Shares in ASX healthcare company Polynovo Ltd (ASX: PNV) have had a shocking start to 2021, shedding over 30% of their value in January. The decline in the Polynovo share price comes despite the company announcing a sharp rise in first half sales, as well as its continued expansion into a new European markets.
What does Polynovo do?
Polynovo is a healthcare company specialising in the development of biodegradable medical devices that aid in skin tissue repair. Its flagship medical technology is called NovoSorb, a medical-grade polymer designed for use in surgery, tissue repair, and other medical procedures.
Novosorb BTM (“Biodegradable Temporising Matrix”) is the first fully commercialised Novosorb product developed by Polynovo. It is a synthetic polymer matrix that clinicians can use to treat burns and other serious skin wounds. The polymer can be applied to trauma sites on the skin and encourages the body to build new tissue. The polymer is eventually safely absorbed and excreted, leaving only biological material behind.
What’s been happening to the Polynovo share price?
After a strong rally in the second half of 2020, which saw the Polynovo share price surge to a new record high of $4.08 by late December, Polynovo shares have collapsed this year. They are now trading at just $2.63 (at the time of writing), 35% less than their 52-week high and their lowest price since early November.
Recent news out of the company
Polynovo has released a flurry of announcements in recent months. On 19 November 2020, the company announced it was extending its partnership with its European distributor, PolyMedics Innovations, and entering the healthcare markets in Belgium, the Netherlands, Luxembourg and Sweden.
Then, on 20 January 2021, Polynovo also announced it had appointed distributors in Poland and Turkey. The company claims these markets are both key to its growth strategy. Turkey provides a gateway into the Europe-Middle East-Africa (EMEA) market, while Poland is the sixth largest country in Europe and has a medical device market valued at over $2.2 billion.
However, while the announcement back in November caused the Polynovo share price to soar to new highs, the ones in January barely shifted the dial at all.
This could be down to uncertainty reflected in the company’s interim trading update for the first half of FY21, released to the market on 12 January 2021. While sales for the half were up 31% versus the first half of FY20, most of this uplift came in the first quarter, while sales in October and November were slower than expected.
The lumpiness in the sales numbers was partly down to disruptions caused by COVID-19, particularly in the United States. Other markets that have dealt better with the challenges posed by the pandemic, such as Taiwan and New Zealand, exceeded their budgets.
Polynovo Managing Director Paul Brennan hinted that there might be some continued short-term volatility in the company’s results when commenting on the announcement. He noted that “in the short-term, forecasting sales will be challenging particularly in the US, however the medium-term outlook is strong.”
Based on the current Polynovo share price, the company has a market capitalisation of around $1.7 billion.
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Rhys Brock has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of POLYNOVO FPO. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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