Avita Medical: Key Upcoming Catalysts Offer Major Upside Potential



Avita Medical (AVH.AX) (AVMXY) (ProActive News Room page at http://www.proactivenewsroom.com/avita-medical) is a global med-tech company that develops and distributes highly innovative products in Regenerative and Respiratory Medicine. The Company's regenerative and tissue-engineered products provide revolutionary solutions utilizing a patient's own skin and the regenerative capability of the human body to treat a wide range of wounds, scars and skin defects.

Earlier today, B. Riley & Co. initiated coverage of the Company with an $8/share fair value estimate for the US ADR ($AVMXY) (representing over 2X upside from the recent stock price range in low-mid $3s) stating, “Disruptive regenerative technology could be the new standard of care for burns, scars and chronic wounds. Broad aesthetic applications offer tremendous long term upside.”

The report projects annual sales for flagship product ReCell of $140 million on a worldwide basis in 2018 which will be largely driven by a projected US market launch in 2014 for burns and 2015 for scars / cosmetic medicine (aesthetic indications to improve appearance). The report bases its valuation on the closest competitor (Advanced BioHealing), which was acquired by Shire (SHPG) in May 2011 for $750 million or approximately 5X revenue.

ReCell is a stand-alone, rapid cell harvesting device that enables surgeons to treat skin defects using the patient's own cells. The surgeon can prepare a small quantity of cells within 30 minutes on site replacing the current technique of skin grafting or the requirement to send a biopsy to the laboratory for culture. ReCell has been designed for use in a wide variety of burns, plastic, reconstructive and cosmetic procedures.

ReCell is patented, CE marked for the EU, TGA registered in Australia and has received SFDA approval in China. Below is a summary of ongoing US (FDA) clinical trials that included partial funding from the US Dept. of Defense.

In late July, Avita provided a financial and operational update for the end of Fiscal Year 2012 (FY12) on 6/30/12, including the following highlights:

- total revenue increased 13% during FY12 ($5.2 million vs. $4.5 million) including an 88% increase in ReCell Spray-On Skin

- increased gross margins from 72% to 76% from Q1 to Q4 with 73% margins for full-year FY12

- gross profit increased by 17% to $4.2 million with a ($5 million) operating loss during FY12 reflecting an expansion phase for the Company focused on ReCell clinical development and sales/marketing initiatives focused on regenerative medicine as a key growth driver 

- received additional regulatory approvals for ReCell in Russia, Mid-East and China while progressing US (FDA) clinical development as outlined above

- obtained full ownership of ReCell in addition to being granted key European patent covering broad claims and trademark protection for “Spray-On Skin” along with the submission of three new patent applications in the US

Key upcoming catalysts for the Company include the following:

- FDA submission for ReCell in burns mid-2013

- completion of pilot study for scars around late 2012-early 2013 to support planned start of US (FDA) pivotal trials in early 2013 for scar remodeling

- expects to begin feasibility studies for chronic wounds during 2H12