expansion. At
Dec 21, the cash balance stood at A$3.3mn. Looking forward, we expect an
improved cash position, reflecting increased BTM sales as well as the sale and
leaseback of a Melbourne property (proceeds of A$6.4mn). Our forecasts
imply a closing cash balance of A$11.2mn at Jun-22E.
• Pipeline products progressing: A BTM foam-only product, Matrix, is
expected to be submitted for FDA 510k approval in CY22. The SynPath
(chronic wound product) reimbursement trial is expected to commence the
next phase in Apr-22 (138 patients), with launch expected once
reimbursement is established. PNV’s Hernia product, SynTrel, is currently in
the process of validating four design options for various types of hernias, with
anticipated FDA filing in CY24.
Earnings and target price revision
• EPS revisions of -212%/-68%/-41% in FY22/23/24E (noting a low earnings
base) reflect lower BTM forecasts, increased cost assumptions, updated FX.
TP cut to A$1.60 (from A$2.85) in line with EPS changes, increased house
risk-free-rates and a reduced Hernia valuation (A$0.20 from A$0.40).
Price catalyst
• 12-month price target: A$1.60 based on a DCF methodology.
• Catalyst: CEO update; quarterly sales data; SynPath top-line trial results
Action and recommendation
• We see the sequential increase in US sales as positive into FY22, with
increased GPO sales helping to support sales going forward. More broadly, we
continue to see PNV as well positioned to increase share within existing
indications, with diversification outside of burns. Retain an Outperform rating.
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