After a difficult 2021, the Polynovo Ltd (ASX: PNV) share price has bounced 13% this morning after the company provided a trading update.
It’s the first notable public communication from the company since the resignation of its long-time serving CEO Paul Brennan.
PNV share price
Back on track
In recent times, Polynovo has struggled to grow sales at an acceptable rate for the market to justify its lofty valuation.
Subsequently, its share price has cratered 60% in 2021.
Unknown to the market at the time, internal differences between the Board and now ex-CEO had been weighing on the rest of the organisation, likely contributing to the poor sales results.
“…in more recent times there have been increasing differences with the Board in relation to Paul’s interaction with the company’s senior management team and his management style”
“The Board has started the search for a new outstanding candidate and leader with appropriate sales and marketing experience to spearhead growth…”
Positively, the company looks to have put that behind them. It recorded a near-record sales month in November with US$1.95 million of sales, just shy of its record of US$1.97 million in July.
Furthermore, the company has added 11 new accounts and is in discussions with two group purchasing organisations (GPOs).
GPOs are effectively the gatekeepers to hospitals. Once on board, it’s much easier to sell into new locations.
“…interim CEO Max Johnston has had a significant impact on morale and is closely engaged with the management team. The feedback and engagement from staff has been overwhelming positive”
Outside of the US, the business noted UK, Ireland and Europe have underperformed expectations, largely as a result of sales execution.
Despite this, the business remains in talks with entering new nations with an announcement expected next year.
Hiring spree
The announcement noted there had been “huge interest” in the vacant CEO role and expects to finalise a candidate by March 2022.
Polynovo is also ramping up its US sales team with an extra 10 sales positions opened to bring the total team to 44.
The United States is the main market for Polynovo, with the business facing fierce competition from incumbent Integra LifeSciences and newcomer Aroa Biosurgery Ltd (ASX: ARX).
Chairman David Williams has previously commented on the financial return of new sales staff, noting the business will keep expanding its team if it believes the payback is favourable for Polynovo.
Product pipeline
The business has completed a successful Chronic Wound Reimbursement trial with 10 patients. The next stage will begin in early 2022.
Polynovo’s next big product release to treat hernias has been pushed back 12 months after the new laminate did not perform as expected.
Finally, its soft tissue product remains in a nascent stage of development.
The business overall has sufficient capital for growth and will continue to reinvest excess cash into the business.
Final thoughts
The overall vibe from the announcement was that the business has failed to execute.
Whether that is solely the ex-CEO’s fault is open to interpretation, but it looks like the underperformance has permeated across most regions.
Positively, a new CEO will help steer the ship, which is a welcome relief for shareholders who have suffered over 2021.
To keep up to date on all the latest news regarding Polynovo and the ASX, be sure to bookmark the Rask Media home page.
