Polynovo: Market Appears Overly Optimistic; Initiating With Fair Value Estimate of AUD 1.00

We initiate coverage on Polynovo with a fair value estimate of AUD 1.00 and with shares currently appearing overvalued, trading at a 26% premium. We suspect the market is likely too optimistic on the speed and extent of Polynovo’s commercial rollout and is underestimating competitive pressures. We think the market is also overly excited about potential new indications of Polynovo’s NovoSorb technology. While broader indications including hernia repair and breast augmentation and reconstruction are being considered and would expand Polynovo’s addressable market, these are still very early in the development phase. Our Uncertainty Rating for Polynovo is Very High, and we assign a Standard Capital Allocation rating.