Okay, welcome everybody to the PolyNovo webcast. We've got, I think about 150 on the line, welcome to you all and good afternoon. I wanna sort of punch through this pretty quickly i hope this is not gonna be an anticlimax for most of you, because I was just reflecting on the fact that we've had an investor presentation for the capital raising at least, then a couple of broker presentations. We've released the results pre the audit, now we've got the four day. There's a lot of the same information in it. I'd...
You know, Swami got some interesting things to tell you, I think in terms of sitting back in a helicopter and looking at our growth rate, not only just in the U.S., but the rest of the world, which is very exciting. I don't intend to take the sort of wind out of his sails, so I'm hoping he'll cover all that off. You know, one of the takeaways for me on this deck today, in particular, is to look at the different indicators of how we're growing everywhere in the world, for example, and not just sales, which are impressive enough in themselves. I'll let Swami get on to that.
The process today will be that Swami will give the front end of the deck. He'll then pass across at an appropriate time to Jan just to talk briefly about the financials, and then I'll make some editorial comments at the end and open it for questions. We've already got some questions, so hopefully some of them will get answered during the process, and if so, we won't ask them at the end. I'll leave that up to Swami and Jan to see if we can all co-cover that together. I'd like to welcome our CEO, Swami Raote, who's also on screen.
Thank you, David, and good afternoon, everyone. We are indeed accelerating our global growth and our PolyNovo teams across the world are doing a fantastic job in terms of... along with our customers, in terms of, reaching as many patients as we can and healing as many patients as we can. Just to give you an idea, we reached about 8,000 patients in the first six months of 2023 versus 10,000 patients through full year 2022. We feel pretty good about it. We know there is a lot more that we need to do, but we are happy with all the steps that we are taking.
We have had a strong revenue growth across the world at AUD 29.5 million, growing at 63%, growing at 62% in the first half. Our global BTM product sales are growing at 67.5% with a very strong push coming in from U.S., with our U.S. revenue at $22.8 million, which is growing at 61%. The rest of world is also doing a fine job in terms of growing. We're almost doubling versus U.S. We're growing on a small base, at $4.5 million in the first half, growing at 110%.
The BARDA revenue is coming along at $2.1 million, growing at 15.4%. We have accelerated our entry into Hong Kong, Canada, and India in December 2022. In Hong Kong and Canada, we have also had the first sales. In India, we have represented ourselves in all the big conferences. We have hired the top two leaders in our in India for us. We are ready to go with our sales team t hey're close to 20 who are waiting in the wings.
We are literally waiting for our commencement certificate to come in, and we hope that the next time when we connect, we have sales to share with you from PolyNovo India. I just want to talk briefly about the strong partnership that we have had with BARDA and US FDA. They are supporting us in terms of helping us enroll patients faster, giving us tips in terms of where should we be going. They have been very supportive of our move to get into India to accelerate our enrollment for the pivotal burns trials.
Again, the next time when we speak for the full year, hopefully we have had great results from the enrollment and we have something more to share with you. Our capital raise of AUD 53 million in December 2022 for geographical expansion, new indications, new products, and building capacity is giving more momentum for us, and we look forward to sharing more with you as the time goes by.
Let me pass on to Jan, who will provide more details about how fast we are growing, how hard we are growing, yet we are being very responsible about how do we touch lives of many more patients. With that, let me pass over to you, Jan. Thank you.
Great. Thanks, Swami. Just touching on revenue, Swami's already touched on the overall growth, there's some key takeaways from this graph. You know, strong growth rate going right through, since, you know, first half 2021 and 2022, we're impacted by COVID y ou can see the growth tapered off from 64% down to 25%, back up to 41%. We've come home strongly this second or first half compared to prior periods with COVID lockdowns and all that was mostly behind us in a near return to normal activities. That's come through in the growth rate for revenue, total 62.2%.
What's also driving the growth in revenue is the customer acquisition. We've had a record customer acquisition rate for the half. You know, 154 new customers added in the half t hat's a growth rate of 43%, which is quite significant, and nearly 1/3 of those were in the U.S. Behind that and making that all happen is employees w e can't grow the business without the efforts of all our employees w e've added quite a few over 21 for the half, but year-on-year, an increase from 122 to 173 staff. The large majority of those are in the U.S., and we do continue to expand the U.S. sales and marketing team.
That being our biggest market and still representing the biggest opportunity for revenue growth. Moving on, just some other key highlights out of revenue. BTM sales themselves were up 67.5% to AUD 27.3 million for the half. In the first half, we actually had AUD 3 5 million months, which was good to see, rather than, you know, it's occurring more quickly.
As Swami mentioned, total BARDA revenue up 15.4% w e now have 43 patients in the BARDA trial, which is driving that increase. Some other key highlights, US sales, BTM sales up 61%, and rest of world up 110% with new sales from Hong Kong and Canada, as Swami mentioned. We're seeing that really strong performance post the impact of COVID. Still around, but we're not hindered by COVID as we were in prior periods t hat's coming through in the numbers.
Just moving on to the, I guess, the overall result. I think the key takeaway from this graph is the growth. The growth in revenue, the business expansion. There is an increase in costs, but at the same time we're minimizing the loss. It's pretty prudent cost management a t the same time, getting value for money out of the investments we're making in growing the business i t's coming through in the top line growth there while minimizing our cash burn.
We've always done that, as you can see, and we'll continue to do that, at the same time being aggressive in growing our U.S. marketing team and entering new markets and penetrating those markets. I guess the key takeaways are operating expenses up 59%. You know, we've entered new markets t here's also a lot of one-off costs.
You know, entering new markets, you've got fees and so forth for setting up companies and professional fees. We've also got recruitment costs for staff as we're hiring t hey're one-off fees. You know, that'll continue for a while as we continue to expand the business. Something to take into account. The overall impact, excluding non-cash items, which is important to do, we do have share-based payments that we've excluded, which are the expensive share options.
Excluding non-cash items, you know, net loss of only AUD 2.2 million and the EBITDA of AUD 2 million. Looking forward, we're gonna continue to do the same thing, and you'll see a similar pattern. Got a lot of headroom in terms of market share to grab, and we'll continue to go after that.
Our cash flow w e completed a capital raise. We ended the half with AUD 50.5 million cash on hand and completed a director placement in January with an extra AUD 3 million. The cash burn from operations decreasing on the prior half. You know, it's not a big number in the grand scheme of things and in terms of what we get back in terms of revenue growth of 62.2%.
CapEx, that's dropped off as we haven't had any capital expenditure plans underway at the moment, but you would all be aware from the capital raising presentation back in November, we are fitting out a new manufacturing facility next door and office. There will be an increase in CapEx spend over the next two years.
Just moving on to sum up on, I guess, overall P&L highlights. Product sales up 67.5%, operating expenses up 59%. I think a key call-out there is employee-related expenses reported up 131%, but the underlying increase is only 50.2% because in the prior year, we had the reversal of the share-based payments with the resignation of the previous CEO and COO. Employment expenses only up 50.2%.
Corporate admin and overhead expenses, they are up 105%, but gotta take into account what was going on last year in the last half. It wasn't a normal scenario in terms of running the business w e were in lockdowns in a lot of regions that we operate in. We've returned to near normal activity, so there's more travel, there's more marketing spend w e're getting in front of more customers and getting back to building those relationships, you know, online, but also in person.
And also what you'd expect with general business expansion. Not really comparing apples with apples there, but, you know, that explains the 105% increase. Overall, net loss for the period, reported loss of AUD 3.8 million, but again, as mentioned, excluding non-cash items, a net loss of AUD 2.2 million. I'll hand back to Swami. Thank you.
Thank you, Jan. As you can see, we are trying to reach and heal as many patients as we can. We are having a good impact. I believe we are uniquely situated to drive global growth. It's a genius technology, as I keep saying again and again. It's simple, it's elegant, it's designed for scale. The opportunity in front of us is an underserved market. While we are talking about thousands now, what we need to talk about is millions in future. I hope we are able to do justice to the job in front of us. We want to be sure that we are capital efficient in our growth and scaling, and smart in doing that.
What I need to warn you is our near-term results could be lumpy and up and down, but equally, they will be consistent from a long-term growth trajectory. As we add indications which take us beyond burns into trauma, we have to find a way of switching our sales team's efforts and training them to make sure that we're able to recognize the trauma opportunity and subsequently a whole lot of other opportunities as well. We will be entering new geographies as well, which would create some degree of up and down as we anniversary from quarter-to-quarter.
Our focus near term is to build a purpose-driven, engaged organization, build processes and technology backbone which help us support and reach that scale of really touching as many customers as we can, and through our customers, healing as many patients as we can. NovoSorb BTM is indeed redefining healing.
We also believe that we can be a soft tissue regeneration platform of choice. With our capital raise, we have started making the first few steps in that direction. I'm pretty sure that we will get there soon. I'm indeed very proud of the PolyNovo team, and more importantly, our surgeons who have reposed so much trust in us.
Because at the end of the day, our NovoSorb is an amazingly engineered piece of polymer, but it's our surgeons who bring it to life, and they tell us where can we take that polymer and the NovoSorb technology. I cannot do enough to thank them about their involvement and their engagement in PolyNovo.
I look forward to working with them. I look forward to working with our teams. While we are happy and proud about where we are today, I'm really looking forward to realizing the dream of touching million more lives than what we could. David has been a strong supporter and, you know, we continue to look forward to David and the board's support in helping us reach that goal. With that, I would like to hand it back to David. Over to you. David, you're on mute.
Some people say I sound better like that. Thank you, Swami, and thank you, Jan. I just wanted, before we move to questions, just to give perhaps my perspective looking at the business, and perhaps you'll see it the same way, perhaps not. Yeah, it's fantastic, of course, at one level where we've got BTM sales up 67% and hopefully we're gonna get more of that, of course t here's 20 extra heads that I think Ed feels he'll have on both before 30 June in the U.S. alone. We got some incremental staff to put on into Hong Kong, into the U.K., Ireland, and so forth.
Before I go and give you a bit of light and color on some of that growth and what's happening in some of those markets, I just wanted to draw your attention to what Jan's put together in terms of the graphs now for staff, for the number of hospitals, and he doesn't have a graph yet for numbers of patients. For me, that was, you know, one of the most fantastic statistics to see t he whole of FY 2022, we did 10,000 patients.
The first half of this year, we've already done 8,000 patients. The interesting thing is, if it's, if the growth rate's sort of symmetrical, which it probably isn't 'cause we're gonna have more staff and therefore more patients. If it's roughly symmetrical, we're 60% up in terms of numbers of patients. You know, we'll do 16,000 patients this year on that sort of run rate, and hopefully with more staff on, even more.
I mean, can you imagine what impact that's having, you know, around the globe and certainly in the markets we're in? We're not only roughly 60% to 70% up in sales, we're 60% or 70% up in hospital. We're 60% to 70% up in numbers of patients we're seeing, and staff and so forth. Yeah, it's sorta... I find it quite interesting that, you know, you look at our sales up 67%, when you look at the other metrics, how many customers we've got in terms of how many hospitals, how many staff we've got, and now how many patients we've got.
Yeah, it's, they're all pretty much in the same p ick what you want, but they're all good, I think, just signals for how the business is growing and will continue to do that, I think, just going forward, and Jan will start, you know, mapping that for graphs on terms of numbers of patients and so forth r eally fantastic. Some of it's, of course, price sensitive, and not so much price sensitive, but competitively sensitive.
We won't be breaking down, for example, I don't know, the number of patients per in Germany and at the same time reporting results on sales in Germany because we don't want our competitors, you know, cross-checking, I suppose, you know, what we're charging in different markets and so forth.
Just a bit more light and color on that, though. I think that those patients, 10,000 to a run rate of 16,000, yeah, that's gotta be heartwarming in every way because not only is it, does it give you a good indication about where our revenue's going, but you know, just in terms of what impact we're having with surgeons and so on and so forth, and expect sort of more of that.
I think, one of the, you know, really interesting things is what's happening in the rest of the world and, you know, it's tempting for us to just dwell on the U.S., and the U.S. is the most important market for at the moment, you know, of even just because we started there. But you know, if I could just mention just a call-out really to what's happening in Ireland and the U.K. It started a little bit slowly, even from our perspective, but I think we all need to keep in mind, you know, this company really didn't have a product four years ago.
What we've seen just in the last 6 months is a real pickup in the U.K., Ireland, and it's not there yet, but it'll be much bigger than Australia very shortly, the way it's going. We're really kicking some goals in the U.K., Ireland t he other one which started with a bang was our, which is our distribution arrangement we've got in the German countries, what I call Germany, Austria, Switzerland, you know, Belgium and so forth.
That started with a bang, of course, because those guys are calling on the same surgeons that we wanna go to. You know, a lot of that was stocking to start with, and it dropped off a little bit. We didn't. The pace didn't sort of keep up. Now we're seeing some real traction in the German markets, and that's, you know, that's really fantastic and it's not just Germany, but as I said, you know, Austria, Switzerland and so forth.
That's gonna, that's gonna be good. You know, in this last six months, as you see, the growth in the rest of the world was 110%, you can, you can dismiss that if you like and go, "Well, it's come off a low base. Who cares?" I can tell you that the sales now in the UK and Ireland and Germany are real, and much of that 110% is already from those two jurisdictions, if you like, the German countries and the, and the Brits. We're getting some small orders coming in already, it'll ramp up in places like Italy and so forth, the rest of the world is gonna be good for us.
Swami touched on it, you know, we're about to go out and start selling in India. We have our two senior people there. Our company's set up. The holdup is just getting the bank account set and so forth. India's can be quite bureaucratic, but I'm optimistic, having been through this myself recently with another company, that we'll have that done in the next week or two.
Once that's done, we've already as Swami said, we've already identified 20 salespeople to put on who geographically have a footprint that covers the, you know, the major areas of India. You all know the challenges there w e know the market's there. You know, how we handle the pricing and all of that sort of stuff will be tested. You know, we all hold high hopes for what might happen in the Indian market itself.
I just wanted to give you that sort of. Swami mentioned it still could be lumpy. Sure. You know, we don't know whether this month will be AUD 4 million or AUD 5 million. We know where we are here, you know, month to date. You know, when will the first AUD 6 million month come? We don't really care. If you look at the graphs, the trajectory is upwards.
As we get more people on, the lumpiness will come out of it a s we get more geography on, the lumpiness will come out of it. As we get our reps going down each floor in the hospital, so they're not just selling to burns, but they're selling to trauma and all sorts of other areas, we're gonna get more lumpiness out of it as well. It'll be continued to be lumpy for some time.
You know, don't hold your breath. The trajectory is clearly up, and all of these signals that we're sending you show that. We're not gonna give. There's a couple of questions about sales updates and so forth, so I'll take the wind out of those sails. I mean, we're not gonna give any directional change in terms of where we'll end up at the end of the year. You know what the run rates are. The graphs are pretty consistent. There's no headwinds we're finding, you know, figure it out for yourself, and we'll come back to you closer to June.
Couple of questions, they've been persistent about the Ukraine. Some of you are aware that one of the U.S. surgeons took some product in there. There was difficulties just in terms of the way the hospital system works and the surgeon system works in the Ukraine for us getting a lot of traction on that.
We've chosen, and we think it's much easier for us to supply the Ukraine where people have been airlifted out. The hospitals in Germany or the hospitals in the U.K. where we've had some, you know, a lot of war injuries taken into, be assured we're supplying in there. We're not shy about supplying it, by the way i t's just not the easiest place to go and release some of this stuff in field hospitals right close to the center.
That's really as much as we can do there for the moment. We're As everybody knows, because of Greece, because of New Zealand, because of Bali, you know, we're very sympathetic to supplying product and supplying product for free if necessary, and even supplying doctors. You know, we've got to have a willing audience and an audience where our people don't get shot on the other end.
I could go on forever, but I just want to give you that perspective to look at this in terms of multiple signals about where we're going. Staff, numbers of patients, numbers of hospitals, not just revenue and the consistency between each of those signals, which should be not surprising.
I also just want to leave you with a clear message that U.K. and Ireland's you know, tearing it up is probably a bit too strong, [inaudible] with Germany. Not just the U.S. You know, hopefully Ed will deliver in his, you know, another 20 people on board for sales, it'll take on a life of its own S wami's got a lot of work to do in terms of making sure that the sales, you know, go to other places within the hospital, we get more depth in the customers we've got and surgeons we've got. All good news as far as I'm concerned. It's great. I think we might just take a few questions, Jan.
Sure. I think we have covering analysts who are going to dial in, if we can do those first, please, operator.
Thank you. If you wish to ask a question via the phones, you will need to press the star key followed by the number one on your telephone keypad. If you wish to ask a question via the webcast, please type it into the ask a question box. Your first question comes from Lyanne Harrison from Bank of America. Please go ahead.
Hi. Good afternoon, David and Swami and Jan. Very good growth that we saw in the first half, so congratulations on that. I know you're not gonna give us any sort of sales update or guidance going into the second half, but can we talk a little bit about, like, I guess, exit run rates? You called out there were three months of AUD 5 million and more of sales. Is that kind of evenly spread through the first half, or did we see that towards the second half? That helps sort of frame our expectations for second half 2023.
Well, first of all, it wasn't evenly spread in the first half. There were three months and I'll try and remember them myself, Jan tell me.
Yeah, September, October and December, David.
September, October and December. We're not only hoping, and I emphasize hoping, that we'll have. You will see more of not only AUD 5 million months, but we're hoping that before we get to this year-end, there'll be AUD 6 million months as well. No promises, but, you know, as Swami said, and as I've said all along, it's lumpy. You know, we might well have a month in there that's AUD 4 million w e might have one that's AUD 6 million.
Hopefully, we're gonna have AUD 6 million because, you know, the way in which the rest of the world is picking up new heads in America i 'm talking about 20 new heads before the end of June, by the way, Leanne. Don't forget, we've probably got 10 that have been on for less than six months anyway.
There's a fair bit of growth to still come out of the new, the new hires that we've got. It probably doesn't make any sense. You know, if you've been sitting here six months previously, Jan, it probably wouldn't have made any sense to tell you when I think the next AUD 5 million month's gonna happen, 'cause frankly, I don't know. It may well be that we're gonna have a big month in February.
You know, one of the interesting things I think, you know, revealed in the past is that when we sit here on the 23 February, as we are today, and we look at the sales, sometimes we're disappointed they're not going as well as we think.
The very interesting thing is that the Americas in particular, always come in late in the last week. It's probably a lot to do with the hospital ordering systems and surprises. You know, we can be sitting on the 23 February with AUD 2.5 million worth of sales and still make AUD 5 million at the end of the month. Anyway, I'm rambling on a bit, Lyanne, but thanks for the question and also thanks for your support.
Lyanne, the one thing which I would add here.
Yeah.
Here is, you know, we have largely been recognized as experts in burns. You know, in Australia, we've got a 45% market share in burns. In US we are growing pretty rapidly w e are getting accepted there. We are also now taking time to learn more about trauma and how to position ourselves for the plastic and recon surgeons in trauma and work the other floors harder, as David said.
That would take a little bit of training. You know, how do we recognize the different things that we go after, necrotising fasciitis, hidradenitis, the degloving injuries. How do we help convert those plastic and recon surgeons? They act very differently from the burn surgeons, and we have to engage with them very differently from the burn surgeons.
There's a learning phase as we go through that, and that's why I said we will be touching more patients. The revenue per trauma on a patient side is a little bit lower, but the consistency and the growth would be much higher. The volume of patients would be much higher. It will be up and down, but it will be consistently up, is what I would share with you.
That would be one step as we start talking to more surgeons, in some cases probably even general surgeons who do burns in other parts of the world w e are going where our surgeons are taking us and we will be training ourselves, learning from those surgeons and then making sure that we are able to do justice for the patients through them. Yeah. Thank you.
Thank you very much. Since you mentioned rest of the world, and obviously you touched on India and how you're laying the groundwork there and looking, to, I guess, launch or start first sales shortly. Can you share your thoughts on, I guess, the strategy in that market, particularly around price point and how that might compare to the developed markets being, I guess, the United States and Germany?
I think firstly, when I think about India, we have to do a whole lot of market development work, which we have started already since last quarter of last year. We were present in the APSICON, which is the Plastic and Recon Surgeons annual event in India. We have presented in the burns event in February. We have already started laying down the work. We have already identified which are the key centers of excellence, because we'll also have to start training surgeons in terms of how to use our product on their patients.
Just because of the cost-effective nature of our product and the way it works, we believe we would get significant traction in India. The one big change versus U.S. is we are not positioning ourselves versus Integra because, you know, in U.S. it is more of a biologic versus synthetic and how do we work and how does our protocol differ from what they would expect from a biologic.
In India it's going to be a pure market development work. We have already started working on that. While PolyNovo does not register sales, we have a distributor in India and we are drawing all the inventory away from the distributor. We have started helping our surgeons there w e have started doing cases there. This is one of the toughest markets, as I said, just from an infection prevention, infection control perspective. The results that we have had so far have been terrific. That's something which I believe would stand us in good stead.
There are three centers of excellence that we have identified. We have signed up with them. There are close to 25 centers of excellence that we are looking at in India. These centers of excellence are going to train more surgeons on our technology. These surgeons would help us reach many more patients. Again, at a different revenue per patient, we will be doing the right thing from a patient perspective y ou can expect that trajectory to keep exponentially growing into the future.
Okay. You mentioned a different revenue per patient in India. Is it safe to say that your price point for BTM in that market will be materially lower than, say, what you sell into the United States and Germany?
Yeah. It would be market appropriate. That is exactly the way it happens across the world. The pricing will be different for different markets on the basis of what the expectations are. Yes. The answer is yes.
Has there been any feedback from your customers in both the United States and Germany or the developed world around price point as a result?
No. I think this is, this is a market expectation in terms of how they compare and see the pricing across different categories. It would broadly be aligned with all the pricing for different categories i f you go to China versus U.S. versus Western European markets, there are differences in those individual markets, and we have to learn to respect those differences.
Thank you. Just one last question from me, and it's just trying to think through what operating costs might look like, you know, over the next six to 12 months. You know, you mentioned you're adding 20 new heads in India in that timeframe. Where else can we expect additional heads and so what proportion or what number of heads that we might expect in the next six to 12 months?
Without being specific, we are investing in UK and Germany, and as I had indicated in the previous webcast that we had, we expect to be market leaders in UK and Germany over the next 12 to 18 months. I am hoping it is earlier rather than later. That's, that's our wish, but I think we are pretty much on that trajectory. The geographic expansion will be there in different markets w e'll pick and choose the markets, but we will be aiming towards leadership and impact in those markets.
Okay, thank you very much. I'll leave it there for the next person.
Thank you, Lyanne.
Thank you. Your next question comes from Rachael Harwood from Macquarie. Please go ahead.
Yeah, good afternoon, guys. Thanks for taking my questions. Firstly, just on the MTX product. Could you maybe just give us an update on how this product is performing and have you been able to cross-sell this product into existing and new accounts?
MTX has been in what we call as a limited market release. We'll start that process from March of this year. We were not able to release the product because of certain validation issues that we had within our business. It's not yet gotten into the hands of surgeons, but we will be starting that process from March of 2023.
Okay. Understood. Thanks. Just in terms of the chronic wound trial, I mean, understood that's ongoing and expected to complete in second half of this calendar year. Do you just have any expectations just around the timing and then maybe the strategy for the launch of this product?
Not yet, Rachael. We will be working on that. We are making some adjustments to the protocol as we shared in our announcement, and we are simultaneously trying to work on the strategy for entry w e don't have anything for you as of now.
No worries. Maybe just keeping on the trial theme, how is the BARDA trial going and do you expect to get any preliminary data that you'll be able to market to surgeons?
We will not market any data to the surgeons as of now, but what FDA and BARDA have indicated to us is that they are very supportive of acceleration, and in fact, they were the ones who came in and suggested opening up Canada and then subsequently suggested opening up India because of the prior experience they had with certain other burn products that they had in their portfolio.
We are in the process of engaging with three sites in India. We hope to complete the initial process of IRBs and the ethical committees and government releases and hopefully start to enroll the patients from June. That should help us bring the midpoint of this trial closer towards the end of this year. That's our hope, but we'll keep you updated as we go along. We're all excited about the trial.
Okay.
We want to try and bring it to a close as quickly as we can, but we want to make sure that we adhere to the protocol as well. We are closely working with the authorities in this regard.
That's great. Thanks very much.
Thank you, Rachel.
Thank you. Your next question comes from Andrew Paine from CLSA. Please go ahead.
Hi. Thanks for taking my question. Just on the BTM trial for treatment severe burns. Just noticed it's been pushed back, the primary completion to March 2025 from May 2023. Can you just give us an update date there, please?
It was always 2025. It was always June 2025, to the best of my knowledge, and we are still planning to complete it by June 2025. In fact, we're trying to see if we could accelerate that and bring it to a close a little bit earlier.
Okay. Gotcha. Cheers. Just on previous commentary, you talked about the new manufacturing facility expected support additional AUD 500 million of sales, and that's about five times capacity. Just trying to think about your current capacity. Is that implying that it's around AUD 100 million of sales per annum that you're currently running at the moment? Or can you kind of push through more of that? I guess when the facility is coming online and, you know, is that gonna be a gradual ramp-up or at once completion?
We have one unit which is close to AUD 60 million of capacity w e have unit two, which is coming up shortly by May, which would give us another AUD 60 million of capacity. Then we will have the third unit next door, which should come on line in another couple of years, which should give us that capacity that you referred to. Jan, I don't know if you want to add any more flavor to that.
No, that's correct, Swami. Where we do have extra capacity in the existing two units is if we went to a three shift scenario per day. At the moment we're just running two shifts. There's always that option as well.
Okay, that's great. Just one last one, just CapEx and R&D expectations in second half and FY 2024. Are you able to provide a dollar value of your expectations there?
In terms of CapEx for the rest of the second half, it'll be at least AUD 1 million w e're fitting out the office space in the new premises next door. That'll be finished by around May, June. Then we're starting on the design phase of the new facility, just engaging some outside expertise as well as got our internal expertise helping with that.
Once the design freeze is achieved on the new manufacturing facility, which we hope sort of by mid or end financial year or early Q1, that's when we'd be looking at contracting builders and putting out a tender and sort of commencing construction. There's still a bit to do, but, as we said in the capital raising presentation, the bulk of the spend would be in sort of over FY 2024 and into FY 2025 as well for CapEx for the new facility.
In terms of R&D spend.
Okay. That's great.
R&D. Thanks, Swami.
Yeah.
All right.
In terms of R&D spend, it's just more of a timing issue because we will start spending much more in the back half of this year, and you will see that reflected as we move forward.
Okay, that's great. Cheers.
Thank you.
Thanks, Andrew.
Thank you.
There are no further phone questions at this time. I'll now hand back for any webcast questions.
Jan. Yeah. We've got a few questions, David, if you're happy for me to make a start.
Go ahead.
Yeah. First question, can you confirm that Integra have reduced prices in retaliation to BTM's entry, and how are surgeons responding?
Yeah. Look, I don't know that there's a general answer to this, and I don't really wanna talk about our competitors. We get a lot of anecdotal evidence about what they're trying to do with hospitals and surgeons in terms of pricing. I think the answer's probably obvious to most people, but we don't have. I'd prefer not to comment on what Integra is doing.
All right.
We're growing very well, we don't need to knife anybody in the back at this stage.
No problem. Thanks, David.
Next question. How confident are we in a viable product for hernia, or some other implant market? Is it still more of an if than a when?
I'll leave that to you, Swami.
I don't want to sound cheeky, but it is an if and when, both. We believe that NovoSorb, as the core technology, can get into hernia and breast. We are sourcing the right expertise across the world to see us help there, help us get there faster. We believe at least some of the products should be inside sooner, and there are some other products which might take more time for us to fructify.
This is always, you know, a research and development is never a slam dunk wherein I can say 100% it will be true. We feel far more confident with everything that we have learned so far. I'm personally feeling hopeful that as we source expertise from different parts of the world to help us solve this problem, we will get there.
That's at least our intention. Our intention is to try and make it work. If someone were to ask me, "Will it work perfectly?" I hope so. We are learning everything that we can from our previous experience. With your blessings, we hope to deliver a good product for hernia as well as for breast.
Great. Thanks, Swami. Move on to the next question.
What is the feedback between surgeons and our product development team, especially regarding surgeon ideas, for new applications of NovoSorb?
I think it's our surgeons who are coming back and, you know, sharing with us what we could do in breast, what we could do in hernia. If it was not for surgeons and the way they see our product behaving in burns and using it in different parts of the human anatomy and getting surprised by the results, we would not be going there alone.
As I shared, it's our surgeons who bring our technology to life. It's our surgeons who help us understand where this product can go. Without their help and without their confidence, we would not even be experimenting the way we are experimenting today. They are the ones who help us build the right protocols to help the other surgeons learn how to use BTM or NovoSorb in different parts of surgical sites where healing is needed.
That's all I can say. I mean, they are taking us into calvarium on skull closures. They are taking us into, you know, pediatric trauma. They're taking us into cancer resection, head and neck. It's our surgeons who are leading us in terms of where NovoSorb can grow, and we can never be grateful enough for them because as I said, we are an amazingly engineered polymer, but it's the surgeons who help heal patients and bring our technology to life.
Yeah. I think it's worthwhile just emphasizing, gentlemen, that, you know, the surgeons are, There's hardly a month goes by where you don't hear of a surgeon who's using an application that we'd never thought of. I think in answer to the question specifically, quite a number of those things are happening without a dialogue with us. Surgeons just take it on their own, and I think most people have heard me tell stories about spina bifida, you know, where it's been applied to a baby without a spine covered in utero, you know, amputations, leg salvage, that sort of thing.
It's really going in a lot of different directions t he challenge for us, by the way, it's a good thing, is to keep up with the surgeons and, even though the surgeons might take it and run with it, you know, we've got a different level of proof that's needed in the sense that, you know, if we're gonna make it into a real product, then we need to do some testing and support the surgeons b ut we've got to know about it first, and that's not always the case.
All right. Thanks, David. Move on to the next question.
With employee expenses rising rapidly by 131% compared to prior period, can you approximate the year-end cost run rate for employee expenses?
I can answer that one. In regards to that, it's not actually 131% t hat's the reported number t he underlying increase is 50.2%. In the prior year, we had that reversal, which I mentioned during the presentation, of AUD 4.7 million in share-based payments t hat was associated with the CEO and COO resigning, so we had to reverse that expense.
You really got to compare AUD 17 million to AUD 12.2 million. That gives you 50.2% increase on the cost. Hopefully that answers your question. As to where it'll land for the full year, a little bit more than double. We'll move on to the next question.
When do you expect growth in revenue to start to exceed growth in expenses?
Look, the way we're traveling at the moment, and again, just going back to Lyanne's question, we're not gonna give any guidance. You know, internally, we think we're going to be, you know, close to or best part of break even this year. When will that turn into a profit? I don't know. I don't really care, to be honest. We're growing. We know what our margin is. It's just a matter of time, and none of us really want to sacrifice growth for controlling the expenses, you know.
Great. Thanks, David.
Question on DFU trial? Can you talk about any early DFU results?
I can just share that, I'll go back to the previous question, wherein where are surgeons taking us? Surgeons have discovered as a terrific limb salvage option for all kinds of difficult cases that many of the podiatrists had given up on. Many of our surgeons have recovered and salvaged limbs and provided those patients more life.
As you know, whenever there is an amputation, the life expectancy of the patient decreases dramatically. That is the way in which we are getting into DFU and how we can work on the trial. What we are also discovering is surgeons and podiatrists are, they work to a particular habit, and SynPath requires a different protocol. It's technique sensitive, and we are working with our protocol and our expert panel to modify the protocol, make sure that we have a calibration process to ensure that the clinicians know how to use SynPath versus the standard of care.
It might take a little bit longer for us to get there, but it is important that we stay true to the mechanism of action of PTM or SynPath and truly heal the patient the way they should be healed versus trying to rush through the protocol t hat's the reason why we are taking a little bit of a break, working with our expert panel, making sure that we're training the clinicians to be sensitive to how the technology needs to be used on the patients, and then we will start enrolling for the trial again.
I think it will be a terrific product for DFUs, as we have seen in Australia, as we have seen in UK as well. For US, we are taking a pause. We are working with our clinician expert panel, we will come back and complete the protocol by end of this year or early next year. Thank you.
Thanks, Swami. Moving on to another question here.
As order volumes increase and some freight channels still have issues, are you considering building reserves of stocks in other distribution centers around the globe?
The answer is yes. We will start having hubs and inventories in different parts as we start expanding globally.
Yeah. It's not really being driven by freight issues. I think a lot of those freight issues have now gone back to where they were, even though the costs are still up a bit. It's more that as people start to use the product more, we think that that won't be just in time any longer, but rather wanna get it off the shelf. We're expecting to build up. We already have stock in the U.S., but we're expecting to build up our stocks in Europe and U.K. and the U.S.
Great. Thanks, David. A couple more questions, then we're probably done.
With regards to reps, how long before the current sales force base is producing AUD 1 million a year in revenue on average?
It's an interesting question, but, and I think we've talked about it before, that the model in Australia got customized for the U.S. so that in the U.S., and I've given the example, we have somebody that does, say, $3 million worth of turnover, and we've chosen that instead of turning that into three reps, that we get him support staff so that that person can continue to sell, and that the people underneath him will do the follow-up. Underneath him and getting paid proportionately less, will do the follow-up with the surgeons.
We're trialing, you know, we're trialing a number of different models around the world, and that includes how to pay those people, so, and incentivize those people. It's a work in progress as far as we're concerned.
Question on CapEx, which I'm happy to answer. AUD 53 million the first half or first half 2023 CapEx was well below the typical half-year run rate. What led to the lower spend, and what we can expect in the second half? We answered that earlier.
The CapEx has dropped off only because we finished building our Unit- 1 clean room, which is gonna be operational in May, and it's gonna increase our capacity w e'll double our current capacity. There's been really no spend required on that, and very little on maintenance. That will change next year once the FY 2024 and 2025 as we start construction on the new facility.
If I may, Jan, just add to that, Jan.
Sure.
What often gets lost on people is that this is a very, when you think about it, a very capital light company. You know, when we wanna double sales, we're not asking you for AUD 100 million to go and buy a new factory or build a new factory.
The cost of building a factory is, relatively speaking, very low. Even though we're gonna build a new factory, you know, compared with any one of my companies that I'm close to in the food industry, it's trivial, the amount of money. This is a really powerful thing for a company, I think, is that not only do we have high margins, but we've got low capital requirements. That's a, you know, that's something to keep in mind when you're comparing us with others.
Great. Thanks, David. Second last question.
With AUD 50 million in the bank, how will that be spent on plant and equipment and over what timeframe, which we've just talked about? Related questions, how will also be spent on market expansion over what timeframe, and can you split that into the relevant buckets?
I think the buckets will be, and Swami, you can add to this, it's what we presented in the investor presentation at the capital raise. I mean, the four areas are geographic expansion, new products and R&D, expanding our current indications, where our product is used, and also some working capital and also fitting out the new facility next door t hey're all the four buckets. The largest chunk will go into, fitting out the facility, but followed by geographic expansion and new products and R&D. I don't know if you wanna add to that, Swami or David, in any way.
No.
We can move on.
No.
No problem. Just reading through a bunch of questions here.
I think we can end with this one. How big does the profit in the future need to be to commence paying a dividend?
Look, it's not worth answering, Jan, because the big driver for us as a board will be, you know, the trade-off between losing cash and growth. To the extent that we can have more growth with a 95%+ margin, we'll take the growth every day. That should be rewarded in share price as it has been already. To the extent people want dividends, go sell a couple of shares, you know. Look, it's a work in progress. As we go from, you know, if India turns out to be successful, you know, we've got quickly coming up behind it, Japan and maybe Indonesia and a lot of other countries as well. You know, we want that growth.
It's only a matter of, short matter of time between when we become profitable, which is extraordinary a gain, I just emphasize, you know, four and a half years ago, there was nothing, and now we're talking about profits and dividends and so forth. The growth on a capital light, high margin product like ourselves, you wanna take that every day, in my opinion. Whether we pay a dividend or not, it's not for me, it's for the board and for the audit committee to recommend. Just so you know what my sort of feelings are.
Thanks, David.
Just to add to what David has been saying is he's been pushing us constantly for, you know, what are the limits of the sheer number of patients that we can touch and heal with this technology, and how many different kind of surgeons can we go and meet and work with to heal patients y ou know, that is something which keeps driving all of us to keep, you know, to keep moving. We can turn the profit tap anytime, but, as long as we are growing responsibly and, you know, reaching more number of patients, the entire company is motivated by that objective.
Yeah, I think To put that in context, you know, we talked about 10,000 patients for FY 2022. We talked about 8,000 patients in the first half of this year. That number will be hundreds of thousands. You know, when we start to hit our strides in the UK and Western Europe and new sales people in the US. You know, we haven't even , even though we're doing very well and the margin's great and the sales are going great, we still haven't scratched the surface.
That's fair. Absolutely. Thanks, David. Swami, that's the end of the questions.
Okay, thank you for that, and thank you, Swami and Jan. Look, thank you everybody for coming. I hope it wasn't too much of an anticlimax today j ust to give you a sense of what's coming, it worked very well at the AGM meeting last year, having a couple of employees offshore and onshore. We plan to do that again this year, and I think we might even extend it. We may even try and get a patient or two in.
I'm really keen for shareholders to see the breadth of our penetration. I mean, I'm not promising anything, but we may have somebody out of the U.K., we may have somebody out of India. We may buy a Boeing jet and take all shareholders to India. Who knows? No, we won't buy that. We plan to make the next AGM a really whiz-bang one y ou will know as much about the product as us and our growth prospects.
On behalf of the board and management, I'm sure we thank you for staying with us. I mean, it was only in May last year, it's not even a year yet. The share price had been shorted, you know, 11.5% down to AUD [inaudible] and, you know, one of the better chairman on the ASX went in and bought AUD 7 million worth of shares, and now here we are back at AUD 2.30 million.
You know, the shorts are gone, nearly gone completely. It just shows you that share price volatility you'll see people will play with the share price, but you know what? The fundamentals are the fundamentals. The company is going very well.
All of those signals that I talked about at the front, keep your eye on those because that's the exciting thing n ot just to look at what our profit is or our revenue is, but look at what we're doing for patients and hospitals and hopefully stay with us. Anyway, thank you very much. If not before, we'll see you at the AGM. I am presenting tomorrow, by the way, at Macquarie Bank in Sydney, face-to-face. I may have... I don't think I'm gonna have anything different to say, but if I do, there'll be an ASX announcement tomorrow morning preceding that at 10:00 A.M.
Thank you, everybody.
Thank you.