Question box and hit Submit. I would now like to hand the conference over to Mr. Bruce Peatey, Chief Executive Officer. Please go ahead.
Good morning, everyone, and thank you for joining us. Since joining PolyNovo last December, I have spent time with customers, clinicians, employees, and shareholders around the world, while also reviewing the business in detail. My confident assessment is that PolyNovo is developing into a stronger, more capable business with a sustainable runway of potential for us to capture. Looking ahead, FY 2027 is less about building capability and more about converting that capability into outcomes, reliable performance, broader adoption of the portfolio, and milestone completion, leading to stronger returns and long-term shareholder value. With that context, I will be sharing some key highlights from FY 2026, the opportunity ahead, and our key priorities for FY 2027 before handing over to Jan to review the FY 2026 financial results. We go to the next slide. We have here the standard disclaimers. Move to the next slide.
The origins of PolyNovo are centered around large complex burns. The way NovoSorb BTM uniquely and specifically addresses the care needs of critically ill burns patients, providing surgeons with the time and control they need to address these complex cases, has truly redefined what is possible in this category. Increasingly, we are seeing NovoSorb BTM and now MTX used across trauma, reconstruction, limb salvage, and other complex wounds, reflecting the versatility of the NovoSorb portfolio. As more surgeons are seeing positive outcomes in new procedures using our products, the potential for growth strengthens. Combined, these markets have an estimated total available market in excess of $2 billion. I want to be clear. BTM in large burns built PolyNovo's clinical credibility and will remain an important growth lever for the future.
The opportunity for NovoSorb is much broader, and that matters because PolyNovo is fundamentally a platform company with a significant complex wounds business today and broader potential over time. It was important for me to include these images today. The patients' lives from around the world that we positively impact through our technology is a source of daily inspiration and pride for our entire team. Let's go to the next slide. During FY 2026, we increased our focus on strengthening our foundations while our commercial momentum continued with more cases covered than ever before in more types of procedures in more hospitals and countries around the world. The clinical study report for the U.S. pivotal RCT is now finalized, representing an important milestone for PolyNovo.
We have successfully completed one of the largest and most rigorous burn studies conducted in decades. We look forward to updating investors on the trial results as we progress through the next stages of regulatory review and commercialization. We are pleased to share that BTM received regulatory clearance in eight additional markets. MTX continued its commercial rollout, achieving close to 90% year-on-year growth in FY 2026. We expect the momentum to continue as clinical evidence and clinician experiences continue to grow. The new manufacturing facility construction has been completed with transition plans underway. Our leadership team was strengthened with proven capabilities spanning science, quality, IP, and governance. We also have invested in critical strategic marketing and market access capabilities to actively drive the next wave of growth. Each of these elements will make us more capable to scale the organization and power the financial growth trajectory. Next slide.
Sharing some of the financial highlights here. FY 2026 continued to deliver growth with the group, the U.S., and the rest of the world sales all growing greater than 21% in constant currency. We have added constant currency detail in response to the volatile Forex landscape over the previous year and to give a more accurate reflection of the local market momentum. Importantly, EBITDA grew significantly versus prior year, while we continue to invest in the infrastructure and capabilities mentioned previously. We are very pleased with the improvement in operating cash flow, in line with the expectations communicated in the first half earnings update, generating AUD 9.4 million in free cash flow for the year. Jan will take you through the financial performance and key drivers in more detail shortly. Next slide.
I recognize there may be some questions around the trajectory of growth in the United States during the second half of FY 2026, so let's address that here. This chart depicts the sales growth trajectory over recent years in the U.S., comparing revenue from large burn procedures to all other procedures. Large burn cases are lumpy by nature. The presentation of large burn cases are infrequent and variable in magnitude, which can impact sales variances more than other typical market forces. A good example is that we saw strong growth in large burn cases in the first half of FY 2026 after a period of lower growth. We saw less of those large cases presented in the second half of 2026.
Meanwhile, the deliberate expansion into procedures beyond large burns, including the introduction of MTX, is paying off, with a 52.8% three-year CAGR coming from an increasing number of complex wound applications.
Now, this is important because it demonstrates that complex wounds are not simply a future opportunity. They are already an increasingly important growth engine. Finishing FY 2026 with a record sales month in June for the U.S. provides confidence that this is not a business that is running out of opportunity. It does suggest our growth drivers are rightly changing, broadening, and maturing. I am pleased to share that we started FY 2027 continuing the FY 2026 momentum with a group sales record for July. Next slide. MTX is a good example of our ability to leverage the NovoSorb platform into new clinical applications and generate meaningful commercial traction. In FY 2026, sales increased to AUD 12.6 million from AUD 6.7 million in the previous year, with MTX now commercially available across six markets. The regulatory pathway is well underway for the U.K..
Most encouraging is what we are hearing from our clinicians about the positive outcomes they are experiencing using MTX either standalone or increasingly in combination with BTM. We have just shared a few of the comments here on the right. MTX's versatility in combination with the NovoSorb credibility gained from BTM is enabling use across a broad range of reconstructive and complex wound challenges, supporting our confidence in the opportunity for further adoption. Next slide. The body of evidence supporting broader adoption of NovoSorb's portfolio across wider range of clinical applications continues to grow, validating the credibility of NovoSorb technology. While there is still a lot to focus on BTM in burns, we continue to see significant growth in evidence outside of burns applications in an array of complex wounds.
Another indicator of broadening clinical acceptance is the inclusion of NovoSorb BTM in academic textbooks, and this step got me excited.
BTM was included in nine published textbook chapters in FY 2026 alone, compared to just one chapter across all of the earlier years. Next slide. Moving to geographic perspective. All regions continue to experience strong growth, with Americas exceeding AUD 100 million for the first time. There is no single growth lever in which our outlook depends. We have different opportunities at different stages of maturity across each region. In North America, the major opportunity includes PMA approval and the RCT clinical study report, entering outpatient care in FY 2027, and deeper penetration of existing accounts in MTX. Outside of the U.S., there remains significant runway through new products and indications, and FY 2027 will be about matching investment and commercial execution to the maturity of each market, deepening penetration where we are established, while selectively building markets with a quantifiable opportunity for NovoSorb introduction. Next slide.
Let me start here by confirming that our ambition as a growth company remains high. The focus of the leadership team is now to translate that ambition into clear direction and accountable actions. Our strategy starts with the strength of what we already have, which is a differentiated complex wound portfolio, established clinical leadership, and a significant opportunity for deeper penetration in existing markets. The next phase is about leveraging the portfolio more deliberately to maintain strong growth in BTM, MTX, and soon to come SynPath by prioritizing application opportunities where clinical need and potential commercial return are the strongest. By leveraging the platform, we commit to increase the velocity of our innovation engine. This includes next-generation products to fuel expansion in our core business and getting back to the science of our polymer technology to unlock potential new ways. Every company goes through evolutionary inflection points.
PolyNovo has grown substantially over the several years. Our commercial teams are expanding. Our manufacturing output and capacity is increasing in a highly regulated market. We plan to sharpen our focus on organizational capability and accountability during FY 2027 to translate clinical leadership into sustainable long-term value. Next slide. Our opportunity is broad, so one of the most important things we can do as a management team is be clear about where we focus our resources. For FY 2027, that means five priorities. Advancing PMA to approval and sharing the RCT results when appropriate, launching SynPath into the U.S. outpatients market, accelerating MTX, increasing our innovation velocity, including adding business development capabilities, and improving operating leverage as we scale. The common thread is execution, converting the capabilities and investments we have made into commercial outcomes, sustainable growth and stronger returns.
I will hand you over to Jan now with these thoughts. The platform is proven, and its full potential has not yet been realized. Burns remain an important foundation, while complex wounds, MTX, outpatient care and other applications substantially broaden the opportunity. This is not simply an aspiration. Non-burn indications are already growing considerably faster. MTX is gaining traction, and there are multiple growth levers across geographies and care settings. The difference you should expect under the refreshed leadership team is focus and execution. Thank you. Over to you, Jan.
Great. Thanks, Bruce. Next slide, please. Thanks again, everyone, for joining the webcast today. I will start with our commercial sales performance. NovoSorb product sales were AUD 138 million for the year, up 16.7% on last year, and in constant currency up 21.3%, as Bruce just mentioned. In dollar terms, sales increased by AUD 19.7 million. The year ended with a strong June result, including a record sales result in the U.S.. This was backed up recently in July with group sales exceeding AUD 13 million for the month, a new record. This is a good indicator of the momentum in the business as we progress into the new financial year. We experienced continued growth in the U.S., achieving sales of AUD 102 million, up 15.6% for the year.
There was significant FX headwinds in FY 2027 due to the stronger Australian dollar against the U.S. dollar. Taking this into account, U.S. sales and constant currency were actually up 21.1%. The growth was driven by strong account acquisition, adding 200 new hospital accounts during the year, and continued penetration of existing accounts, with total accounts now over 880 in the U.S. In regards to the rest of the world result, we recorded sales of AUD 36 million, up 20% on last year, and up 21.9% in constant currency. This includes some exceptional results in a number of markets with growth rates well above 30%, which I will highlight a bit later in the presentation.
NovoSorb MTX sales for the group were AUD 12.6 million, up 89.6%, recording sales not just in the U.S., but also Canada, Australia, New Zealand, India, and Hong Kong. Next slide, please. Moving on to additional highlights for the U.S. As just mentioned, the U.S. achieved 21.1% sales growth in constant currency for the year. NovoSorb MTX sales in the U.S. were AUD 12.2 million, up 92.7% in constant currency. Surgeon adoption of NovoSorb MTX continues to grow and will accelerate across the customer base as more clinical evidence is generated and shared. NovoSorb MTX has now been used in over 330 accounts in the U.S., doubling from the same time last year. We currently have 132 staff in the U.S., including 106 in the sales team.
The average sales per sales team member continues to increase as we penetrate existing hospitals across a wider range of indications, also assisted by having additional product available, being NovoSorb MTX. As a result, overall productivity of the U.S. team has increased, increasing operating leverage and profitability. Furthermore, the U.S. business continues to generate strong cash flows, with debtor days well within our expectations. Next slide, please. Moving on to the rest of world results. As mentioned, sales were up 21.9% on the prior year in constant currency. We achieved some exceptional results, both in relatively new and well-established markets. In particular, Australia, our home market we entered several years ago, grew by 33.9%, which is an excellent result. Ireland grew by 38.3%. It is one of our best-performing markets on a per capita basis.
The results in long-standing markets such as Ireland and Australia, as an example, is a good indicator of the adoption by surgeons using NovoSorb BTM, not just in large burns, but across a range of indications. Sales in Hong Kong continued at a strong rate, recording 49.9% sales growth for the year. Turkey's strong growth has also continued, up 79% for the year. India performed with a consistent growth rate, recording 52.8% sales growth for the year. Furthermore, following first sales in June last year in Malaysia, we have received monthly orders, each order increasing in value, and we will be investing that market by hiring two sales reps this quarter. We have experienced similar growth in the Czech Republic, following first sales late last fiscal year.
Rest of the world share of global sales now accounts for 26% of global sales, and we see significant opportunities for growth, particularly in Europe and the Middle East in the short term. Next slide, please. Moving on to the P&L. I want to start off by highlighting the underlying EBITDA performance for the year. After adjusting EBITDA for significant items, being the impact of the R&D lab fire and unrealized Forex impact on translation of the balance sheet due to the strong Australian dollar, adjusted EBITDA was AUD 13.4 million, up 50% on the prior year. There are a number of one-off items impacting the reported net profit after tax result, which I will now explain. BARDA revenue is down on the prior year as expected. The pivotal burns trial is complete, and we are finalizing the submission for pre-market approval to the FDA.
In connection with the BARDA pivotal trial completing, the trial costs have reduced, which explains the lower R&D expense for the period. Onto gross margin. You may recall in the first half of the year, with inventory at comfortable levels after building them up during FY 2025, we took the opportunity to bring forward attending to various tasks in our manufacturing facilities in preparation for the pre-market approval submission and FDA audit that will follow in due course. To do so, we temporarily reduced manufacturing output in the first half, which in turn reduces the production recovery to cover manufacturing overhead costs. Despite increasing manufacturing output in the second half to 3.8 x the output of the first half, we recorded a modest improvement in gross margin in the second half of 89.2% compared to 88.7% in the first half. The margin for the full-year was 89%.
At year-end, a number of adjustments were recorded to account for the underutilization of the facilities that occurred during the first half. As such, the underlying gross margin in the second half was much higher than 90%. Other income includes a AUD 6 million insurance claim related to the R&D lab fire. This offsets the AUD 4.7 million asset write-off recorded further below in the P&L. Employee-related costs were up 5.7%, or 4.3% excluding share-based payments, with employee headcount remaining steady at circa 300 employees at 30 June. Underlying corporate admin and overhead expenses were actually down on the prior year by 1% after excluding unrealized Forex movement on translation of the balance sheet.
This unrealized Forex movement comes about due to the Australian dollar appreciating against the U.S. dollar during the period, resulting in an unrealized Forex loss of AUD 2.7 million for the year, compared to AUD 2.2 million unrealized gain for the year. This particular expense gets recorded in the corporate admin and overhead line in the statutory P&L. So important to back it out and look at the underlying result there. In terms of operating leverage, it is increasing, and the bottom line is becoming more sensitive to sales growth, evident by the 50% increase to EBITDA after adjusting for significant items. Next slide, please. Moving on to cash flow and the balance sheet. We ended the period with AUD 35.4 million cash on hand, an increase of AUD 1.9 million on last year's balance of AUD 33.5 million.
Cash flow from operations was AUD 23.1 million, improved significantly compared to the prior year result of AUD 3.1 million, with strong debtor collections in all markets. We completed construction of the new manufacturing facility in Port Melbourne, with CapEx payments of AUD 12.4 million for the period. We also commenced reconstruction of the R&D lab and offices with progress payments of AUD 1.4 million, which are fully covered by insurance. AUD 1.5 million in CapEx remains outstanding for machinery for the new manufacturing facility, and this will be paid in the first half. Even after funding AUD 13.8 million in CapEx, the business achieved free cash flow of AUD 9.4 million, which is an important milestone achievement for the business.
Finally, we ended the year with a strong balance sheet, free cash flow, which will enable us to focus on further investment, driving revenue growth, and importantly, product innovation. Thank you. I'll now hand back to Bruce.
Thanks, Jan, and thank you all for joining us today and for your continued support of PolyNovo. As you've heard, we are entering the first half with strong momentum, a clear strategy, and a deep commitment to execution. Our focus remains on delivering meaningful clinical impact, scaling globally, and unlocking the full value of the NovoSorb platform. I'm incredibly proud of what the team has achieved and confident in the opportunities ahead. We look forward to updating you on our progress and appreciate your engagement today. I'll now hand over to the operator to move to Q and A.
Thank you. If you wish to ask a question via the phone, you will need to press the star key followed by the number one on your telephone keypad. If you wish to cancel your request, please press star two. If you wish to ask a question via the webcast, please enter it into the Ask a Question box and click Submit. Your first phone question comes from Lyanne Harrison from Bank of America. Please go ahead.
Good morning, Bruce. Good morning, Jan. Can I start with your slide 11 in terms of your 2027 opportunities? In terms of the PMA for BTM, can you tell us whether or not the submission timetable for the end of this calendar year still holds? Also, what needs to happen between now and submission? Then following submission, what are your expectations on the FDA review timeline?
Hi, Lyanne. Thanks for the question. Yes. As far as timeline is concerned, as we communicated earlier in the year, we made the deliberate decision to take an opportunity to look at the scope of the program. With the updated guidelines from the FDA, we took the decision to bring some of those activities that were going to be post-submission to pre-submission in the intent to make a more complete and compelling submission all in one go. Also, it allowed us to line up the clinical report outcomes at the 18-month period, the follow-ups with the patients. All tracking well there. After the submission, I've always said our goal is a PMA approval, more than racing to a PMA submission, and we feel like we're in good stead for that as we've gone through this review timeline.
Once that submission's in, then it's more appropriate to talk about the outcomes for the clinical study, and then we're more in the hands of the FDA as they go through their process over several months, including an inspection of the facility, we expect.
Okay. So effectively, in terms of approval for the FDA, the expectation is perhaps middle of next calendar year. Is that right?
It's definitely months. Again, we go to the FDA timelines. We're prepared to work with them. From experience and our understanding, it's around that 12-month mark from submission.
Okay. But that isn't sped up because of your additional submission activity?
It's difficult for us to say, but what I can say is that what we'll have is a very complete submission, the work being done prior to the submission rather than originally planned to do some work after submission. For me, I'm more confident in how we would proceed in this sense.
Okay. Thank you. If I could move on to SynPath, can you give us an update on where you're up to in terms of that outpatient opportunity, particularly on perhaps trying to secure reimbursement, and where SynPath is up to in terms of the launch?
Yeah. We're in preparations for commercial launch as we move forward. As far as reimbursement is concerned, SynPath has a HCPCS code already, so we don't have any concerns there. As I think most people know as following this space, it's been a market in a fair bit of turbulence over the start of the year, getting used to the new policies through CMS. So we have added our market access capabilities to the organization to help us navigate through this very different space than the inpatient market that we currently are in every day. Not only is it about the product or the reimbursement, it's also about provider confidence in that they can get paid through this new system. With all of the different movements, that turbulence has something that we've kept an eye on as we prepare for launch into the market.
Commercial readiness is underway. We're ready for a commercial launch. It's progressing well, I would say.
Okay. What is your view then in terms of the ability to penetrate that market, obviously, given the challenges the market currently has?
So very deliberate in how we are going to approach the market. We make sure that we have the right go-to-market strategy, which includes not just the sales team, but also what indications make the most clinical sense for us to be involved in, and also has a significant commercial opportunity. So you are talking about procedures that are more single-episode procedures rather than the repeat episodes that you might see in some of those chronic wounds. We see a lot of opportunity there, and it actually dovetails quite nicely with our current momentum in the inpatient space. Similar contact points, similar surgeons involved, just a different care setting.
Thank you very much. I will leave it there.
Thank you. Your next question comes from Shane Storey from Canaccord Genuity. Please go ahead.
Good morning, everyone. I think I might stay on the SynPath tack just for a couple of more minutes, Bruce.
Sure.
Just thinking about the settings there, would I be right in anticipating that you'd probably look to the outpatient setting, more hospital outpatient department, rather than going into, say, the broader private physician market at this point?
Yeah, you got it, Shane. Thanks for the question. It's a logical first step for us. Like I say, there's that relationship that we already have with the surgeons in those hospitals. We've got over 100 reps now in more and more hospitals every day. I think over 800 was the last count, and increasing. So that makes a logical first step. The indications, if you looked at some of the oncology repair type or reconstruction type procedures, they can be further outside of the hospital and we are looking at opportunities to address those markets over time as well. But yeah, you're right. Logical first step in the hospital outpatients.
When you think about just where the evidence sort of stands right now, just your thoughts perhaps on what additional evidence development you think might be appropriate. I know that's a bit of an open question to everyone in the category, but just interested in your thoughts on it.
Yes, it is. It is true. The evidence requirements also need to be established as we go forward. We are gaining more and more evidence across multiple indications, as I mentioned in the presentation. So whether that is in the chronic wound space as well as the more acute setting, we are seeing that evidence that is applicable to this space. But we are also mindful if there needs to be more, let us say, specific evidence generated, that we are open for that. What I can say is that the strategy to move into the procedures that are more applicable to our product's capabilities and advantages, I think we are well-placed with the evidence that we have.
Thanks, Bruce. I have got one final question just for Jan. Jan, thanks for tracking us, talking us through the various moves in gross margin over the halves.
Sure.
I suppose my question is really just around any of that sort of mechanics might reverse in FY 2027, I suppose, just with new facilities coming online, just how you expect that overhead to affect the margin over the next year or two. Thanks.
Yeah, sure. The new facility is not available for use at the moment, so it is not hitting margin, and we are not going to be transitioning to the new facility till around March next year. And we will likely start with MTX moving across. We are in the middle of validating machines and so forth. So despite the facility being built. We are not going to have that impact until sort of the fourth quarter. Before I talk about that, I will touch on how margin is progressing, and we are sort of back to the normal levels now out of our existing facilities. So July, gross margin was just under 95%, and that is kind of what we are used to. And that comes about by strong sales exceeding budget, actually, in July. We had AUD 13 million in sales for the group, which was a record.
But we also hit budget or target for our production output in July. When that happens, you get a 95% gross margin. With all that continuing as planned, when we hit our targets between now and, say, December, our first half, our gross margins will be in that 90%-95% range. When the new facility comes on, that will have a 1%-1.5% impact on gross margin, once it is up and running. But our sales will be a lot higher than where they are now, too. So you have to take that into account. But all in all, we are in a good spot in terms of being able to use that new facility and looking forward to firing it up in the next calendar year.
Thanks, Jan. That is all I had.
Great. Thanks, Shane.
Thank you. Once again, to ask a question via the phones, please press star one. Your next question comes from Scott Power from Morgans Financial. Please go ahead.
Good morning, Bruce and Jan. Just a quick question around some of the other research that you're doing. You mentioned SynPath and the launch of that, but I'm just wondering if you'd give a bit of commentary around hernia repair and some of the areas that you're looking at. I guess the second question to that is, with that R&D spend coming down in FY 2026, what's the sort of anticipated percentage of sales that we can look forward to going forward? Thanks.
Okay. Thanks, Scott. Just on the innovation pipeline in general. I think you'll recall at the half-year, I spoke about the need of getting some velocity back into our innovation pipeline. One of the first steps to do that is to bring in a Chief Scientific Officer, which we did. Wonderful to have Marthe D'Ombrain in the team now. I can see really two months in, we can see that rigor and discipline to the pipeline, visibility, and approach is definitely improving. So we have that. In that mix, like you mentioned, we've got a number of products. Hernia and breast recon have been mentioned before. We've got products in that pipeline as well that are going through a very deliberate prioritization process.
My focus is to making sure that we have that velocity come back into the innovation pipeline and to be able to make the tough decisions. Unless there's a clinical differentiator, unless there's a very strong commercial need for the product as well, we'll make those tough decisions whether they stay in the pipeline or not. I'm looking forward to sharing that more as we have Marthe have a bit more time under her belt. I think I'm very happy also with her approach to start bringing in some voice of customer with clinician groups, as well as she'll be planning to establish more formal forums for scientific advisory over time as well, starting in this calendar year.
I think, for the most part, it's about making sure we have that disciplined process in place for our innovation pipeline to get that velocity back into our system. As far as the spend, I'll get Jan to speak about it, but I think as we shift away from the heavy lifting linked to PMA preparation, we will see more of that investment going into R&D to help fuel this increased velocity.
Absolutely. Just to add to that, in terms of R&D spend as a percentage of sales, it will be around 5% of sales next year, and that excludes the R&D costs which historically have sat in that line in the statutory P&L. That has all come to an end now. To Bruce's point, though, Marthe, new CSO, has only been in the role for a couple of months, and she is getting a handle on things. We do want to invest more in R&D. We do want new products to come out and line extensions. So expect it to increase, but next year it will be closer to 5% of sales.
Great. Okay. Thanks, Jan. Just a second question, if I can. You have called out a number of the regions in rest of world that have done very well. Are there any regions that perhaps are underperforming and up for review?
I think just to jump in on that one and the questions around rest of the world, I think it goes back to what we have learned, particularly around that evolution of the markets. We talk about markets being at a different level of maturity. Again, as that mix between the large complex burns and the other complex wound applications, as that mix evolves, until that evolves, we will have some variability in those markets. So that is why I called out the deliberate approach for at least 2027, FY 2027, is to go deeper in some of those high potential markets rather than more emphasis on going into more markets.
Definitely we think we have got some potential in particularly some of the European markets to go a little deeper and build up that momentum that we have seen in some of our more established markets, like Australia performing extremely well as one of our most mature markets, and you can see how that mix is changing in the U.S.. I would like to see that happen more in some of the European markets. Jan, I do not know if you had anything to add? You are on mute.
Apologies. Nothing really further to add, but we've had some really great performances. We know what good looks like, and we know how to get there in particular markets. We are a driving force in supporting distributors, so we'll continue to do that and anyone that's sort of dropping off, we manage to pick them up again. There's no shortage of opportunity. Also in the Middle East, we see opportunities because we've had product go into that region since the wars occurred and all the activities have been going, unfortunate activities that have occurred over there. So that's another opportunity as well we're going to be looking at.
Great. Thanks, guys. That's all my questions.
Thanks, Scott.
Thank you. Your next question comes from Andrew Paine from CLSA. Please go ahead.
Yeah. Morning, all. Thanks for taking my questions. Look, in the trading update you mentioned that you were seeing record sales in June. It would be good if you can just quantify those sales and maybe provide any insights on how sales are tracking for the start of FY 2027.
Yeah. Happy to jump in there, Bruce. Yeah, so July, as we have already mentioned, actually, was a record result for the group. So we actually achieved sales over AUD 13 million. The U.S. backed it up again, which is great. That is a really good sign of, you know, we hope the quarter will end. So yeah, it has not gone off a cliff. It has done the opposite, which is a really good indication.
That is great. Sorry, might have missed that earlier.
Yeah.
Then just looking at the OpEx that you are giving a bit of leverage through 2026. Just kind of interested, especially in employee-related expenses, obviously, those kind of FX movements there. Are you able to give any guidance around constant currency for employee-related expenses for just looking forward into 2027?
Right now, not at this point. I haven't got it in front of me. But in terms of the volatility, we certainly hope we don't see the volatility we've seen this year and the impact it's had on the P&L, particularly revenue. But in terms of costs overall, I mean, the leverage is definitely coming through. I mean, you look at corporate admin and overhead costs being 1% down on the prior year. We're getting a lot more productivity out of the entire group, particularly in all our sales and marketing subsidiaries. So the U.S. average sales per rep continuing to grow, increasing profitability. We're seeing the same in the U.K. and Australia and so forth. That will start to come through even more so this year. I think the EBITDA or the profitability line is highly sensitive now to growth in sales.
You can see that with the underlying EBITDA growing by 50%. We did have that did have an impact. But we're off to a good start with record sales, gross margin of 95% in July. We're going to work towards making sure that continues through this first half.
That's great. Thanks. Just one last thing, just looking at your adjusted EBITDA numbers for significant items. Obviously, there's the write-off, the asset. Just looking at the interim insurance claim, where's that coming through the P&L?
It'll be sitting in other income, and the net impact is AUD 1.1 million gain to the bottom line. But we've added it back there, obviously by adjusting for significant items. So the underlying result excludes any insurance impact and asset write-off impact.
Yeah, okay. I can see it in the notes as well. Okay, that is perfect. That is all I had. Thanks.
Thanks, Andrew.
Thank you. There are no further phone questions at this time. I will now hand the conference back to your speakers to address your webcast questions.
Great. Thank you. Bruce, we have got a few questions that have come through here. The first one being India. What are the plans for India, and is it breaking even? Are we going to continue to invest in that market?
Yes. Great question. We are very happy with the performance in India. You can see strong growth again for that team. I think more importantly, the underlying foundations of that business are very strong. The team there have built a solid, compliant, reliable business that is growing. Particularly when I look at lead indicators like the work that has been done over several years in winning contracts within India takes some time, typically does. Two years down the track, we are starting to win tenders that have only just come up. A lot of work to get there. We have that runway of tenders and contracts that are in the pipeline, and we are seeing those convert. We are in a lot more hospitals now. Several of the major AIIMS hospitals in India, as well as the largest burns center in Asia, which is based in Delhi.
Very strong growth. As far as profitability is concerned, that is expected within this financial year, really aiming for the second quarter to make sure that is a profitable business. Again, continuing to grow. We are putting discipline in the expense side of the business to make sure that we are starting to see returns on that investment before we go to the next phase. All signs are looking positive. I do not know, Jan, if you wanted to add anything there.
No, exactly right. It is going to continue to organically grow and will break even this side of Christmas. They are growing significantly. They do have a lot of cases that they continue to treat. The growth has been exceptional, really, in terms of the number of patients, particularly compared to other markets. We are making inroads into the bigger burns, and it will just take time. Moving on, just another question now, Bruce, just on competition in the U.S., and there is a specific here around Avita Medical and their synthetic product and other synthetic competitors that may be popping up. What are we seeing in the U.S. market, and how are we responding?
There is a little bit of noise in this space, and I think it actually relates back to also what we are seeing in that outpatient segment. With a number of the players in the market, having the turbulence that has occurred due to the policy changes, we are seeing a bit more activity in the inpatients. I think it is important to ground ourselves in what BTM and MTX and the NovoSorb portfolio, really does in the inpatient setting. Those large complex cases where BTM was designed to improve patient outcomes, those results are well documented now as we see more and more evidence, and the experiences of the clinicians are quite compelling. We might see some activity in those lower burn spaces where faster graft and other length of stay criteria are being discussed.
We have options in that space, but again, it's that larger wounds and more complex cases where we really shine through. In those other areas, again, there's some trialing going on, but we're seeing more and more that the clinicians can't forget the great outcomes that they've had with our product, and we're seeing that come back. That's evident in June being a record sales for the U.S., backing it up in July. We're definitely up for the fight, and we have the product that we believe that can stand up against any competition.
Great. Thanks, Bruce. Related to that, there's a question here from David at E&P, Evans and Partners, acknowledging the impact of FX, in the second half and also the burn seasonality just on the second half sales result, even though there was sequential growth of 5% in the U.S. What gets the business back on track to close to a 20% growth rate? How are we going with penetrating existing accounts and the 200 accounts added during the year? Really a question around how we accelerate growth in the commercial markets.
I think the priorities are clear. Like I laid out, we've got momentum in that large burn space which, up until recent times, the key focus was on winning more accounts. We're in a majority of the large burn accounts in the U.S., primarily if we talk about the U.S. as a driver. We have penetration into those accounts. But it's not just that. It's the credibility that we build from being in those accounts that you can see is driving adoption of the product, whether it's BTM, MTX, or BTM and MTX in those complex wound cases. That's where we see, and you can see the growth of the complex wound applications outside of those large accounts growing over 50% on a three-year CAGR. I think that gives us a lot of confidence that we've got a runway for growth.
Again, outside of the U.S. with some more focused activity around those larger markets where we can improve penetration, I think we can see that happening as well.
Great. Thanks, Bruce. Quite a few questions on the R&D pipeline here. It is probably a good opportunity to acknowledge where we are at, and then just to reinforce, I guess what you said earlier, Bruce, about how we are investing in that area, and how the pipeline would evolve and anything you can share there just to reassure shareholders that we are working on it.
Absolutely. Like we mentioned, more resources going into that program, through the course of FY 2027, now that we are starting to wind down some of the PMA activity. We are bringing, I got to say this, we are bringing greater discipline to our innovation and portfolio decisions. That is going to be important so that we can make decisions whether it is to speed up or delay or even to kill projects so that we get the output that we are looking to achieve. There is a lot of talk about hernia and breast recon. They are definitely in consideration as we decide on the focus areas for our portfolio.
We have also got products that are in the pipeline that very much speak to our strategic pillar of scaling the core business, that we look to advance those and keep fueling the growth in our complex wound application business. In addition to that, making sure that we have got works being done on the potential of the platform. Like I say, and what I have learned, we have got this beautiful polymer, which is a gift to our business. Over recent years, understandably, we have had a lot of focus on growing the U.S. and making sure we support BTM expansion, MTX coming into the market, now SynPath coming into the market. We are going to be assigning a portion of our innovation mindset and in decision-making around what can we do with this platform to build our next growth engine for the business beyond the core business.
I am really excited about that we have now the opportunity and the capabilities in the business to be able to manage those well and keep the momentum in the core business.
Great. Thanks, Bruce. There is a question here talking about, great to see the textbook publications referencing our products and so forth. What specific trials does PNV have underway so new regulatory approval submissions can actually be made to scientifically back new indication. Do we have any RCTs underway? Maybe there is also an opportunity, Bruce, there to talk about the IQVIA studies and the health economics and the free flap compared to BTM in the U.K. that we are doing. But any evidence really.
Yeah. A really good point, Jan. There are a number of investigator-initiated studies underway in multiple applications that we are happy to support. I think, going back to the RCT that is linked with the clinical study, the PMA application to me is going to be a real highlight and have far-reaching benefits beyond just the PMA application. Like I said, it is the largest of its kind, first for a synthetic, and a study like this has not been done for decades in this space. So making sure we maximize the awareness of those outcomes when they are able to be shared is going to be an important piece. But you make an important point there, Jan. Health economics is such an important part of driving growth in medical technology.
It is not just about the clinical performance, but that clinical performance can be matched up with a willingness and ability to pay, and showing the economic benefits to some of our key stakeholders. So alongside this study, there is also a health economics work that is being done in partnership with IQVIA that will be able to show the economic benefit of using BTM versus the current standard of care. That is one. And then also, as Jan mentioned, a second health economics arm looking at the economics of free flap, which is the current procedure for some of the larger oncology surgical reconstructions, and looking at how our products then line up against that standard of care. So really important, and I would say it is like the third arm to it.
You have your innovation arm with R&D, you have your sales and marketing commercialization arm, but market access and bringing that skill and capability into our business really completes that flywheel of growth. And I am looking forward to all of these elements coming to market.
Great. Thanks, Bruce. On the back of that, a great question here. Can you please remind us of what the PMA approval could do for PolyNovo, both commercially, and in terms of clinical evidence globally?
Yeah. Number one, I think it's credibility. It gives credibility to the platform of BTM, going through what is really the highest level of clinical study, and then having that approved by the PMA is a real advantage. Also, though, it helps with on the reimbursement side, then it gives you the ability to apply for reimbursement. I want to remind everyone that that's such an important point. The progress that we've made in the U.S. has been against an incumbent technology that has reimbursement, that has that approval. We don't have the indication for deep burns until the PMA approval. The team don't promote it. This is a clinician-led expansion. To me, that's the most powerful message you could ever tell about BTM.
The fact that this product, through clinician and peer-to-peer education, sharing their experiences, has grown to the point that it has is quite unique. That gives me confidence beyond the PMA approval that we can continue that good work, actively promote, actively defend the product. I think the third element is that beyond the scope of the U.S., that credibility then helps us enter markets like we've mentioned, some other markets in Asia, like Japan, maybe down the track, China. That type of evidence helps. There's always going to be potentially local evidence requirements, but that is definitely going to help with credibility from a registration perspective. Then outside into the European markets, for example, it really does give you the ability to have some swagger when it comes to our portfolio.
Thanks, Bruce. You may have answered this in that question. I've been busy reading questions here. There's questions around Japan and China entry, and a comment, I believe you had discussions with the PMDA in Japan. Can you provide the latest update?
Sure. Yes. I was in Japan. I met with our distribution partner there, so commercial readiness is progressing as much as you can before registration. Understanding I was able to go to a burns conference in Tokyo, all in Japanese. I had to use the translations, but I was able to follow along, and the enthusiasm is there for sure. The other piece of the puzzle is not only registration, of which the clinical study will help with that, but also reimbursement. So putting all of those pieces together to make sure that this is a market that is going to provide us additional sustainable growth for the long term, putting those pieces together. But I think the gating piece now is getting to the other side of that PMA approval and sharing that clinical study.
Thanks, Bruce. I will give you a break for a sec. There is a question here, and I can answer this one. Can you please expand on the comment, augment the manufacturing footprint? Really what we mean about that is make that transition to our new facility, which we are going to look to do in March next year. Then it will be a phased approach as we exit out of the other two facilities that we have currently got in place. And one of those older facilities will be kept as a redundant facility or backup, if you like, which is a good thing to have. But that is really what that comment means. Just scrolling through, just give me a moment. A question again about the DFU outpatient market in the U.S..
Any trials are we going to be conducting, and what evidence have we got that we could use to submit to the CMS right now?
Yeah. So the CMS opened a window to send in more evidence, and we are going to take that opportunity to send evidence from around the world. We have some evidence locally that is very strong for BTM in chronic wounds, so making sure we can share the details when appropriate. But that will form part of the pack. And it is not ideal in a sense for U.S. local data is probably preferred like most countries, but this is such a compelling piece of evidence, we wanted to make sure that that could be included. So that is an important piece. What was the rest of the question, Jan?
Yeah. I think it was really just around what can we submit to the CMS, and do we have any specific RCT trial for DFU planned?
Yeah. I suppose the main point I want to get across with DFU, and VLU as well, those chronic wounds, is that while we're gaining some very compelling real world evidence along the way, it's important to realize that this outside of the inpatient setting, there are a number of factors, including the reimbursement factor, but also provider economics, those sort of things as well. The one thing with those chronic wounds, that it's geared towards repeat application of which our product is not designed to do. We are more around a high acuity. There's a surgical procedure. You put the product on and it does its work. So we're making sure that all of those factors line up as we look at that part of the market. That's the part of the market and our patients that is in the most amount of flux.
So we've got opportunities in areas that are very aligned with our customer base, very aligned with what our product can do, and a significant market potential that we can go after looking at those single episodic cases. So that's where we'll start.
Thanks, Bruce. This will be our last question. We're coming up to the hour, and we've pretty much got through all of them, actually. Any that do remain, we'll send an email after the call. Important question. It's an opportunity to talk about how we mitigate risks really too as well. So, we've got here, what are the biggest risks you see to achieving your plan over the next couple of years?
Well, like I said, we've got a proven platform. We know that that works. I'm not worried about the product. I'm not worried about competition, to be honest. Our key focus is execution. We're building that discipline into the organization to make sure that we have the operating mechanisms from the leadership all the way through the organization to ensure that we do what we say we're going to do. That's key for me. It always has been, and it always will be. Setting up the forums, the operating mechanism, to make sure that we execute. I'm very pleased with how we've progressed as an organization since I joined in December. I think we've got a leadership now where we've added capabilities in. Combine that with some great institutional knowledge for leaders that have been in the organization for some time. This is a powerful team.
We're going to get stronger as well. Having that rhythm that we've got in place now to make sure we're focused on the priorities and we're delivering what we say we're going to do. I look forward to the year ahead as we update more of these milestones being completed.
Great. Thanks, Bruce. I think we'll leave it there. I'm on the hour. I guess, yeah, thank you everyone for dialing in. I'll hand it back to you, Bruce, just for closing remarks.
Oh, yes. Just to close up. I'd say thanks everyone for joining. Thanks for your time. I hope this has been valuable information for you. We do intend to continue our communication to the market as appropriate when we have significant updates, and keep watching for those. I think we've turned the corner as far as starting the year very well, finishing the year well, starting the year well in July. I would look to bring that momentum into the rest of FY 2027 as we tick off these important milestones. An exciting year ahead.