AVITA Medical, Inc. — Q1 2022 Form 10-Q
Business context and reporting period. AVITA Medical is a commercial-stage regenerative medicine company whose lead product is the RECELL System, used to treat burns and other skin injuries. This unaudited filing covers the three months ended March 31, 2022, compared with Q1 2021. Figures below are in U.S. dollars; financial statement amounts are in millions unless stated otherwise.
Key financial metrics
- Revenue: $7.54 million, down 14% from $8.77 million. Commercial revenue rose 61% to $7.45 million; BARDA product sales were zero versus $4.09 million in Q1 2021. BARDA emergency-preparedness services contributed $0.09 million.
- Profitability and margins: Gross profit was $5.76 million; gross margin was approximately 76%, broadly flat year over year. Operating loss widened to $9.49 million from $5.99 million. Net loss was $9.46 million, or $0.38 per share, versus $6.00 million, or $0.26 per share.
- Operating expenses: $15.98 million, up 21%. Sales and marketing increased 32% to $4.83 million; general and administrative increased 39% to $7.53 million; research and development declined 12% to $3.62 million.
- Cash flow: Cash used in operations was $9.37 million, versus $8.54 million. Investing used $22.60 million, primarily reflecting purchases of marketable securities. Financing provided $0.001 million, compared with $64.03 million in Q1 2021, which included an equity raise.
- Liquidity and debt: At March 31, cash and cash equivalents were $23.54 million and marketable securities totaled $71.52 million; restricted cash was $0.20 million. Current assets were $90.68 million and current liabilities $6.50 million. The company reported no significant external borrowing and stated it had sufficient cash reserves for the next 12 months.
- Other: Total assets were $106.49 million and shareholders’ equity $97.82 million. Share-based compensation was $2.93 million, up from $1.33 million. Common shares outstanding at March 31 were 24,955,581.
Material changes versus Q1 2021
- Total revenue fell because Q1 2021 included $4.09 million of BARDA product deliveries into managed inventory. Commercial sales grew by $2.82 million, attributed to broader use and deeper penetration within customer accounts.
- Operating loss increased by $3.50 million. Management cited higher sales and marketing costs, expanded staffing and compensation, and higher share-based compensation; R&D spending was lower because some programs were in less costly phases.
- Gross margin was broadly stable, although management said current-quarter margins were affected by reduced production and higher average production costs at the Ventura facility.
- Cash and cash equivalents declined from $55.51 million at December 31, 2021, while the company shifted funds into marketable securities. Total cash, cash equivalents, and marketable securities were approximately $95.05 million at quarter-end.
Outlook, commentary, risks and unusual items
- The filing provides no specific revenue, earnings, or margin guidance. Management expects to use cash reserves until U.S. sales are sufficient to fund ongoing operations and stated reserves would cover the next 12 months. It noted that future capital raising may be needed and spending could be reduced if capital is unavailable.
- Japan’s PMDA approved RECELL for burns in February 2022. Commercial launch is pending reimbursement pricing approval. Enrollment in U.S. pivotal trials for soft-tissue reconstruction and vitiligo was complete; further market access depends on successful studies and FDA approvals.
- The FDA approved an enhanced-ease-of-use RECELL device supplement in February 2022. Management said higher sales and marketing costs included field expansion, training, and pre-commercialization planning for potential soft-tissue and vitiligo launches.
- COVID-19-related hospital staffing shortages and access limitations may affect sales and clinical activity; the company also cited uncertainty around future variants and possible supplier or supply-chain disruption. Management said the full effects remain difficult to predict.
- Marketable securities had a net unrealized loss of $0.40 million at March 31, 2022; no credit losses were recognized. No material litigation, off-balance-sheet arrangements, or purchase commitments were reported. Lease obligations were the disclosed contractual obligations.
- Disclosure controls were assessed as effective, with no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether commercial RECELL growth continues and offsets the absence of further BARDA product deliveries.
- Whether cash use and operating losses remain consistent with management’s stated 12-month runway, and whether additional capital may be required.
- Timing and conditions for Japan reimbursement pricing and launch, and for potential U.S. approvals in soft-tissue reconstruction and vitiligo.
- Drivers of the higher operating expenses, particularly share-based compensation, and whether production costs continue to pressure gross margin.
- Potential effects of hospital staffing constraints, COVID-19 developments, and supply-chain disruption on sales and clinical programs.