Once the darling among medical shares on the ASX, Polynovo has been struggling of late. Let’s take a look.
The post Why did the Polynovo (ASX:PNV) share price drop 15% in May? appeared first on The Motley Fool Australia. –
Polynovo Ltd (ASX: PNV) had a tough May. Shares in the medical company were trading around $3.05 at the start of the month only to drop almost 15% to $2.60.
The Polynovo share price is trading at $2.59 at the time of writing.
The jewel in the Polynovo crown is its NovoSorb product, a “novel range of bio-resorbable polymers whose unique properties provide skin regeneration for burn victims”, according to the company.
Once the ‘belle of the ball’
Polynovo growth numbers over the last two years have been impressive. The PolyNovo share price was one of the best performers on the ASX in 2019, up more than 190% for the year.
Then in 2020, the share price almost doubled in price with a 97% gain. It was a stock market favourite returning more than 825% over 5 years.
Then came COVID
Polynovo is a global business and relies on its ability to work with hospitals. As its half-yearly report indicates, the company currently operates in the United States, Australia, New Zealand, Europe, UK/Ireland, South Africa, Malaysia, Singapore, India, Israel and Saudi Arabia. For growth, the company relies on approaching surgeons with its medical applications. So business has taken a hit from the COVID-19 pandemic.
The Polynovo report advised that revenues had been affected by reduced access and elective surgery in all regions. Despite the bad news, the business reported that its Novosorb BMT sales had increased 31.2% to $11.25 million and its net loss swelled to $3.54 million in the six months ending 31 December. This from $2.42 million in the year-earlier period.
The results appear to have disappointed the market and the shares have not really recovered since. The Polynovo share price traded flat at $2.42, following the result. Five months later, the share price is still struggling at $2.56.
The winds are changing
The sentiment coming from management is positive. In a February interview with the Australian Financial Review (AFR) Polynovo managing director Paul Brennan said surgery rates had bounced back in some US states. Mr Brennan was confident that:
… thanks to the vaccine rollout progressing well in the UK and falling infection rates, surgery rates would begin to increase and it should see a corresponding sales increase.
What bear?… David has been buying
Nothing ‘talks the talk’ of positive sentiment than when company insiders are buying shares. Especially if that insider is the chair of the company. Polynovo chair David Williams bought 100,000 shares on 10 March at $2.34 per share via on-market trade.
According to the AFR, Williams raised his stake from 16.6 million ordinary shares to 18 million over six weeks after the half-year results in February. He bought shares at prices ranging from $2.47 to $1.40.
The end of year financial report will provide insight into the Polynovo share price moving forward. Less frequent lockdowns and an accelerating vaccination process around the world is likely to be positive for a global company such as Polynovo.
Polynovo shares have fallen almost 34% year-to-date and 5% over the past 12 months. Shares in the medical equipment industry have lifted 12% over the corresponding 12-month period.