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PolyNovo share price shoots higher on coronavirus update

The PolyNovo Ltd (ASX: PNV) share price has burst higher during morning trade.

At the time of writing the dermal regeneration focused medical device company’s shares are up 6% to $2.19.

Why is the PolyNovo share price shooting higher?

Investors have been buying the company’s shares this morning following the release of an update on the impact the coronavirus is having on its business.

As you might have guessed from the share price reaction, PolyNovo advised that the coronavirus outbreak is unlikely to have a direct impact on its business or sales going forward.

This is partly because the company does not source raw materials from China and has multiple supplier redundancy built into its supply chain. This is expected to prevent any significant supply chain disruption.

In addition to this, management notes that the company currently has enough raw materials to run two shifts of production.

These two production shifts are scheduled from April 2020 and are expected to produce enough inventory to fulfil the anticipated demand for the remainder of the year.

Furthermore, the company has sufficient inventory of finished product on shelf in the US, Australia, and New Zealand, and adequate stocks in the UK/EU to meet anticipated sales for a significant period.

Another positive is that unlike Cochlear Limited (ASX: COH), which has seen hearing implant surgeries deferred, PolyNovo’s products are not used in elective surgeries. They are used in emergency, trauma, or extensive surgery applications, which management expects to continue in a virus challenged world.

PolyNovo’s Chief Executive Officer, Paul Brennan, said, “We are taking a disciplined approach to the virus and we are careful to be realistic and not have undue optimism. We are vigilant about our business and will adapt to any changes at short notice and as they arise, taking decisive action if required.”

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.