New CEO Raote puts a shine on Polynovo, the ‘diamond in the rough’

A new CEO with extensive experience in the pharmaceutical industry and an eye on global expansion has given Melbourne-based burns treatment developer Polynovo (ASX: PNV) a healthy shot in the arm on the share market over the past week.

The shares this week surged more than 20 per cent since Polynovo announced on 29 July that former Johnson & Johnson executive Swami Raote had been appointed CEO.

US-based Raote, who has come out of retirement to take on the Polynovo challenge, describes the company as a ‘diamond in the rough’ and he has revealed a wish-list of emerging markets that he says could be highly lucrative for the company.

In the US, where the company currently generates about 70 per cent of sales, Raote sees further significant growth opportunities, but he also notes China, India, Japan, Korea and Indonesia as markets that could prove even more bankable.

“Throughout my career, I have launched multiple products and procedures and truly changed outcomes for consumers and patients,” says Raote, who spent 30 years with Johnson & Johnson, retiring as the global president of its Vision Care business at the end of 2020.

“For the first time I see a technology that is breathtakingly simple in its design and its ability for the body to heal itself. I think this is a truly robust technology that can really impact millions of patients.”

In a webcast interview with Polynovo chairman David Williams, Raote also hinted at ‘tremendous opportunity in the US’ where the company’s key NovoSorb product for treating burns is gaining traction among health professionals.

“We are just starting in the US,” says Raote, who is currently in the US and expected to take up his Australia-based role in mid-August.

Polynovo’s origins can be traced back to the serious challenges faced by medical teams in the treatment of burns victims airlifted to Australia following the 2002 Bali bombings. The company’s principal scientist, Dr Tim Moore, developed NovoSorb in collaboration with Professor John Greenwood from the Royal Adelaide Hospital.

NovoSorb is a biodegradable medical product that assists skin tissue repair from burns or serious wounds. However, the company is expanding the applications of this technology to include common conditions such as hernias and diabetic foot ulcers.

Raote comes to Polynovo with 20 years’ experience in the Asia Pacific region, including stints in Indonesia, Singapore, South Korea and China. He wants to build on the company’s existing base beyond the US, Australia and Europe, arguing that emerging markets where ‘burns and trauma are more commonplace’ have a greater need for the technology.

Raote says while surgeons are sold on the clinical and cost benefits of NovoSorb, the challenge for Polynovo ‘starts with a disbelief and suspicion’ by surgeons that the technology cannot work ‘because it goes against the grain of everything they have been taught’.

“In developed markets, we have to get surgeons to unlearn what they were taught for the last three decades,” he says.

“In emerging markets, we will teach them how to use this technology and that’s where the advantage will be. We can construct the rule book in emerging markets.

“Emerging markets are more digitally savvy than developed markets, so I am hoping that we are able to find a way to penetrate faster. I am raring to go at some of those markets and construct the right business models and education models for us to impact many more patients.”

Raote has also alluded to potential acquisitions for Polynovo but only to assist in expanding the reach of NovoSorb into new markets.

“I would not try to acquire another technology. but if I can find a player which can bring access and relationships and capabilities to Polynovo, then it certainly will open doors for Polynovo to impact many more patients than today,” he says.

The appointment of Raote marks the end of a nearly nine-month search by Polynovo for a new CEO after the sudden departure of managing director Paul Brennan in November due to ‘differences with the board’.

The departure exacerbated the steady slide in Polynovo’s shares over most of 2021, which made it one of the most shorted stocks on the ASX last year. The slide also knocked the company off Business News Australia’s Melbourne Top Companies list.

After briefly hitting a high of $1.88 in January this year following news of record US sales, the shares continued their slide to a low of 85c in May. They were trading at close to those January highs this week, having risen more than 110 per cent in the past three months.

Raote has been lauded by Polynovo for driving growth at Johnson & Johnson’s Vision Care business in the US, China, Japan and Europe, leading a business that delivered revenue of $3.6 billion when he retired.

Polynovo posted a 42 per cent increase in revenue to $18.15 million in the first half of FY22, building on consistent sales growth in recent years. The company announced record third-quarter trading in March this year, with sales of $12.26 million up 59 per cent on the previous year.

The company has yet to post a bottom-line profit but announced it had reached a break even in FY21 excluding non-cash expenses.