PolyNovo Limited

PNV Details

A Series of Recent Developments: PolyNovo Limited (ASX: PNV) is a medical device company that designs, develops and manufactures dermal regeneration solutions using its patented technology.

New Patents Granted: On 8^th April 2020, the company announced that it has been granted four new patents within the NovoSorb polymer family, which will cover its Hernia and Breast products along with few other devices which are to be developed in the near term. The new patents include – (1) 2018403989 Oriented biodegradable polyurethanes, (2) 2018390992 Tissue repair laminates, (3) 2018390991 Soft tissue implant pocket, (4) 2018387125 Tissue repair laminates.

CE Mark Burn Study: In another announcement, the company updated on the results of the CE Mark Burn Study for assessing the reliability of NovoSorb® Biodegradable Temporizing Matrix for the treatment of deep burn injuries. The clinical study was conducted on 30 patients across five sites and revealed that BTM was capable of supporting temporary wound closure and the reconstruction of a dermis for subsequent wound healing.


BTM Commercial Revenues (Source: Company Reports)

Debt Facility: The company has recently secured a debt facility worth $9.3 million from the National Australia Bank to fund the hernia cleanroom construction, manufacturing equipment and miscellaneous capital expenditure.

COVID-19 Update: The company does not expect any material impact on the business from coronavirus outbreak, as physical sales have now been replaced by product presentations on online platforms such as Zoom. Sales for the March quarter were 166% higher than the sales during the pcp, with monthly record sales reported in the US for the month of March. During the half year ended 31^st December 2019, the company reported total revenue amounting to $10.18 million, while achieving significant milestones such as the expansion of the US sales team and CE Mark approval.

Stock Recommendation: The stock of the company generated positive returns of 142.5% in the past one year and is currently trading slightly above the average of its 52-week trading range of $0.770 - $3.285. The trial for CE Mark Burn supports the company’s claims of BTM being a reliable and simple product for prescription by clinicians. The successful results from the trial have strengthened the company’s position in the markets worldwide. Moreover, the newly granted patents also marked a significant step for business development. While the company has seen a strong upward trajectory in sales in the past few months, it finds it difficult to forecast sales due to the ongoing ups and downs in the market. Considering the backdrop of the above factors, we have a watch stance on the stock at the current market price of $1.970, up 1.546% on 8^th April 2020.

 
PNV Daily Technical Chart (Source: Thomson Reuters)
 

Compumedics Limited

CMP Details

Additional MEG sales Continue after FDA Clearance:Compumedics Limited (ASX: CMP) develops and manufactures diagnostics technology for sleep, brain and ultrasonic blood-flow monitoring applications.

COVID-19 Update: In a recent update, the company stated that it may have some short-term adverse impacts on the business due to COVID-19 containment measures and is developing the required contingency plans to manage the crisis. The company also updated that it has sufficient inventory levels to meet the anticipated demand, with key suppliers remaining open for now. While the company has withdrawn the guidance for FY20, it has continued to pursue additional MEG (Magnetoencephalography) system sales after obtaining the FDA clearance for the Orion MEG system in February 2020.

Half Yearly Highlights: During the six months ended 31^st December 2019, the company reported revenue amounting to $18.3 million, down by 2% on the prior corresponding period, due to lesser sales booking in the US. The company has been continuously engaged in investing in new products for the core business, with orders worth $18 million taken in 1HFY20.


1HFY20 Results Summary (Source: Company Reports)

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation


 
EV/EBITDA Multiple Based Relative Valuation Approach (Source: Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months
 
Stock Recommendation: The stock of the company has corrected by ~18% and ~44% in the past 1 month and 3 months, respectively. Currently, the stock is trading below the average of its 52-week trading range of $0.250 - $0.960. While the company has withdrawn its financial guidance due to uncertainty surrounding the impact of coronavirus, it is actively pursuing certain business activities and is preparing to gain momentum despite the pall on the global markets. We have valued the stock using EV/EBITDA based relative valuation method and arrived at a target price with an upside of lower double-digit (in percentage terms). Hence, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.420, down 6.667% on 8^th April 2020.
 
 
CMP Daily Technical Chart (Source: Thomson Reuters)

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