Welcome to Polynovo's Half Year Results Presentation. Today, we have presenting Chairman, David Williams Managing Director, Paul Brennan and CFO, Jan Geilen. Covering analysts will have the opportunity to ask questions following the presentation. I would now like to hand you over to Chairman, David Williams. Please go ahead.
Thank you, and welcome everybody to this call. I don't propose to say too much. I'm going to hand it over to Paul Brennan and Jan Geelan. But we have just come from a Board meeting, and I thought it might be helpful just to reflect on the progress of the company the way I see it. As you saw, our growth in the first half in terms of sales was only 31%.
I've said ad infinitum that the business is lumpy. And interestingly, while we had a soft October, November, sales in December, for example, in the U. S. Were above budget. So I'm not going to sit here and say that COVID is a problem.
It's got small issues for us in terms of access to 1 on 1 meetings with surgeons. It's got small issues for us in terms of hiring new staff in the U. S. But at the same time, we can go from a soft month to an above budget month in a heartbeat. And at the same time, I've got a super confident head of the U.
S. Who's very happy with his forecast and with his trajectory. In this half, we've picked up 20 new clients in the U. S. Alone.
We're now servicing over 100 hospitals in the U. S. And in recent months, we've I think couple of months. So even when I look at today, compared with our 31% BDM sales year on year, it's now over 40%. And as I said, our Head of the U.
S, in particular, is very confident about where he's going and what his trajectory is. We've now got 22 sales staff in the U. S. A lot of those have only recently come on, so we're not seeing the full belt of that either. But it's not all U.
S. It's, if you think about what's happened, and Paul will go through some detail of this, but since September you know, last year, we've signed up distribution arrangements in Finland, Taiwan, Benelux and so forth, Turkey, Poland, Italy. All of those have happened since September, and many of them were in January, Turkey, Poland, February for Italy, for example. And already, we're starting to see some fruit come out of that. So in Benelux alone, where we didn't sign until into November, we've had 4 patients.
In Finland, we've had 12 and so forth. So as the year progresses, those sales are going to trick up. And will we get to double our sales on last year? Who knows? But the business is growing strongly, and we continue to pick up new hospitals around the world.
I've given the example recently of Germany, which is going And as I've said before, I haven't seen it yet where a surgeon trials a product and then doesn't buy the product. So quite rightly, they want to put it on a wound, they know about it, but they want to see how it comes out, and that's a 2, 3, 4 months process, depending on what they want to see out of a particular operation. But I'm pretty happy with the way it's going. I wish the sales weren't as lumpy, but as the business grows, a lot of that lumpiness will come out of the business. So, I think that's probably enough for me.
I think that the price, it is what it is. I keep saying to people, when we did the AGM in November, I think our share price was $2.20 but then went all the way up to $4 and now we're back roughly probably where we were. I would point out to those of you a bit more sophisticated that the shorts in the market at that stage were 7.5% went down to 1.5%. So look at a lot of that action as being people covering themselves. And I look at a lot of the action now where the shorts look like they've come back down to back up to 4.5% as driving some of the downside.
But I'm very happy with the progress of the company. Surgeons love it. We love it. It's a bit volatile. But if you look at the trajectory over the last 2 years, it's there's only one direction.
Welcome, everybody. I'd like to introduce you now to Paul Brennan. I'll probably put Paul and Jan Geelan, our CFO, on the screen at the same time and let them talk to the presentation that we put up on the ASX this morning.
Good morning, everybody, and thank you for joining us today. Both Jan and I will take questions, and both of us will be presenting different parts of the deck. If we start off on Slide 2, next slide, this is just giving the highlight numbers as a top line, And as David's covered, we've had the increase of 31.2% in overall Novozorb BTMs sale. But the pleasing thing in U. S.
Dollars, so it's had any currency impacts. We've seen the U. S. Increase 41% in the first half, and that's with several challenges in the variability of the states in their response to COVID. So the U.
S. Is not one market, it's 50 individual markets in effect, and they all behave slightly differently to the challenges. Overall, for the group, the pleasing thing also is the decrease in outflow of sort of net cash for the profitability and really tracing our breakeven line, which I'll speak to a little bit later. The research and development expenditure of $1,280,000 during the quarter is reflective of most of the investment going on in that's transferring the Pernea devices into a production ready phase. Capital expenditure is coming to a close, if you like, with the factory build.
We've spent $2,300,000 in the first half, and that now in the remaining period, and it has $1,300,000 of commitments. And cash on hand is $7,600,000 So when we go to your end slides, you'll see the out flowing of cash that, that $7,600,000 is fine by us. We've got good cash and good revenue projections in the months ahead. So if we go to Slide 3, we've signed 22 new accounts in the U. S.
During this COVID challenge of the first half, and sales in Germany, as David has alluded to, in that dark region, 30 accounts with another 30 evaluations in progress. The really pleasing thing is that's a very wide clinical indication use of uptake that we're seeing in the dark region. So that is turning into relatively consistent revenue for us from our partner PMI. We've had very strong webinar referral program, and that's bringing new accounts and increasing the credibility. The APPRIS, which is the British Association of Plastic Surgeons Conference held recently was classed almost embarrassingly as a lab result BTM show, and there were surgeons from the U.
S, Germany, Australia and the UK all presenting their cases of BTM, so very strong peer to peer referral. The first two GPOs and IDNs started in the US, and we've got further agreements in process at the moment, so we'll have some announcements coming through in the coming months. The GPOs general purchasing organizations have groups of hospitals within their purchasing group, So that will give us a faster route to market and a smoother process for inventory management within those groups. Doctor Anthony Kaye joined us as a COO from CSL, and Anthony brings enormous production and R and D and engineering experience to the business, and he's already had a significant impact on our Hania program and the quality of the ultrasonic welding and things have really stepped up since Anthony has come into the business and added his expertise to the team. The handiographic build is going well and there's been some commissioning delays in some of the machines, but we managed to overcome this with video links to our German suppliers of those machines, and for them to custom make some cabling to enable dual control of those machines through the internet, so we were able to commission them.
So really good effort on our team, and thank you to all of our staff in R and D and production who were very creative and tolerant through this process. We have the US FDA approve our pivotal trial, which is for the BARDA trial, and that now means that we can begin recruitment of patients in the program. And we also have data committing the US15 $1,000,000 to support us in that program itself. And we'll now go to the next slide. With our distributors, as David alluded to, we've continued our expansion throughout Europe.
We sell direct in the UK and Ireland, the Republic of Ireland, and we use distributors in Finland, Taiwan, Belgium, Netherlands, Luxembourg, and Greece. So to achieve that in that first half, our business development manager who's based in the UK has been doing a fantastic job, And we've got some excellent distribution partners, and he's done the training and induction of these companies into how to sell PTM. And that looks like it's going to be good business for us. And we've added Turkey, Poland and Italy since January. And there will be further countries added to that before the close of this financial year.
We'll go to the next slide. Just wanted to highlight some of the creativity in digital processes, so for Australians on the line, you'll know that we can't travel to New Zealand, and Valerie Young, who's our Sales Manager, is also the Territory Manager for New Zealand. So she had a life size cut out made there and she had a conferencing system put there, and she attended that conference virtually and spoke to many surgeons during that conference session, and opened a couple of new accounts post the conference. So we're very creative in how we sort of get ourselves around and how we involve ourselves with our customers. Mike, go to the next slide.
So revenue has been lumpy and that's been the reality that hospitals have varying levels of activity in elective surgery and bed access. So it's been a very strange world for all of us to live in. And for those in hospitals, it's much more stressful than anything that any of us on the outside experience. So, I think on for some of it, we've done very well through about a very challenging period. For logistics, we've had some increasing cost in finding bellies of planes to ship things in and scheduling challenges.
However, we've got significant inventory in all of our holding warehouses in all regions. And Katharina and her team in logistics have done an outstanding job of staying on top of not only the production, which is excellent and very efficient, but also in getting into the markets. For the markets themselves, it's been highly variable with how they've treated the lockdown. But suffice to say, within all regions, we've been opening new accounts, And those new accounts mean that as the elective surgery backlog needs to be cleared, we should see a corresponding rise in demand for nasal BTM. So the outlook for us, I think, looks quite strong.
And the vaccine rollout globally is accelerating with the U. K. Already at nearly 15 million people and having announced this morning a 4 stage exit plan in 5 week blocks for the UK. So our U. K.
Team are very excited because they've already signed 9 NHSs and doing evaluations in several others. So the demand and knowledge notes or ATM as I was referring to the Pampers conference is quite strong. So we should see a good uptake in BTM in all of our markets. At the next and on the side of that slide you'll see webinars that have been run and they can be viewed retrospectively on our web site under the healthcare professional tab. We'll go to the next slide.
For the BARDA program, we've had the IDE approved, and there was a bit of a delay in the FDA processing that because they had the rain COVID challenges as well, but we've now had the vendor kickoff meeting which is all of our contractors and suppliers for running this program and we'll be in a position to recruit patients into this trial in March, April. And one of the things that's quite exciting about this program is is going to be done in Canada as well as the U. S. We'll have between 2025 sites involved in the program and we'll be making announcements as soon as we get the 1st patient recruited, and we're judging no dissolved BTM against what's called the standard of care, so whatever that institution uses within that facility, to treat institution uses within that facility, to treat a full thickness band is what BTM will be compared to within that facility, and then the aggregate rolled up to give a comparison of notice of BTM's performance, which I'm sure given our commercial success and everything we see from our surgeons, it will be a very positive outcome for the trial. Next slide.
For our employees, we're now at 92 when we had June 30, we're at 78. We see that we're not going slow on the recruitment of talent into the business. And you know roles such as Anthony's as COO is important to us. We're actively recruiting at the moment for a Head of R and D, so that once we've got that head we can bring in more scientists underneath. There are ads out there at the moment for further development scientists.
I'm pleased that we've, as of a couple of days ago, contracted with a marketer, who will be joining on that global capacity to help with product development, to make sure that we're incorporating the patient and surgeon needs within those development programs. For the U. S, we continue to expand that. We're actually at 22 sales managers at the moment and 4 regional sales managers, we're making the investment in and as we find talent, we'll be constantly bringing them into the business, in line with driving revenue opportunities. For Australia and New Zealand, it's been quite challenging with some of the border closures, but you've seen how creative we've been.
So as the vaccine now rolls out in Australia, I'm hoping that the border closures might leave be left behind, and our team can be more mobile and more face to face with their customers. For the UK and Ireland, we have 4 sales people in place there and we'll hold that level of staffing until COVID restrictions have eased and we see some revenue bump. Next slide? For the factory, we thought you might appreciate some photos of what this new factory looks like as shareholders effectively repurchased. So we're quite excited that the film extrusion process is well and truly understood by us now, and the area that those machines will go in will be finished by the end of March 2021.
We've been extruding film at Universal Biosensors at Scoresby. We've been renting some space from them, and that's been fantastic for us to get our skills and talents up to speed before the factory was ready, and we'll bring those machines in the house, and install them here at Port Melbourne by May. We're already building the finished product to begin all the laboratory and animal study work required for building the regulatory dossier. So we're quite excited about our achievements in this phase. In the forward commitment, we've got some, 1,300,000 of outstanding capital required, and one of the items noted is a packaging machine, which is a final part payment, and we're looking forward to that packaging machine.
It's been significantly delayed in its build in the UK because of COVID and when we get that, that will also have significant efficiency improvements for us in our BTM space for packaging. Next slide. So for all of our inventory in the warehouses, we have plenty of inventory in all warehouses, So we can supply any customer very quickly, and we've got no problems in our supply chain. We've got plenty of raw materials, and we've got plenty of stock. So we're in a very healthy position.
Next slide. Just to take a few questions, but I'll hand over now to Jan Geerlen and I'll retry new at the new products at the end. Over to you Jan.
Great. Thanks, Paul. So just running through our financial results for the half. As mentioned, our BTM product sales were up 31% for the half. Total sales coming in at $11,250,000 versus last year's $8,600,000 Total revenue percent.
Total revenue Next slide. Thank you. So total revenue coming in at 12,800,000,000 dollars That includes $1,300,000 of part of sales. Some other highlights, we had really strong sales in Q1. So the Q1 was up 75% on the same time last year.
Things slowed down a little bit in October November, as Paul mentioned, but all COVID related with restricted access to hospitals and surgeons and we did see a reduction in elective surgery. But again, that came back stronger again in December where we actually exceeded budget in the U. S, New Zealand and Taiwan, which was really pleasing. Looking at other markets and growth overall, so the first half, we opened 35 new accounts across all our direct markets. Quite a few of those in the U.
S, followed by Australia and then the UK. And important just to look at how we performed for the calendar year during a pandemic, we actually managed to open 109 new accounts, which is nearly double what we did in the prior year. So it's great platform growth and obviously good stead for the year ahead. Looking at the U. A, U.
S. A, their local sales in local currency over there, we've obviously had an appreciation with the U. S. Dollar against the Australian dollar. So looking at their sales for the half, they were actually up 41% at the same time last year, which is better than 30, 31% overall.
Moving on to distributors. So as David mentioned at the start of the call, really strong sales in the DASH region through our distributor PMI, very been very pleasing. We've entered new markets in Greece, Benelux, Sweden, Finland and Taiwan and some of those with initial stocking orders and also a number of evaluations underway. The UK is continuing to build on its customer base despite being in lockdown. We do have further evaluations underway.
And we're also pleased to say that we've had our first evaluation performed in Ireland, so which is great. Next slide, please. So moving on to our operating loss and OpEx. So you can see from the graph there, our operating loss is down 78.9% on the same time last year. I've excluded non cash items in this just give a true underlying view of what the operating loss is.
The reason why it's getting to that point, which is good to see, we've obviously had revenue growth. We've had gross margin improvement of 3.9 percent, which is great to see year on year. And cost management has been minimized. We're actually below budget with our OpEx for the half. In terms of profitability, the U.
S. And New Zealand are actually profitable on a stand alone basis. And you can see from the graph there from an operating perspective, we're actually close to breakeven for the half. In terms of OpEx, so OpEx was up 19.8%, but the major driver of that is the increase in headcount from 65 staff to 91, so increasing by 40%. And obviously, you get that annualized effect of prior period hires coming through, but all this is planned and was expected.
So but what was also pleasing to see is corporate admin costs have made fairly low in terms of the growth, only coming up 3.4% compared to the same time last year. So obviously, as we expand our costs in entering new markets and regional operations like setting up in Ireland, but we'll continue to invest in growth and monitor our cash flow and OpEx accordingly. Next slide, please. So moving on to cash and cash flow. So you can see we ended the period there with $7,700,000 cash on hand.
Our cash burn for the half was negative $1,400,000 but the trend has improved at the same time last year for the reasons I just pointed out on the previous slide. In terms of CapEx, as Paul has mentioned that Stage 2, which is the last stage of the hernia claim room build, will be completed by 31st away, and that's on track. We've got all our equipment on hand, it's just the packaging machine which will arrive soon and then that will be complete in terms of equipment CapEx. And I'll put in a forecast there for the half, second half with $1,500,000 and that will be met by our MAM facility as well. So that's covered.
Next slide please, operator. Let's move on to our P and L. I'm just looking at some highlights and what I have done at the bottom of the P and L there is just adjust it so you can see the underlying loss and backed out the non cash items of share based payments, which is expensing share options, and also the unrealized ForEx loss for the period, just with depreciation of the U. S. Dollar against the Australian dollar.
So I'll go through the highlights, as mentioned, product sales 31%, partner revenue up 25%, products sales gross margin up 3.9%, so we enjoy a very high gross margin. Employee expenses are up 32%, 32.6%, but for reasons we know, increased headcount. The R and D spend has been down, but that's mainly due to activity with the BARDA trial switching from feasibility and we're transitioning to the pivotal trial. So that will increase as the pivotal trial starts to recruit patients. Corporate and admin overhead, up 3.4 percent and the loss for the period after tax, negative 3.5 percent.
And our underlying loss, and I went back to the breakeven comment earlier, only just under $1,000,000 for the half. Next slide, please. So just wrapping up the finance section, gross sales, again, it's 81%. We've entered new markets successfully, as Paul indicated, 109 new accounts during the pandemic, 89% growth, so great effort from my sales team. Improved margin, underlying loss near breakeven.
We ended the period with cash on hand of $7,700,000 which we feel is enough to get through and execute our plans. And we have a net NAV debt facility of $1,500,000 So I've been ahead of room there and that will cover the CapEx for the first half. Next year will be a CapEx light year with everything in place by 30 June and paid for. So thank you and thanks, Bong, back to you.
Thanks, Sean. That's excellent. Next slide, please. And the next one. So Syntrel is the name of our Hania device and so we thought we'd give you a bit of an update of the Hernia progress where we're at.
And there's a picture there of the actual finished device that you can see ultrasonically welded foam together. That might sound very straightforward. Technically, that's quite an achievement. Our R and D team have been fantastic, at being able to achieve this, and many in our production team who have brought many of their skills to the table, literally. So we're now commercially production ready for making this device, And we're also got the opportunity to look at some partnership opportunities to see if that accelerated path to market and accelerated penetration.
That's too early to get into any detail there. As always, our role is to look at the products we've got and maybe some variations of and look at how we can generate revenues quickly. So we'll make some further announcement on Hania by July of 'twenty one. The next slide, the NovaSorb BTM, we've got some additional sizes there. The packaging is really what we need to move forward with this project, so that's arriving and on track.
The SYNPAS product for the chronic wound space in the US, the diabetic foot ulcers, Ben and Sleg ulcers, We're now open for recruitment for this trial, and we should have some announcements very shortly about the 1st patient enrolled. And that's a 2 year study to build the economic data for private health reimbursement of the product. I just want to emphasize it is not a U. S. FDA requirement.
It's purely a commercial requirement for the reimbursements and we'll launch into that market segment as soon as we do have our reimbursement from those insurers. Novozorg other products, the plastic and reconstructive device respectively is a breast device, but for technical and regulatory points of view, we'll be calling it plastic and reconstruction. And we've moved that development in house and employed a dedicated marketer to help build product specifications and requirements and we're recruiting some additional scientists. So we anticipate that it will be a 3 year plus development path. Just caution you that, you know, with all these things, there are a lot of unknowns as you're developing products, and so we'll have a more time line further into this process.
For the beta cell diabetes treatment, the beta cell group at Tobey Coates in Adelaide still say they're on track for doing a human trial in 2021, so we're just standing by waiting for that. Our role will be to supply Novusil BTM and the longer term is that this would be another market segment for sales of BTM albeit unique shapes and sizes into that segment. So that's another exciting opportunity for market expansion. Next slide? Just for the H2 activities, just want to caution, as David has highlighted already, that, you know, we do anticipate sales will be lumpy, but there is a significant pent up demand within the hospital networks now, globally as elective surgery is, so we should see that flow through in demand.
We'll continue to expand our R and D team and our product development pipeline. Should have our 1st patient enrolled in the pivotal trial in March April, and we'll have patients in the recruitment for the chronic wound study, and we'll have further market entries into Europe and the Middle East. And that concludes the sort of formal presentation part. And now I'll hand back to the moderator to take questions from the analysts.
Thank
Your first question comes from Lianne Harrison with Bank of America. Please go ahead.
Hi, Paul and hi, Jan. Thank you for taking my questions today. Can we talk a little bit in terms of, I guess, the expectations for the second half of 'twenty one. I know it's uncertain times because of COVID. And I know that previously you've been reluctant to talk about month on month trends.
But given, I guess, the circumstances and you mentioned, first half twenty twenty one, the United States saw significant improvement there, but then slower October, November, and then returning again December. Can you provide some color on what you're seeing for January February?
Well, I don't want to get into the cycle as soon as I answer this question, Leanne. You and others will be asking me each month what the sales were like this month. So, on the agreement that that doesn't degenerate into that as in the go, as we said was very good. January still showed some good performance and from what we hear in the US at the moment, things are looking reasonable for February. I'm only hesitant on saying anything can close on February because the month has not closed, and the last week of each month is when a significant number of purchase orders come through in the administrative processes of hospitals.
So I don't want to crow about things that aren't invoiced and banked. But suffice to say that the team activity and what we're hearing on the ground, sounds quite positive.
Okay. And if I could ask probably in a different way about with the caseload easing, particularly in the United States and the vaccine being rolled out, how is PolyNova placed to, I guess, ramp up its sales activity in the United States, for the second half of financial 'twenty one?
Well, we've got sales representatives in widespread of geographies and compared to pre COVID in many more geographies than we had before we went into this lockdown. We've been doing a significant amount of webinars peer to peer engagements, and you can see that we've signed many new accounts in the past calendar year and just in the first half of twenty twenty two new accounts, plus we've signed GPOs. So I think if you connect all those dots, it's looking positive from where I sit in Polynovo's preparedness to be able to service the demand in the market. We've got significant inventories sitting in Kentucky, so no problems or downsides from my perspective.
Okay thank you and since you mentioned new customer accounts, am I right, because you mentioned 35 new accounts for first half twenty twenty one and 109 for calendar year 2020. Is that like for like showing that first half of twenty twenty one was significantly lower?
It is like for like. It represents the growth from the prior year. The 109 is 89% greater than the prior calendar year.
Yes. Okay. And then if I could talk about the United States in particular, I guess the new 22 new customer accounts that you signed up in first half twenty twenty one. Can you talk a bit more about the extent GPAs? Well, there are a wide through the GPAs?
Well, there are a wide variety of hospitals, Leanne. Hospital, we only target large hospitals. We're not after the small rural type settings. So the penetration within all of those hospitals is variable depending on the maturity of that account, so whenever you gain entry into say a new hospital, you'll be in either through trauma, plastics or burns and whichever one of those tentacles was your way in then as a salesperson you're tasked with growing all the other departments, you know, orthopedics, general surgery and the rest. So depending how long the reps have been in those accounts and the networks they've established, then there'll be a variable deficit penetration.
So there's, there's no one answer to give as x percent penetration in the accounts. It's territory by territory, but each of those salespeople in their territories have specific goals and targets based on penetration in dollars to achieve, and they're judged and mentored and coached around those numbers weekly by their sales directors.
Okay. Thank you. And I guess just one final question. In terms of your new products to market, particularly the alternate sizes for BTM, What's the timeframe on that?
Well, we haven't got a hard and fast because it's going to depend on the different markets. For the U. S, for example, as soon as I've got that packaging machine, we can roll out different sizes as we can here in Australia and Europe in that our filing for the 510 covers everything from 4 square centimeters to 800 square centimeters. So I can make any size we like within that. The thing that you need to build into that is that we've got to do stability testing, accelerated oven testing, if you like, of the packaging.
So that takes a couple of months. So we'd be looking at, at least another 4 to 5 months before we roll out those sizes to get stability testing for the QA system because you've already got your regulatory approval, but those regulatory approvals are on the condition that if at any point you get audited, you have that data. So you morally, ethically and commercially should not be out there selling a product until you've generated all your data. So there are some normal quality processes that you've got to complete, and we'll be doing those diligently.
Okay. So if we're thinking about, first revenues from those new sizes to come through in first half '22, that would be reasonable to factor that in?
That would be reasonable.
Okay. Thank you. I'll leave it there. Thanks a lot.
Your next question comes from Rachel Harwood with Macquarie. Please go
ahead. Firstly, just to be really clear, trauma and burns seems to be urgent in nature rather than elective. So I'm just wondering exactly what the driver of the COVID impact is? Are you finding a lower incidence rate of people presenting to hospitals that are eligible for BTM as a result of these lockdowns? Or is it more around surgeons having little time to evaluate and trial a new product?
With the trauma and burns one, yes there is a reduced incidence directly by people staying at home. So not not out doing all the silly socializing things. I mean burns in particular, in the highest cohort is 18 to 24 year old males with alcohol in one hand and fuel in the other. It's an unfortunate reality. But the elective surgery, we've got penetration within that space as well, and that's been impacted.
But as normal life and normal activity returns, so will the hospital activities. Some of the surgeons in in some regions like in the UK have been on duty as nurse assistants doing basic patient care. So, you know, normal surgery practice hasn't been happening in some of the markets we're in.
Okay. That makes sense. And then I guess just following on from Leanne's question, you mentioned some new GPOs and other accounts signed. Are you starting to see any sales come through from these accounts yet? And then I guess do you expect there to be some pent up demand that will be pulled through once hospital capacity starts to free up or how should we start thinking about this?
Yes, some of the GPAs we've got some sales have come through. Some of those accounts are ones that until we were with the GPF, we weren't allowed access and no ability to sell, and we've had sales into some of the hospitals within some of those GPOs. They'll accelerate as we go forward as their activities etcetera increase and some of the other GPOs that we're signing have some good support mechanisms to help the adoption of BTEM as well and we'll cover those with more granularity once we've actually finished all those processes with those GPAs.
Okay, great. That makes sense. Thanks. That's all from me.
Your next question comes from Shane Story with Wilsons. Please go ahead.
Yes. Good morning, team. Thanks for taking my question. Patrick can start. I just want to look at the U.
S. Business in a slightly different way. And look, lumpiness aside, can you help us understand the level of sales concentration within that portfolio of U. S. Accounts?
And by that I mean, like if you look at the proportion of accounts that constitute 50% of sales like as the business stands today? I mean, what would that percentage look like? Thanks.
Yes, my hand to Jan. We do have several very large accounts that proportionally cover quite a bit of revenue. So that's going back I suppose to Leanne's question on penetration, some accounts in particular are very strong for us and others are still in maturation phases if you like. So Jan, would you like to comment on that sort of weighting and maybe the Pareto eightytwenty sort of rule?
Yeah, sure. I mean, not every quarter will a customer will order every single month, but it depends on the hospital and how they're using our product. So with trauma, you'll get a series of orders, but it's also episodic, so that can play into it. But as we penetrate those hospitals, that changes. We've seen things like that, for example, New South Wales, where we do have a lot of concentration in other parts of indications and we do get those regular ones from customers every month.
So, you know, there is a portion of customers probably, but definitely a good 20% that are big orders of BTM. But, yes, I would definitely say it's probably seventy-thirty, it would be where that would sit. Sam, is your question, Shaun?
Yes, thanks, Lucas. Yes, yes, it does. That's very helpful. The other question that I had just as far as utilization and penetration is concerned was, it seems that the company has had like a fairly different experience through the first and then the second kind of experiences through COVID. It seemed the first experience had more resilience.
I guess the second time around, the lumpiness that we've just seen in the current period, it seems that to me, it seems I mean, am I right in thinking it was just more elective stuff that has kind of developed as utilization of the projects or the product has developed and it's that elective piece, which is kind of fallen off and perhaps that happened within those sort of larger accounts. Is that an accurate kind of way to think about it?
Yeah, the electives have fallen off. We've got one report from the U. S. Which talks about in effect $20,000,000,000 of losses across the US hospital networks over that quarter and then the US government response to that. The impact of COVID on the second phase, if you look at the year of 2020, just as it was in Australia was much stronger than it was in the initial phases of COVID rolling out.
In the initial phases we all thought well this will go shortly, it'll be like the flu, and you know for anyone in Melbourne you know we have lockdowns that seem to last a long time, but the health impacts on people about it are severe. So, it has had a direct impact. You know, we've had staff who thankfully have recovered, But we've had staff's relatives who have passed on. So, you know, the brutality of COVID in the US has been, quite severe with, you know, them now approaching 500,000 deaths. There just is an impact on every aspect of people's lives in the US on a day to day basis with COVID regardless of the political spin that's put on it in the news, it's on the ground, it's quite harsh.
So thankfully, the vaccines are rolling out. They're, starting to see an improvement, but 330,000,000 people have got a long way to go.
Thanks. Last one for me, for Jan. Perhaps some guidance on the R and D expense that we can expect over the next 18 months outside the pivotal program and kind of residual sort of evidence development in hernia, the outpatient trials you've called out today in the breast reconstruction project? Thank you.
Yes, sure. Obviously, with the handy device that we've seen in the presentation today, we've come a long way in terms of actually developing a device. So in doing so, to get to that point, there's always a bigger spend with materials and research and all the things that you need to get to that point. I guess moving forward aside from BARDA, with breast, as Paul mentioned in other presentations, it will leverage off our hernia manufacturing process and what we've developed there. So that's the whole benefit of Novosil and the base technology.
We will get a lot of leverage as we off that as we sort of branch out and start working on other products. But until we're sort of we do have a short list of other things we want to develop and it just depends how that plays out and what we prioritize and expect it to increase. But we're still working through plans on that and when and how they're going to be executed and what the cost will be.
Thanks very much.
I think the key thing, Shane, to consider there in the R and D expenses is that our revenues that we're earning with our very high gross margins. So we've got plenty of cash and we'll manage that expenditure in line with our cash flows and we're in a very good position.
Thank you.
Your next question comes from Elyse Schapiro with Bell Potter. Please go ahead.
Hi, guys. Thanks for taking the question. Most of mine have already been asked, but just given the fact that we saw a lot of COVID related delays on sales and market access and hospital entry and now with your additional hires ramping up the sales efforts, how many sites would you say that you're in the late stage kind of that process with that you might expect to be signed on over the course of the next 6 months?
I don't think we plan on giving forward projection numbers at this point, Elyse. So I'll take that one on notice and we'll consider that for another time.
Would you say that it's an improvement though over what we saw the last for the last half?
What I will say is that we are bringing on more salespeople, and we're very active with GPAs, and that will also bring further accounts. So I think things are looking positive and optimistic, but I don't think I'm in a position to give you a hard number.
Got it. Great. Thank you.
There are no further questions at this time. I'll now hand back to Mr. Brennan for closing remarks.
Well, thank you very much, everybody, for your interest and continued support of Polynovo. I think you'll see that we're in a reasonably good position for what's been a very difficult and trying time for everybody globally. We're continuing to expand our sales team. We're adding new accounts. We're increasing our bringing to market potential products.
I think there's a lot of good energy and excitement within the business, and I'd also publicly like to thank our board for their ongoing support, guidance and coaching for the management and indeed the individuals within the business. Make a special call out to Anthony Kaye, who joined us for his fantastic contributions since he has joined, and in particular, not only our sales team, but our production team who have turned up here every day through COVID lockdown as essential workers and maintained really high standards of personal protection and things to ensure that we had a very robust functioning business of manufacturing BTM display our global partners. So, a big shout out to our production team for being fantastic people who consistently put in. And, thank you very much for your interest today.