Melbourne-based biotech PolyNovo (ASX: PNV) has confirmed it is in the box seat to take advantage of changes to the US health system being implemented by the Trump administration, helping to briefly drive the company’s shares 26 per cent higher in early trade.
Shares in PolyNovo resumed trading following a requested halt on Monday due to a media report that detailed the company’s potential “unlikely boost” from a crackdown by US Health and Human Services Secretary Robert F. Kennedy Jr. on kickbacks received by surgeons for expensive skin substitutes used in outpatient wound care.
The shares hit a high of $1.665, up 35c from Monday’s close, before easing back to be trading at $1.47 at 11.09am (AEST).
PolyNovo has informed the market that despite the proposed changes to US Medicare Reimbursement for outpatient wound care, the company’s key BTM and MTX products would remain profitable under the proposed flat rate while reducing the number of higher-cost competitors in the market.
Chairman David Williams says PolyNovo is “well positioned” to benefit from changes proposed for US outpatient reimbursements.
“We have always placed importance on quality as well as value and the proposed new flat reimbursement will suit our value-oriented offering,” says Willliams.
“There are a number of things to play out before it is clear what the full benefit for PolyNovo will be with plastic surgeons and podiatrists, but I am excited by the possibilities.
“In particular, we are very keen to bring our technology to help American serviceman and women, veterans and others with chronic wounds exacerbated by diabetes.”
PolyNovo’s NovoSorb BTM is being embraced by surgeons globally to treat burns victims and increasingly diabetic foot ulcers, while NovoSorb MTX offers a single-step procedure for soft tissue regeneration in the management of complex wounds.
The US remains the company’s key market accounting for 74 per cent of the group’s sales in FY25.
The company reported a 23 per cent increase in revenue to $129.2 million which led to a 149 per cent increase in net profit $13.2 million.
Under the existing reimbursement model in the US, physicians receive a kickback from each skin substitute used in outpatient wound care.
PolyNovo says this has “dis-incentivised the selection of lower priced product as it reduces the physician/surgeon payment with a decrease in product cost”.
“As a result, the market has favoured expensive products, driving significant Medicare outlays and making it harder for cost-effective options to compete,” says the company.
Spending on skin substitutes in the US is reported to have topped $10 billion in 2024, or more than double the 2023 total.
In July, the Trump administration proposed cutting reimbursements to a fraction of what some companies currently earn.
The Centers for Medicare & Medicaid Services (CMS) has proposed flat reimbursement for outpatient skin substitutes of US$806 per square inch – a move designed to remove the incentive for surgeons to use more expensive products.
CMS has reported that skin substitutes can cost as much as US$2,000 per square inch and its proposal aims to cut spending on these products by close to 90 per cent in order to “save billions for Medicare and taxpayers”.
PolyNovo says the move will lead to physicians focusing on “proven clinical outcomes, where PolyNovo products compete strongly”.
“The majority of PolyNovo’s current business has to date been inpatient product application,” says PolyNovo’s acting CEO Dr Robyn Elliott.
“Outpatient product application, the focus of the CMS proposed changes, is a significant potential growth area for PolyNovo’s products.
“We are currently assessing the optimal commercial model for accessing this market opportunity.”
The CMS proposal is still subject to consultation with stakeholders and a decision is expected in November before the targeted implementation date of 1 January 2026.
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