# AVITA Medical, Inc.: Form 10-Q for the period ended Mar 31, 2024

- Company: [AVITA Medical, Inc.](/companies/rcel.md) (CIK 1762303)
- Form: 10-Q
- Filed: 2024-05-13
- Accepted by EDGAR: May 13, 2024, 16:04 ET
- Period: 2024-03-31
- Accession: 0000950170-24-058619
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1762303/000095017024058619/rcel-20240331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1762303/000095017024058619/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-01-01 to 2024-03-31 | $11.1m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2024-01-01 to 2024-03-31 | $1.5m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2024-01-01 to 2024-03-31 | $9.6m | us-gaap:GrossProfit |
| Research and development | 3 months, 2024-01-01 to 2024-03-31 | $5.2m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2024-01-01 to 2024-03-31 | −$17.2m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-01-01 to 2024-03-31 | $1.4m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-01-01 to 2024-03-31 | $30.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | −$18.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-01-01 to 2024-03-31 | −$0.73 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | −$0.73 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-01-01 to 2024-03-31 | 25,637,783 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-01-01 to 2024-03-31 | −$20.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-01-01 to 2024-03-31 | $1.1m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-03-31 | $17.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-03-31 | $86.0m | us-gaap:AssetsCurrent |
| Total assets | at 2024-03-31 | $97.4m | us-gaap:Assets |
| Current liabilities | at 2024-03-31 | $11.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-03-31 | $64.0m | us-gaap:Liabilities |
| Long-term debt | at 2024-03-31 | $41.3m | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2024-03-31 | $32.6m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 18,755 characters.

*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited Consolidated Financial Statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q.*

*Our actual results and timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking statements. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report on Form 10-Q, they may not be predictive of results or developments in future periods.*

*The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this Quarterly Report on Form 10-Q, including those risks identified under Part II, Item 1A. Risk Factors.*

*We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made. We disclaim any obligation, except as specifically required by law and the rules of the SEC and the ASX, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.*

#### Please see “Special Statement Regarding Forward-Looking Statements” on page 3.

### Overview

AVITA Medical, Inc. ("we", "our", "us") 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 portfolio is our patented and proprietary RECELL® System (“RECELL System” or “RECELL”), approved by the United States Food & Drug Administration (“FDA”) 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 an autologous skin cell suspension, 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.

We are focused on becoming the leading provider of regenerative medicine addressing unmet medical needs in burn injuries, full-thickness skin defects, and in skin repigmentation, such as vitiligo. We will continue to drive commercial revenue growth to generate positive cash flow and achieve operating profit. To achieve these objectives, we intend to:

- Become the standard of care in the U.S. burns industry by increasing RECELL penetration and adoption in burn centers
- Expand into U.S. trauma centers to increase utilization of RECELL for the treatment of full-thickness skin defects
- Launch RECELL GO™ following FDA approval to increase market adoption and expand our customer base
- Submit a PMA supplement for RECELL GO mini, which is designed to address smaller wounds.
- Expand our global presence within the European Union and Australia through the exclusive use of third-party distributors
- Continue to build upon commercial activities in Japan through our partnership with COSMOTEC Company, Ltd ("COSMOTEC") with our current Pharmaceuticals and Medical Devices Act (“PMDA”) approval for RECELL with an indication in burns
- Continue to pursue business development opportunities that are complementary to our core RECELL indications and/or our targeted markets, such as the agreement with Stedical Scientific, Inc.
- Establish commercial payor coverage for RECELL in the U.S. for the treatment of vitiligo lesions; initial phase of coverage expected during the fourth quarter of 2025

### Business Environment and Current Trends

The macroeconomic environment may have unexpected adverse effects on businesses and healthcare institutions globally that may continue to negatively impact our consolidated operating results. There remains significant uncertainty in the current macroeconomic environment due to factors including supply chain shortages, increased cost of healthcare, increased inflation rates, a competitive and tight labor market, and other related global economic conditions and geopolitical conditions. If these conditions continue or worsen, they could adversely impact our future operating results.

Changes in reimbursement rates by third party payors may place additional financial pressure on hospitals and the broader healthcare system. Healthcare institutions may take actions to mitigate any persistent pressures on their budgets and such actions could impact the future demand for our products. Geopolitical conditions may also impact our operations. Although we do not have operations in Russia, Ukraine or in the Middle East, the continuation of the military conflict in these regions and/or an escalation of the conflicts beyond their current scope may further weaken the global economy and could result in additional inflationary pressures and supply chain constraints.

### Recent Developments

On January 10, 2024, we entered into an exclusive multi-year distribution agreement with Stedical Scientific, Inc.

to commercialize PermeaDerm® Biosynthetic Wound Matrix in the United States ("PermeaDerm"). PermeaDerm is cleared by the FDA as a transparent matrix for use in the treatment of a variety of wound types until healing is achieved. Under the terms of the agreement, we hold the exclusive rights to market, sell, and distribute PermeaDerm products, including any future enhancements or modifications, within the United States. The initial term is for five years, with the option to renew for an additional five years, contingent upon meeting certain minimum requirements.

On January 31, 2024 we entered into an exclusive Distribution Agreement with Fidelis Sustainability Distribution, LLC ("Fidelis"). As part of the agreement, the Company appointed Fidelis as the exclusive distributor of RECELL products in the U.S. Government healthcare facilities such as Veteran Affairs and the Department of Defense.

On February 16, 2024, we executed a contract modification with BARDA to extend the period of performance,

under the original contract dated September 29, 2015, from December 31, 2023 to September 28, 2025. Under the modified contract, BARDA will have access to AVITA Medical’s RECELL inventory in the event of a national emergency. In the case of a national emergency, BARDA will pay for RECELL devices at a reduced price for the first 1,000 units and retail price for any units over 1,000 requested. No additional inventory build will be required as part of this modification as the Company has sufficient inventory in stock to fulfill this requirement. BARDA will pay AVITA Medical approximately $333,000 in maintenance fees over the term of the contract to ensure first right of access.

On June 29, 2023, we submitted a premarket approval ("PMA") supplement to the FDA for RECELL GO. RECELL GO maintains the FDA Breakthrough Device designation from predecessor devices. On September 29, 2023, we received notice from the FDA that additional information regarding the PMA was required for the continuation of a substantive review for RECELL GO. This request, which is not unique to the Breakthrough Devices Program, placed the application file on hold while we addressed the FDA's questions. We submitted our complete response to the FDA on February 28, 2024, at which point the application reentered the 180-day cycle, with 90 days remaining in the review period. This timing would imply FDA approval, immediately followed by a product launch on May 31, 2024.

**Results of Operations for the three-months ended March 31, 2024 compared to the three-months ended March 31, 2023.**

**The table below summarizes the results of our operations for each of the periods presented (in thousands).**

| Statement of Operations Data: | Three-Months Ended March 31, 2024 | March 31, 2023 | $% Change | Change |
| --- | ---: | ---: | ---: | ---: |
| Revenues | $11,104 | $10,550 | 554 | 5.3% |
| Cost of sales | (1,513) | (1,667) | 154 | 9.2% |
| Gross profit | 9,591 | 8,883 | 708 | 8.0% |
| BARDA income | - | 627 | (627) | -100.0% |
| Operating expenses: |  |  |  |  |
| Sales and marketing | (12,640) | (6,540) | (6,100) | -93.3% |
| General and administrative | (8,963) | (8,295) | (668) | -8.1% |
| Research and development | (5,194) | (4,586) | (608) | -13.3% |
| Total operating expenses | (26,797) | (19,421) | (7,376) | -38.0% |
| Operating loss | (17,206) | (9,911) | (7,295) | -73.6% |
| Interest expense | (1,356) | (4) | (1,352) | \*nm |
| Other income (expense), net | (66) | 725 | (791) | 109.1% |
| Loss before income taxes | (18,628) | (9,190) | (9,438) | -102.7% |
| Income tax expense | (30) | (30) | - | 0.0% |
| Net loss | $(18,658) | $(9,220) | (9,438) | -102.4% |

\*nm = not meaningful

Total net revenues increased by 5.3%, or $0.6 million, to $11.1 million, compared to $10.6 million in the same period in the prior year. Our commercial revenue was $11.1 million in the three-months ended March 31, 2024, an increase of $0.6 million, or 5.8%, compared to $10.5 million in the corresponding period in the prior year. The growth in commercial revenues was largely driven by deeper penetration within individual customer accounts and new accounts for Full Thickness Skin Defect ("FTSD").

Gross profit margin was 86.4% compared to 84.2% in the corresponding period in the prior year. The increase was largely driven by increase in revenues and lower shipping costs.

BARDA income decreased to zero, compared to $0.6 million in the corresponding period in the prior year due to reimbursable clinical trials winding down. BARDA income in the prior year 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.

Total operating expenses increased by 38.0% or $7.4 million to $26.8 million, compared with $19.4 million in the corresponding period in the prior year.

Sales and marketing expenses increased by 93.3%, or $6.1 million, to $12.6 million, compared to $6.5 million in the corresponding period in the prior year. Higher costs in the current year were primarily related to an increase in salaries and benefits, commissions, professional fees and travel expenses. The increase in salaries and benefits is due to the expansion of the sales force to support our growing commercial capabilities. Higher commissions were directly associated with the increase in revenues. The increase in professional fees is primarily due to pricing studies for future product development. The increase in travel is due to the expansion of the sales force.

General and administrative expenses increased by 8.1%, or $0.7 million, to $9.0 million, compared to $8.3 million in the same period in the prior year. The increase was attributable to higher salaries and benefits and an increase in recruitment fees, partially offset by lower stock-based compensation.

Research and development expenses increased by 13.3%, or $0.6 million, to $5.2 million, compared to $4.6 million in the same period in the prior year. The increase is primarily due to salaries and benefits and share-based compensation, offset by a decrease in professional fees and research and development expenses. The increase in salaries and benefits and stock-based compensation is due to the deployment of a team of Medical Science Liaisons. The decrease was partially offset by lower professional fees and diminished development expenses for RECELL GO due to the latent development phase of the project.

Interest expense increased approximately $1.4 million in comparison to the same period in the prior year due to the interest expense related to the long-term debt as part of the OrbiMed Credit Agreement, for an aggregate principal amount owed of $40.0 million.

Other income (expense), net decreased by $0.8 million or 109% to net expense of $66,000 from net income of $725,000 in the corresponding period in the prior year. We recognized $0.4 million and $0.9 million of non-cash charges due to the change in fair value of the debt and the warrant liability, respectively. In addition, we had an increase of approximately $0.5 million in income related to our investment activities and other income.

### Liquidity and Capital Resources

#### Overview

We expect to utilize cash reserves until U.S. sales of our products reach a level sufficient to fund ongoing operations. We have historically funded research and development activities, and more recently its substantial investment in sales and marketing activities, through raising capital by issuing securities and the issuance of debt. On October 18, 2023, we entered into a Credit Agreement with an affiliate of OrbiMed Advisors, LLC. The Credit Agreement provides for a five-year senior secured credit facility in an aggregate principal amount of up to $90.0 million, of which $40.0 million was drawn during fourth quarter of 2023. In addition, an aggregate of $50.0 million will be made available in two separate $25.0 million tranches, at our discretion, subject to certain net revenue requirements. The first tranche of $25.0 million is available on or before December 31, 2024. The second tranche of $25.0 million is available on or prior to June 30, 2025, only if the first tranche was drawn upon. We have monthly interest rate payments for the debt at a rate equal to the greater of (a) forward-looking one-month term SOFR rate and (b) four percent (4.0%) per annum, plus eight percent (8.0%). In the event that we do not meet certain twelve-month trailing revenue targets at the end of certain fiscal quarters, the outstanding balance of the loan must be repaid in equal quarterly installments of 5.0% of the funded amount through the maturity date. As of March 31, 2024, our projected revenues, for the trailing twelve months ending December 31, 2024, exceeded the minimum revenue requirements under the credit agreement. We had approximately $17.0 million in cash and cash equivalents and $51.2 million in marketable securities.

As of the date of these financial statements, we believe we have sufficient cash reserves to fund operations for the next 12-months.

The following table summarizes our cash flows for the periods presented (in thousands):

*(in thousands)*

|  | Three-Months Ended March 31, 2024 | March 31, 2023 |
| --- | ---: | ---: |
| Net cash used in operations | $(20,864) | $(9,073) |
| Net cash provided by investing activities | 15,066 | 18,787 |
| Net cash provided by financing activities | 631 | 171 |
| Effect of foreign exchange rate on cash and cash equivalents | - | 1 |
| Net increase/(decrease) in cash and cash equivalents | (5,167) | 9,886 |
| Cash and cash equivalents at beginning of the period | 22,118 | 18,164 |
| Cash and cash equivalents at end of the period | 16,951 | 28,050 |

Net cash used in operating activities was $20.9 million and $9.1 million during the three-months ended March 31, 2024, and 2023, respectively. The increase in net cash used in operations was primarily due to lower revenue, higher operating costs and increased cash outflow due to the inventory purchases as part of the Stedical Agreement.

Net cash provided by investing activities was $15.1 million and $18.8 million during the three-months ended March 31, 2024 and 2023, respectively. The decrease in cash provided by investing activities is primarily attributable to lower cash inflows from maturities of marketable securities in the current year compared to the prior year, offset by an increase in cash outflow for capital expenditures and patent filing fees. The increase in capital expenditures in the current year is primarily related to the leasehold improvement in the Ventura production facility to enhance manufacturing output.

Net cash provided by financing activities was $0.6 million and $0.2 million during the three-months ended March 31, 2024, and 2023, respectively. The increase in cash provided by financing activities is related to proceeds from the exercises of stock options.

#### Capital Management and Material Cash Requirements

We aim to manage capital so that the Company continues as a going concern while also maintaining optimal returns to stockholders and benefits for other stakeholders. We also aim to maintain a capital structure that ensures the lowest cost of capital available to us. We regularly review our capital structure and seek to take advantage of available opportunities to improve outcomes for us and our stockholders.

For the three-months ended March 31, 2024, there were no dividends paid and we have no plans to commence the payment of dividends. As part of the Stedical Agreement, we have minimum purchase requirements for PermeaDerm inventory of $5.0 million dollars. As of March 31, 2024, we have purchased $2.6 million and have approximately $2.4 million remaining to satisfy the requirement. With the exception of the inventory purchases from Stedical, we do not have any other purchase commitments or long-term contractual obligations, except for lease obligations as of March 31, 2024. Refer to Note 7 of our Consolidated Financial Statements for further details on our lease obligations. In addition, we have no off-balance sheet arrangements (as defined in the rules and regulations of the SEC) that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. We have no committed plans to issue further shares on the market but will continue to assess market conditions.

### Critical Accounting Estimates

There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in the Company’s Quarterly Report on Form 10-Q for the quarter-ended March 31, 2024.

## Controls and procedures

As filed, 1,504 characters.

### Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and our Chief Financial Officer evaluated, with the participation of our management, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. As of March 31, 2024, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures, as defined in Securities Exchange Act Rule 13a-15(e) and 15d-15(e), were effective.

Our disclosure controls and procedures have been formulated to ensure (i) that information that we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) that the information required to be disclosed by us is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

### Changes in Internal Controls over Financial Reporting

There was no change in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the first quarter of fiscal year 2024 covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

## Risk factors

As filed, 703 characters.

In addition to the other information set forth in this report, you should carefully consider the factors discussed under Part I, Item 1A, “Risk Factors” in the 2023 Annual Report and as updated in the Company’s subsequent Quarterly Reports on Form 10-Q. These factors could materially adversely affect our business, financial condition, liquidity, results of operations and capital position, and could cause our actual results to differ materially from our historical results or the results contemplated by the forward-looking statements contained in this report. There have been no material changes to the risk factors described in Part I, Item 1A, “*Risk Factors,”* included in the 2023 Annual Report.

Filed May 13, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-058619. Last ingested by Listed: Nov 2, 2026, 18:33 ET. No prices; not investment advice.