Polynovo CEO Swami Raote hands in his notice amid rumblings of board discontent

Rumblings of discontent within the board of Melbourne-based biotech Polynovo (ASX: PNV) have been confirmed by the company with the announcement that US-based CEO Swami Raote has resigned.

While the reasons for Raote’s departure were not disclosed in this morning's announcement, reports in The Australian this week suggested that the former veteran Johnson & Johnson executive had levelled allegations of bullying against outspoken Polynovo chairman David Williams.

The Australian, in its Margin Call column, reported that the matter has been brewing for some time after Polynovo last October appointed barristers Philip Crutchfield KC and Katherine Brazenor to conduct an inquiry into the allegations.

Until this afternoon, Polynovo had not responded to these allegations and the announcement this morning of Raote’s resignation had been the only official sign of trouble simmering on the burns-treatment company’s board.

“PNV confirms that on Friday last week there was a confidential discussion with the chief executive officer, Mr Swami Raote, requesting his agreement to cease his employment with PNV effective June 2025 at the end of his contractual notice period and to step down as chief executive officer effective from an earlier date,” the company says in a statement to the ASX.

“The discussion proposed terms for his separation if agreement was reached and revealed that non-executive director, Dr Robyn Elliott, would be stepping into the role as acting chief executive officer pending the appointment of a permanent replacement.”

News of the boardroom discontent has hit Polynovo shares hard this past week, with the shares closing 18c, or 13.2 per cent, lower today at $1.20. The stock hit a recent high of $2.36 in late January and has been in decline ever since.

Raote’s departure has come as a shock after The Australian earlier this week revealed that Crutchfield and Brazenor, following their investigation, had recommended to the board that Williams step aside.

Polynovo clarified the situation further with a second statement issued after the market closed this afternoon, confirming the external probe into “alleged interactions” between Williams and “some members of PNV's management team".

The company says the board “took these matters seriously”, leading to the engagement of Crutchfield and Brazenor “to provide the board with their recommendations as to the ongoing working arrangements and professional relations between the chair and management”.

Polynovo says it has since taken steps to address the matters and to review its governance arrangements, including the appointment of Alice DeBoos of Kingston Reid to “provide training to the board about appropriate workplace behaviour and employee and director responsibilities in that context”.

“The board also engaged Lindsay Maxsted, a pre-eminent Australian director, to advise the board on specific governance matters, including on the interaction between board members and group executives,” the company says.

In a major step, Polynovo has even engaged Spencer Stuart, an executive search firm, to “assist with skills assessment and succession planning across the entire board” including the chairman.

“The board is confident that the actions it has taken, as detailed above, have appropriately addressed the various matters raised, to ensure a positive, safe and inclusive workplace for all our staff,” says the company.

“This outcome, balanced with the significant contribution of the chair to the success of the business, ensures the ongoing focus of the company on delivering quality patient care and positive outcomes for all stakeholders.”

Williams, who has been chairman of Polynovo for the past 11 years, is seen as a key driver of the business through deep connections across the industry and his forthright approach to promoting the business.

Raote’s appointment in 2022 marked the end of a nine-month search by Polynovo for a new CEO after the sudden departure of former managing director Paul Brennan at the end of 2021 due to “differences with the board”.

Raote at the time of his appointment described Polynovo as a "diamond in the rough" as he revealed a wish-list of emerging markets that he planned to target to grow the business globally.

The latest internal strife has come at a critical time for Polynovo, which after years of stellar sales growth finally saw this translate into profitability in FY24 and again in the first half of FY25.

Williams is known for making frank admissions during briefings to investors and analysts in a brash style that could be described in some quarters as larrikin.

Raote, who has a different style of leadership, spent 30 years with Johnson & Johnson, retiring as the global president of its Vision Care business at the end of 2020.

Raote brought with him 20 years’ experience in the Asia Pacific region, including stints in Indonesia, Singapore, South Korea and China, and he was pivotal in the company’s early push into India and other Asian markets.

Polynovo’s key product is NovoSorb, a biodegradable medical gauze that assists skin tissue repair from burns or serious wounds, with applications also used for common conditions such as hernias and diabetic foot ulcers.

The company posted a net profit of $3.3 million in the first half of FY25, up 22 per cent from a year earlier, as revenue lifted 22.8 per cent to $59.9 million.