Polynovo (ASX:PNV) CEO interview
October 19, 2021
PNV, Polynovo, video
We talked with Paul Brennan, CEO of Polynovo (ASX:PNV), about the origins of the company’s PolySorb technology and the range of innovative products that are now emerging from it, beginning with Novosorb BTM for full or deep partial thickness burns, surgical and reconstructive wounds and traumatic wounds.
Stuart: Hello, and welcome to “Stocks Down Under.” My name is Stuart Roberts, and I’m one of the co-founders of our publication. It’s Wednesday the 13th of October. And joining me from Melbourne today is Paul Brennan, who’s the CEO of PolyNovo, ASX:PNV. Paul, good morning to you.
Paul: Good morning.
Stuart: So, the PolyNovo story has really taken a lot of people by surprise in recent years. If you go way back in time, it was a CSIRO technology that no one was doing much with, a startup… A spin-out company was formed by the CSIRO, was picked up ultimately by the company that became PolyNovo. And you’ve now inherited probably one of the best wound care burns treatments. As a man who might have a hernia, one of these days, you’ve got a potential hernia treatment, you’ve got a lot to offer patients out there with great Australian-developed technology. Talk to us about what’s happened in the last year or so with some of the products you’ve developed.
Paul: I personally kinda developed…I’ve had a hand in the development process in more is that principal scientist has done a lot of the heavy lifting on that scientific front. What myself and others in the team have bought is the commercialization and infrastructure to sort of make these real, so we can get them out there into the market to patients. So the BTM, which is biodegradable temporizing matrix, is the first product. And that initially started off in burns and now is in a wide range of applications from diabetic foot ulcers, venous leg ulcers, hand surgery, melanoma excision, where you have wide excisions, and you have skin deficit reconstruction, such as severe old scarring and contractions that need to be released and revised, large traumas, so road accidents, industrial accidents where there’s large tissue loss, a whole range of infective diseases like necrotizing fasciitis and hidradenitis. So, the application of the product is very wide.
And what’s exciting is that the way BTM works is that it’ll cover…so far the largest area of a person that has been covered is 95% of their total body wrapped in BTM that was from a burn. And that gentleman in Adelaide has survived and gone on to have a good life. And when you see those sorts of results, that’s pretty outstanding. But the thing that’s incredible with the product is that you get a full regeneration of the dermis and very minimal scarring and contractions. So, you get really good outcomes for the patients, for their function, for their cosmesis. And their quality of life, they can be returned out from what’s often a traumatic and horrendous position. And we’ve got that product now globally available, there are lots of countries we’re still adding. But we’re in a long laundry list of countries which are all available on our website. The next in the rank is the hernia product, which will be in the market in August of ’23.
And the initial product will be followed fairly soon after by a second product that can be used to repair the abdominal wall in hernia repair, to reinforce that area and regenerate native tissue back into that space. The important thing to consider is that the Polymer itself has a low inflammatory profile, has minimal toxicity profile, it’s very cell-friendly, and it dissolves away in the body. And you excrete that in your urine or breathe it up through your lungs. So, as it breaks down, it becomes lactic acid, carbon dioxide, and water. Lactic acid is metabolized into carbonic acid, and you excrete tha or blow that off in your lungs. And you excrete or pass it through your urine. Macrophages, which are little white cells, will take care of any micro remnants of the polymer that’s there. And it’s completely dissolved and gone within two years. So you’re left with native tissue.
Stuart: So there are various kinds of scaffolds that people are using for tissue repair these days. Very few of them disappear without a trace right when they’re needed, but it feels like NovoSorb and BTM have cracked that puzzle in terms of the right time for the scaffold to go away.
Paul: You know, it’s going to, in the long-term, flip the market. Everything else on the market is based on animal products. You have everything from fish skin to pig’s intestines or bladders…
Stuart: And the obvious inflammatory issues that go with putting animal skins inside the human body.
Paul: Yeah, well, you’ve got foreign proteins, which your body doesn’t like. The other thing is that you’re often putting that into an area that has low blood vessels available because it’s either a burn or a trauma or a surgery, you’ve cut all that surface vasculature out, then you lay in the scaffold. And so there are no blood vessels in it. Now, when you’ve got bacteria in that green base, a new drop in a biologic, you’ve delivered a smorgasbord. So, you’ve just delivered the agar plate for them to grow, and feed, and proliferate. So you can lose up to 30% of biologic scaffold through infection, where they need to be removed.
Now, same thing, an inert polymer doesn’t need a vascular supply and doesn’t provide any food for bacteria. But the beauty is that because it’s completely vacant and empty, and it’s got a ceiling membrane that mimics your skin, then your body knows that, hey, I’ve got a vacant space there. And so blood vessels will grow into it very rapidly. Within a couple of days, they start to migrate into there, and then all the cells follow. And within two weeks, you know, you’re starting to get a fairly full regeneration of tissue and structures inside the scaffold, so you’re not losing it through infection. It’s very robust, but it also gives a very organized structure. So when this gavel does dissolve and go away within two years, when you look at the biopsies that the tissue that’s there, it’s indistinguishable from what you would normally see as normal tissue. So that’s the beauty of it, you haven’t got any foreign protein or collagens or structures that are remnant and left there or causing infections or initiating inflammatory responses.
Stuart: What do investors…we’ll know you mainly for your success in treating a serious birds. And I often tell people, yeah, it’s great to be able to help patients whose seriosuly burnt. There are less and less burns every year on average, given the extra safety we have in a lot of homes and products that we use every day. But the important thing for investors to know about you is you’re rapidly building out the pipeline beyond burns. We talked about hernia a moment ago, and the legion of users that you can potentially put this to. Where’s the big money for you? Out of all the future indications, potentially, where can we see the most value uplift in terms of potential use?
Paul: A wide range of…I mean, burns is only 10% of the skin market anyway. So, out of a $1.5 billion market space to play in, burns is only around $150 million globally out of there. So, things like hand surgery, we’ve heard things like tradies, who, with a circular saw accidentally cut the entire front half of their hand off and had their hand reattached and then all the missing and damaged skin on the outside has been regenerated through using BTM, and they’ve returned good function. We had a woman in England who had her hair caught in a roller in a factory and was scalped and had her entire scalp regenerated with BTM, unfortunately.
Stuart: With hair growing capacity at the other end of that.
Paul: No, I’ll just discuss that. Unfortunately, she’s now bald, but she has skin covering that. Things like radiotherapy where you lose tissue from cancer treatments, they can be regenerated with BTM. So there’s a vast array of applications just in normal day-to-day surgery, where BTM will be used wherever you got any excision of skin.
Where the big money’s gonna come for PolyNovo is both fully exploiting that skin opportunity of, you know, how many of the hundreds of millions of dollars we can get in the skin area. Now realistically, there’s probably a good $600 million in potential there broken up into, you know, $200 million in hospital treatments. And then the American market for the outpatient chronic wounds like venous leg ulcers, diabetic foot ulcers is another 400 million-plus.
Stuart: There’s a heck of a lot of diabetics in America who will often end up developing diabetic foot ulcers. So that’s a huge market opportunity.
Paul: Yeah, but there is globally. I mean, 20% of diabetics will end up with a diabetic foot ulcer. So, when you think of, we’re on the wave, somewhere between 10 and 15% of the world’s population ending up with diabetes, and you take 20% of that into diabetic foot ulcers, so it’s a massive market potential. The other one is hernia, which the hernia market is around a $2 billion market space today, but that’s growing in total around 7% a year driven by things like obesity. Within the hernia segment, most hernias are traded with polyethylene or polypropylene mesh. So…
Stuart: I looked at it. It’s barbaric, some of those treatments. We’re talking 20th century. You’ve got the 21st-century option coming.
Paul: Yeah, well, that’s the sort of holy grail to have a dissolvable rather than a permanent, those meshes, you know, to visualize it, they look like a flyscreen mesh. They’re a bit softer, more flexible, but essentially, that’s what they look like. They’ve seen all the legal cases going on with meshes. But the real thing is to be able to go in there with our product against, again, biologics. And there’s also another polymer-based one in there called Vesics [SP] by B. Braun. And the beauty of a dissolvable is that you can put it into multiple surgical planes, that’s the levels of tissue dissection, where they might wanna put that reinforcement in the abdominal wall. And you can regenerate the native tissue there to reinforce that abdominal wall so that the bowel is kept in its place and not poking into that abdominal muscle space. And then it can dissolve away and be out of the way. So, the person when they’ve had their hernia repaired, don’t get the pain on movement, don’t get chronic infections. And some people have had problems with erosion of those meshes into other body structures. So all of that is resolved by using our polymer in two formats bonded together. One is a foam and one is a film. Both are 100% dissolvable, those made of NovoSorb polymer, but have different formulations in how we express that. So, the role of the film is to cause cells or tissue to grow into it, to reinforce and regenerate. The film is to provide a dam wall or a reinforcement to stop the bow trying to push through that while you’re allowing the tissue to regenerate. That film will dissolve away in about two years, but it’ll lose its structural strength at around about six, seven months or so after implantation.
Stuart: Now that’s plenty of time for the tissue to remodel.
Paul: For it to remodel. And also what you wanna do is you wanna gradually transfer that stress to that tissue so that the remodel tissue becomes strong. So, having that gradual breakdown and resorption is a good way of gradually transferring that load. It’s a little bit like when you do exercise and you might lift a dumbbell and, you know, one kilo feels really heavy after you do 20 lifts. And you do that for a couple of months. And all of a sudden you’re lifting 5 kilos or 10 kilos, right? So it’s no different with the hernia gradually transferring that load so the body can get stronger.
Stuart: Now, Paul, many investors won’t know you very well. Tell us a bit about your background that led you up to sign with PolyNovo.
Paul: Oh, my history originally was a nurse. So I had seven to eight years of nursing in all sorts of capacities. And that was in New South Wales in Sydney and Gosford on the Central Coast. I then became a medical sales rep because I just wanted a change, I suppose. And sales I got tired of fairly quickly and was fascinated by the marketing side. So I got into medical device marketing. And one thing led to another. And after 15 years of doing that and traveling a lot through Asia-Pacific as my territory, but globally in product development with the various companies I worked with looking at their manufacturing and other things. PolyNovo was there and looking for a CEO. And I thought, well, it’s a big risk to jump from a big corporate safety net and dive into this tiny, late sling company, but…
Stuart: Tiny in those days, not so tiny anymore, Paul.
Paul: Yeah, we’ve grown that a lot. And that’s fantastic because we’ve got a really good team of people now. When I joined, you know, there were five of us, and there wasn’t really a clear direction of how we were gonna commercialize it. But the thing that was exciting to me was, both as a clinician and a marketer, was that Professor John Greenwood at Adelaide was…the first time I saw BTM was in a pig. But he was doing a pig study, Emu[SP] Plains there. And I call there to see John and just looked at the wounds. And I said, that’s amazing. It’s impossible. How are you getting square wounds? You should be getting contraction. And so he was telling me all about this product and I said, “Well, why isn’t it in the market?” And that was a long story. But there’s a lot of regulatory stuff that you’ve gotta do.
Stuart: But it’s fair to say he was the champion who really propelled us forward, at least on the burns front.
Paul: He was definitely the clinical champion, and then he was supported by people like Dr. Marcus Wagstaff, who’s still involved with this now at Royal Adelaide. And now we’ve got key opinion leaders all around the world singing the praises of BTM. But for me it was clinically fascinating and revolutionary. And here was an Australian-invented technology that could really change the world. And we could make it in Australia. So we didn’t have to apologize for being an Australian manufacturer. Australia has a lot of capacity and lot of smart people. We just need to believe in ourselves and step out there and make it happen. So, you know, we’re very fortunate. We’ve had a board that has enabled us to raise the money to go forward and do this.
Stuart: I mean, hats off to David Williams, he’s the other champion in this whole process in terms of encouraging investors to look when you were a not so big company that stays.
Paul: Yeah. Yeah, David’s an entrepreneur. He is also a hard taskmaster. But, you know, you need that because you’ve gotta have connections, you’ve gotta have drive. And whenever you raise money…like, we haven’t raised money since…when was it, October 17th.
Stuart: It’s been a while.
Paul: Now, that’s unheard of in biotech space. And, you know, we manage our money really well because our philosophy is that it’s not our money, it’s shareholders’ money. And we’ve gotta turn every dollar into value. And so, we’ve grown at a rate where we’re making good margins and we can put that back into the business. And we’re quite aggressive with our growth if you look at our growth trajectory over the years. But it’s how you responsibly segment out, where can I get market share? Where can I get a return at pace for the investment? And then once you’ve got that up and going, then you can step out bit by bit into the other areas and grow those so that you’ve got a sustainable business because shareholders tire if you’re constantly coming back saying, “Oh, well, I’ve spent all that, can I have some more?” They really wanna see that, if they give you money, they’re not gonna get overly diluted and they’re gonna get a return. And our potential for growth for the next many years is significant. So, there’s a lot of blue sky out there. And we don’t have anything sort of pushing down on top of this. COVID has given us a pause. And, you know, everyone can see, globally, hospital capacity is impacted by patients clogging up the hospitals with COVID. And so with the vaccination rates getting up there now and then the world liberating itself and getting back to normal, we’re sort of emerging from this COVID fog, if you like. But even with COVID, we’ve grown significantly throughout the world with that. And, you know, we entered eight new geographies in Europe last year. We doubled our sales force in the U.S. We grew 49% in the U.S., in what was a, you know, as the Queen would say, Annus horibillis. It was not pretty.
Stuart: And you did this all without being able to leave home from Melbourne, basically?
Paul: Yeah. You know, I don’t miss the travel. I can tell you that. But I missed the customer contact and those relationships, but we’ve got a really good team set up in each of our markets. And they do have those customer contacts and interfaces. We use a lot of this video conference calling now. There’s a lot of business efficiencies happen. We’ve had to get very smart at how we do our digital marketing programs, webinars, LinkedIn, Facebook groups, like in the UK, orthopedic surgeons heavily use Facebook. So, it’s looking at what’s the communication channel in. We had Valerie, our salesperson who covers New Zealand. We sent a cutout, life-size cutout of Valerie standing next to the table and a video screen over there so that she could interact with surgeons at a conference. So, you know, you have to be creative.
Stuart: Certainly. Paul Brennan, well on how you’ve built this great company, and here is to the next five or six years of growth.
Paul: Thanks very much. It’s a pleasure. And plenty of challenges ahead, but I think we’ve got a lot of opportunities still to come.
Stuart: All right, stay well.