ASX provides health care with positive returns this year

In 2019, it was a good year for investments in healthcare. Led by CSL Limited (ASX: CSL), the annual S&P / ASX 200 Healthcare Index (ASX: XHJ) has risen by more than 42 per cent.

At $1.96 (at the time of writing), Polynovo shares are currently trading, up 226 per cent from 60 cents in January. Polynovo is a medical device company that uses its unique polymer technology to develop and market products. The Novosorb BTM drug is an implantable dressing which can be inserted as it heals into the body.

Polynovo shares moved higher in December following the announcement that a certificate of conformity (CE mark) was issued for sale throughout the UK, Ireland and the European Union for the Novosorb BTM drug. The company reports that through international conferences, publications and peer interactions it already has strong brand recognition and awareness of its clinical success in these markets. After the disaster of the White Island volcano, the company announced that it had supplied 3 hospitals in New Zealand and 2 in Australia with the Novosorb BTM drug. The product, it said, mitigates some of the major challenges in the treatment of mass trauma and burns.

Novosorb BTM sales rose from FY18’s $1.7 million to FY19’s $9.3 million. FY20 guidance was in the region of $12 million, but in all markets, the business is seeing progress. The business is usually seeing month-to-month growth and plans to raise the revenue run rate as the months go on. Growth in the US market is very solid, and clinical practice in many areas is evolving with the Novosorb BTM drug. The drug can be used in the treatment of burns and wounds and restoration of the surgery. Plans are underway to apply the drug to the treatment of hernia and breast.

With good cash flow and rising cash burn, Polynovo has good profit margins and increasing revenue. It’s close to breaking even this year’s goal. The current focus remains on achieving actively market penetration and growth in revenue rather than a short-term benefit. The business has raised the prospect of raising capital to boost expansion, but there is currently no need for additional working capital–they are optimistic that new sales workers will be able to pay for themselves quickly and earn profits. It is a work in progress if additional capital is needed for R&D.