AVITA Medical Ltd

AVH Details

Key Personnel Changes:AVITA Medical Ltd (ASX: AVH) develops, manufactures and distributes innovative products for regenerative medicine and respiratory markets. Recently, Redmile Group, LLC and Jeremy C. Green reduced their substantial stake in the company from 12.42% to 10.66%, effective from November 20, 2019.In another update, the company announced the issuance of new 203,389,831 shares at an issue price of $0.59 per share, in relation to share placement to international and Australian institutional and sophisticated investors.

The company announced the appointment of David McIntyre as Chief Financial Officer (CFO) effective from November 18, 2019.Mr. McIntyre is expected to assume the overseas Valencia office in California and would be looking at the global finance and investor relations functions. He has an extensive 20 years of experience in global finance, operations and law. He has worked as a senior executive and corporate advisor with life sciences and device companies listed on multiple stock exchanges.

Key Highlights of September’19 Quarter:The company reported A$4.6 Mn U.S. sales of RECELL System, an increase of 60% QoQ. Its U.S. commercial achievements since approval are underpinned by orders from 56 of 132 U.S. burn centers for the RECELL System; over 50% of U.S. burn surgeons and burn centers are trained on the RECELL System; and U.S. sales worth A$10.8 Mn.

During the quarter, the company was added to S&P/ASX300 index. Cash balance at the end of September quarter was reported at $22.66 Mn.


September’19 Quarter Operating Cash Flow Statement (Source: Company Reports)

What to Expect:The company received U.S. FDA Investigational Device approval of pivotal study protocol to evaluate the RECELL System for soft tissue reconstruction, inclusive of traumatic wounds.The recent listing of American Depositary Shares on NASDAQ provides it broader access to the global investors. The company aims to maintain its growth trajectory by sustaining a keen focus on U.S. commercial activities in tandem with the growth of its development pipeline.

Stock Recommendation:AVH’s share generated a significant YTD return of 589.87%. Its gross margin for FY19 stood at 79.2%, better than the industry median of 77.6%. Current ratio for FY19 stood at 5.50x, better than the industry median of 5.08x, implying a decent liquidity position of the company. Substantial increase in company’s quarterly sales and robust uptake of the RECELL System by U.S. burn surgeons in nine months from its commercial launch, are expected to help the company in delivering value to its shareholders. Company’s top-line for FY19 has performed exceptionally well in comparison to FY18. However, bottom-line for FY19 was impacted by an increase in expenses related to marketing, labour and R&D. Hence, considering current developments in the overseas market, decent cash on hand, development pipelines and current trading levels, we recommend a “Hold” rating on the stock at the current market price of $0.520, down 4.587% on November 21, 2019.

 
AVH Daily Technical Chart (Source: Thomson Reuters)
 
 
 
 

Polynovo Limited

PNV Details

Decent FY19 BTM Sales Performance:Polynovo Limited (ASX: PNV) is involved in the development of innovative medical devices for a number of medical applications, utilising the patented bioabsorbable polymer technology NovoSorb. On November 15, 2019, the company published the AGM report, wherein it highlighted the passage of all the resolutions by the shareholders. Mr David Williams, Chairman, PNV informed shareholders that the company’s FY19 BTM sales stood at $9.3 Mn as compared to $1.7 Mn in FY18.

FY19 Key Highlights for the period ended June 30, 2019:Revenue for the period was reported at $13.683 Mn, an increase of 128% than the previous year. Sales of goods revenue improved by 435% to $9.348 Mn. PNV reported a net loss after tax of $3.190 Mn for FY19 as compared to the loss of $5.974 Mn in the previous year. Cash on hand as on June 30, 2019 was reported at $13.9 Mn.


NovoSorb BTM Sales Data (Source: Company Reports)

What to Expect:The company in spite of providing growth profile forecast gave limited guidance of sales of $12 Mn for the year (sales $1 Mn/month). It sees significant growth in all markets for FY20, underpinned by month on month growth where October 2019 BTM sales are more than 100% higher than October 2018 sales. It expects a significant increase in BTM sales in the US, Australia and New Zealand. It aims to enter the EU, UK/Ireland with significant initial sales and at the same time, prove there is a strong latent demand for BTM in Western Europe. Moving forward, it expects the monthly sales run-rate to increase as new hires are expected to add significant value within a year.
Moreover, the application of its technology (BTM) to Hernia and Breast will add depth to its presence in many hospitals, provided completion of its Hernia production facility in Port Melbourne.

Stock Recommendation:PNV’s share generated a whopping YTD return of 228.33%. Its gross margin for FY19 stood at 90.5%, better than the industry median of 73.6%. Current ratio for FY19 stood at 9.64x, better than the industry median of 2.77x. Currently, the stock is trading above the average of 52-week high and low of $2.660 and $0.510, respectively. However, its 52-week high was achieved on October 11, 2019, and since then, it has declined by ~30.45%. Hence, considering the aforesaid facts and current trading levels, we have a wait and watch view on the stock at the current market price of $1.850, down 6.091% on November 21, 2019.

 
 
PNV Daily Technical Chart (Source: Thomson Reuters)

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