AVITA Medical Reports First Quarter Financial Results

Rhea-AI Summary

AVITA Medical (NASDAQ: RCEL) reported Q1 2024 financial results. Key highlights include a 5.8% increase in commercial revenue to $11.1 million, and a gross profit margin of 86.4%. The company launched PermeaDerm, a biosynthetic wound matrix, in March.

Future milestones involve RECELL GO, undergoing a 180-day FDA review, with expectations to submit a PMA supplement for RECELL GO mini by year-end. Financial guidance projects Q2 revenue between $14.3-$15.3 million and full-year revenue at the lower end of $78.5-$84.5 million.

Expenses rose to $26.8 million due to increased sales, marketing, and R&D costs. Net loss widened to $18.7 million, or $0.73 per share, compared to $9.2 million, or $0.37 per share, in Q1 2023.

Positive

• Commercial revenue increased by 5.8% to $11.1 million.
• Gross profit margin improved to 86.4%.
• Launched PermeaDerm in the U.S.
• RECELL GO undergoing 180-day FDA review under the Breakthrough Devices Program.
• Expected Q2 2024 revenue between $14.3-$15.3 million.
• Full-year 2024 revenue projected at the lower end of $78.5-$84.5 million.
• Expect to achieve cashflow break-even and GAAP profitability by Q3 2025.

Negative

• Total operating expenses increased to $26.8 million from $19.4 million in Q1 2023.
• Net loss widened to $18.7 million, or $0.73 per share, from $9.2 million, or $0.37 per share, in Q1 2023.
• Increased sales and marketing expenses by $6.1 million.
• G&A expenses rose by $0.7 million.
• Other income/expense, net, increased by $0.8 million in expenses.

Insights

Financial Analyst

The financial results from AVITA Medical show a mixed bag of outcomes. On one side, the commercial revenue saw a modest increase of 5.8% to $11.1 million and the gross profit margin has improved to 86.4% from 84.2% compared to the same period last year. Despite these positives, the net loss has significantly widened to $18.7 million from $9.2 million, driven by higher operating expenses. The rise in sales and marketing expenses is a double-edged sword, implying aggressive market expansion but affecting the bottom line in the short term. For retail investors, the focus should be on whether the cost escalation results in substantial revenue growth in the subsequent quarters and if the company's guidance for cashflow break-even by Q3 2025 is achievable. The mention of non-recurring items, such as expenses related to the Stedical distribution agreement, indicates some of the increased expenditure may not continue in the future, which could be a positive sign.

Medical Research Analyst

AVITA Medical's recent achievements and future milestones indicate a robust pipeline, particularly with the launch of PermeaDerm and the ongoing review of RECELL GO by the FDA. The strategic focus on becoming the standard of care for burn and full-thickness skin defects is ambitious. Additionally, the plan to submit a PMA supplement for RECELL GO mini highlights an expanding product portfolio aimed at addressing a wider range of clinical needs. Investors should note that devices under the Breakthrough Devices Program could potentially bring significant competitive advantages, including expedited regulatory review processes. However, it is important to monitor the outcomes of these submissions and reviews, as regulatory setbacks could pose risks.

Market Research Analyst

The market response to AVITA Medical's initiatives will likely be observed through their ability to meet revenue expectations and achieve cashflow break-even as projected. The expected growth rate of 57% for full-year 2024 commercial revenue, if realized, would be a strong indicator of the company's effective market penetration and product adoption. However, the net loss and increased operating expenses are concerns that could weigh on investor sentiment. It’s important to watch how the market absorbs the newly launched products like PermeaDerm and how effective the company’s sales strategies are in driving sustainable growth.

VALENCIA, Calif., May 13, 2024 (GLOBE NEWSWIRE) -- AVITA Medical, Inc. (NASDAQ: RCEL, ASX: AVH), a commercial-stage regenerative medicine company focused on first-in-class devices for wound care management and skin restoration, today reported financial results for the first quarter ended March 31, 2024.

Financial Results and Recent Business Updates

• Commercial revenue increased approximately 5.8% to $11.1 million compared to the same period in 2023
• Gross profit margin of 86.4%
• Launched PermeaDerm, a co-branded biosynthetic wound matrix, in the U.S. on March 23, 2024

“We believe we have taken the necessary measures to invigorate our burns business and improve our commercial sales process to return to sustained growth," said Jim Corbett, AVITA Medical Chief Executive Officer. “We remain dedicated to establishing RECELL as the standard of care for burn and full-thickness skin defects. Simultaneously, we are actively transforming AVITA Medical into a broad wound care business by expanding our portfolio to address the full spectrum of clinical needs. We are confident that our strategic initiatives to transform our business will enhance accessibility and reach more patients."

Future Milestones

• RECELL GO, a device which provides consistent disaggregation of skin to produce RECELL Spray-On Skin Cells, is currently undergoing a 180-day interactive review by the U.S. Food and Drug Administration under the Breakthrough Devices Program; the 180-day period will end on May 30, 2024
• Plan to submit a PMA supplement for RECELL GO mini, which is designed to address smaller wounds. This submission will fall under the Breakthrough Device designation, which has been granted to RECELL for burns, RECELL for full-thickness skin defects, RECELL for repigmentation of stable depigmented vitiligo lesions, and RECELL GO
• Expect to submit both our post-market study (TONE) treating patients with stable vitiligo, and separate health economics study for publication by year-end

Financial Guidance

• Commercial revenue for the second quarter 2024 is expected to be in the range of $14.3 to $15.3 million
• Commercial revenue for the full-year 2024 is expected to be in the lower end of our previously provided guidance range of $78.5 to $84.5 million, reflecting growth of approximately 57% at the lower end of the range over the full-year 2023
• Expect to achieve previously given guidance of cashflow break even and GAAP profitability no later than the third quarter of 2025

"We acknowledge the significant cash utilization this quarter, however we remain confident in our financial stability and our ability to reach cashflow break even as guided," said David O'Toole, Chief Financial Officer of AVITA Medical. "It's important to note that the cash use was driven by several non-recurring items, including expenses incurred related to our distribution agreement with Stedical, totaling approximately $4.0 million for inventory purchases and other costs. Of this amount, approximately $3.1 million represents inventory that we will recover through future product sales, with gross sales in the range of $6 million."

First Quarter 2024 Financial Results

Our commercial revenue, which excludes Biomedical Advanced Research and Development Authority (BARDA) revenue, increased by approximately 5.8% to $11.1 million in the three-months ended March 31, 2024, compared to $10.5 million in the same period in 2023.

Gross profit margin was 86.4% compared to 84.2% in the corresponding period in the prior year.

Total operating expenses for the quarter were $26.8 million, compared to $19.4 million in the same period in 2023. The increase in operating expenses is primarily attributable to an increase of $6.1 million in sales and marketing expenses due to employee-related costs, including salaries and benefits, commissions, professional fees, and travel expenses, collectively, as a result of the expansion of our commercial organization to support our growing commercial operations in the second quarter of 2023. G&A expenses increased by $0.7 million as a result of higher salaries and benefits, partially offset by lower stock-based compensation. In addition, the increase in operating expenses included an increase of $0.6 million in R&D costs, which was primarily due to employee compensation costs of the team of Medical Science Liaisons.

Other income/expense, net increased by $0.8 million of expense, compared to the same period in 2023, as we recognized $0.4 million and $0.9 million in expense for non-cash charges due to the change in fair value of the debt and the warrant liability, respectively. These expenses were offset by an increase of approximately $0.5 million in income related to our investment activities and other income.

Net loss was $18.7 million, or a loss of $0.73 per basic and diluted share, compared to a net loss of $9.2 million, or a loss of $0.37 per basic and diluted share, in the same period in 2023.

BARDA income consisted of funding from the Biomedical Advanced Research and Development Authority, under the Assistant Secretary for Preparedness and Response, within the U.S. Department of Health and Human Services, under ongoing USG Contract No. HHSO100201500028C.

Webcast and Conference Call Information

AVITA Medical will host a conference call to discuss its financial and business results on Monday, May 13, 2024, at 1:30 p.m. Pacific Time (being Tuesday, May 14, 2024, at 6:30 a.m. Australian Eastern Standard Time). To access the live call via telephone, please register in advance to receive dial-in details and a personal PIN using the link here. A simultaneous webcast of the call will be available via the Company’s website at https://ir.avitamedical.com/events-and-presentations.

About AVITA Medical, Inc.
AVITA Medical^® is a commercial-stage regenerative medicine company transforming the standard of care in wound care management and skin restoration with innovative devices. At the forefront of our platform is the RECELL^® System, approved by the Food and Drug Administration for the treatment of thermal burn wounds and full-thickness skin defects, and for repigmentation of stable depigmented vitiligo lesions. RECELL harnesses the regenerative properties of a patient’s own skin to create Spray-On Skin^™ Cells, delivering a transformative solution at the point-of-care. This breakthrough technology serves as the catalyst for a new treatment paradigm enabling improved clinical outcomes. AVITA Medical also holds the exclusive rights to market, sell, and distribute PermeaDerm^®, a biosynthetic wound matrix, in the United States.

In international markets, the RECELL System is approved to promote skin healing in a wide range of applications including burns, full-thickness skin defects, and vitiligo. The RECELL System is TGA-registered in Australia, has received CE-mark approval in Europe, and has PMDA approval in Japan.

To learn more, visit www.avitamedical.com.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements in this press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to significant risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Forward-looking statements generally may be identified by the use of words such as “anticipate,” “expect,” “intend,” “could,” “may,” “will,” “believe,” “estimate,” “look forward,” “forecast,” “goal,” “target,” “project,” “continue,” “outlook,” “guidance,” “future,” and similar words or expressions, and the use of future dates. Applicable risks and uncertainties include, among others, the timing and realization of regulatory approvals of our products; physician acceptance, endorsement, and use of our products; failure to achieve the anticipated benefits from approval of our products; the effect of regulatory actions; product liability claims; risks associated with international operations and expansion; and other business effects, including the effects of industry, economic or political conditions outside of the company’s control. These statements are made as of the date of this release, and the Company undertakes no obligation to publicly update or revise any of these statements, except as required by law. For additional information and other important factors that may cause actual results to differ materially from forward-looking statements, please see the “Risk Factors” section of the Company’s latest Annual Report on Form 10-K and other publicly available filings for a discussion of these and other risks and uncertainties.

Authorized for release by the Chief Financial Officer of AVITA Medical, Inc.

AVITA MEDICAL, INC. Consolidated Balance Sheets (In thousands, except share and per share data)
	As of
	March 31, 2024				December 31, 2023
ASSETS	(unaudited)				(audited)
Cash and cash equivalents	$	16,951			$	22,118
Marketable securities		51,232				66,939
Accounts receivable, net		7,081				7,664
BARDA receivables		28				30
Prepaids and other current assets		3,523				1,659
Inventory		7,171				5,596
Total current assets		85,986				104,006
Plant and equipment, net		4,297				1,877
Operating lease right-of-use assets		3,275				2,440
Corporate-owned life insurance ("COLI") asset		2,880				2,475
Intangible assets, net		542				487
Other long-term assets		401				355
Total assets	$	97,381			$	111,640
LIABILITIES, NON-QUALIFIED DEFERRED COMPENSATION PLAN SHARE AWARDS AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities		4,477				3,793
Accrued wages and fringe benefits		5,803				7,972
Current non-qualified deferred compensation ("NQDC") liability		429				168
Other current liabilities		1,153				1,266
Total current liabilities		11,862				13,199
Long-term debt		41,301				39,812
Non-qualified deferred compensation liability		3,913				3,663
Contract liabilities		349				357
Operating lease liabilities, long term		2,532				1,702
Warrant liability		4,028				3,158
Total liabilities		63,985				61,891
Non-qualified deferred compensation plan share awards		827				693
Commitments and contingencies (Note 13)
Stockholders' equity:
Common stock, $0.0001 par value per share, 200,000,000 shares authorized, 25,789,051 and 25,682,078, shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively		3				3
Preferred stock, $0.0001 par value per share, 10,000,000 shares authorized, no shares issued or outstanding at March 31, 2024 and December 31, 2023		-				-
Company common stock held by the non-qualified deferred compensation plan		(944	)			(1,130	)
Additional paid-in capital		353,205				350,039
Accumulated other comprehensive loss		(3,068	)			(1,887	)
Accumulated deficit		(316,627	)			(297,969	)
Total stockholders' equity		32,569				49,056
Total liabilities, non-qualified deferred compensation plan share awards and stockholders' equity	$	97,381			$	111,640

AVITA MEDICAL, INC. Consolidated Statements of Operations (In thousands, except share and per share data) (Unaudited)
	Three-Months Ended
	March 31, 2024				March 31, 2023
Revenues	$	11,104			$	10,550
Cost of sales		(1,513	)			(1,667	)
Gross profit		9,591				8,883
BARDA income		-				627
Operating expenses:
Sales and marketing		(12,640	)			(6,540	)
General and administrative		(8,963	)			(8,295	)
Research and development		(5,194	)			(4,586	)
Total operating expenses		(26,797	)			(19,421	)
Operating loss		(17,206	)			(9,911	)
Interest expense		(1,356	)			(4	)
Other income (expense), net		(66	)			725
Loss before income taxes		(18,628	)			(9,190	)
Income tax expense		(30	)			(30	)
Net loss	$	(18,658	)		$	(9,220	)
Net loss per common share:
Basic and Diluted	$	(0.73	)		$	(0.37	)
Weighted-average common shares:
Basic and Diluted		25,637,783				25,202,088

FAQ

What was AVITA Medical's commercial revenue in Q1 2024?

AVITA Medical's commercial revenue increased by approximately 5.8% to $11.1 million in Q1 2024.

What is the gross profit margin reported by AVITA Medical for Q1 2024?

AVITA Medical reported a gross profit margin of 86.4% for Q1 2024.

When was PermeaDerm launched by AVITA Medical?

PermeaDerm was launched by AVITA Medical in the U.S. on March 23, 2024.

What is the expected revenue range for AVITA Medical in Q2 2024?

AVITA Medical expects Q2 2024 revenue to be in the range of $14.3 to $15.3 million.

What are the full-year 2024 revenue projections for AVITA Medical?

AVITA Medical projects full-year 2024 revenue at the lower end of the previously provided guidance range of $78.5 to $84.5 million.

When does AVITA Medical expect to achieve cash flow break-even?

AVITA Medical expects to achieve cash flow break-even and GAAP profitability no later than the third quarter of 2025.

How much did AVITA Medical's net loss widen in Q1 2024?

AVITA Medical's net loss widened to $18.7 million, or $0.73 per share, in Q1 2024 compared to $9.2 million, or $0.37 per share, in the same period in 2023.

What was the increase in AVITA Medical's total operating expenses for Q1 2024?

AVITA Medical's total operating expenses increased to $26.8 million in Q1 2024, up from $19.4 million in Q1 2023.