AVITA Medical, Inc. annual report, FY2022

AVITA Medical, Inc. — FY2022 Form 10-K Summary

Reporting period: Fiscal year ended December 31, 2022; filed February 23, 2023. The filing’s annual results are not a separate fourth-quarter report. AVITA develops and commercializes the RECELL System, a point-of-care device that uses a patient’s own skin cells to support skin restoration.

Key financial results and liquidity

Metric	FY2022	FY2021 comparator
Revenue	$34.4 million	$33.0 million
Commercial revenue	$34.1 million	$25.1 million
Gross profit / margin	$28.4 million / 82%	$26.9 million / approximately 82%
Operating expenses	$59.1 million	$53.6 million
Operating loss	$27.5 million	$25.1 million
Net loss	$26.7 million; $1.07 per share	$25.1 million; $0.58 per share
Operating cash flow	$(19.1) million	MD&A cites $(18.0) million

Commercial revenue grew 36%, driven primarily by deeper sales within existing U.S. accounts and the launch of sales through Japan partner COSMOTEC. Total revenue grew 4%; the 2021 total included $7.9 million from BARDA inventory deliveries, versus no BARDA product sales in 2022. BARDA income recognized for research and development funding was $3.2 million, up from $1.6 million.

At December 31, 2022, cash and cash equivalents were $18.2 million and marketable securities were $68.1 million, for $86.3 million combined. Total current assets were $87.5 million and current liabilities $10.7 million. The company reported no significant external borrowing. Shareholders’ equity was $84.7 million and accumulated deficit was $262.6 million. Management said available cash reserves were sufficient to fund operations for the next 12 months, while noting that future capital raising may be needed.

Material changes and operating developments

Commercial revenue increased substantially, while total revenue rose only modestly because of lower BARDA inventory product sales.
Gross profit increased 5%; gross margin remained approximately 82%.
Operating expenses rose 10%, led by a 35% increase in sales and marketing spending, including account expansion and preparation for potential new indication launches. R&D expense fell 12% as clinical studies moved into less costly follow-up phases.
Net loss widened by $1.5 million. Operating cash use was $19.1 million; cash and cash equivalents and restricted cash declined by $37.5 million during the year, partly reflecting investment of cash in marketable securities.
The company changed its fiscal year-end to December 31 in 2021. The 10-K’s audited statements present a six-month transition period for 2021, so some year-to-year comparisons are not directly comparable; the MD&A provides selected 2021 annual comparison figures.

Outlook, risks, contingencies, and unusual items

U.S. expansion: The company planned a full commercial launch for soft tissue repair in July 2023, subject to FDA approval of its December 2022 PMA supplement. It also planned a vitiligo launch after FDA approval and receipt of in-office reimbursement, which management anticipated by January 2025. These were plans, not assured outcomes.
Clinical and regulatory progress: The soft tissue repair and vitiligo pivotal studies reported positive topline results in 2022, and each indication received FDA Breakthrough Device designation. The related applications remained pending at year-end.
International sales and BARDA: RECELL received Japanese approval for burns in February 2022 and launched commercially in Japan in September after reimbursement pricing approval. The BARDA contract, valued at approximately $53.3 million, runs through December 31, 2023, but BARDA may terminate earlier; cumulative payments were $37.9 million at year-end.
Profitability and funding: AVITA reported ongoing losses and a $262.6 million accumulated deficit. Continued operations depend on revenue growth, expense management, and potentially additional financing. Equity issuance may dilute shareholders, and listing rules can constrain capital raising.
Key business risks: Regulatory approval and reimbursement uncertainty; competition with established burn treatments and other products; dependence on product adoption and clinical staff training; supply-chain constraints and some single-source components; manufacturing, quality, and product-liability risks; and intellectual-property protection. The core U.S. RECELL patent was expected to expire in February 2024, with a requested extension to April 2024 still subject to approval.
Macroeconomic and pandemic risks: Management said COVID-19 had not materially adversely affected FY2022 results, but future effects were uncertain. The filing also cites inflation, potential recession, supplier lead times and costs, and workforce turnover as risks.
Unusual and governance items: James Corbett became CEO in September 2022; Sean Ekins became interim CFO in January 2023. The filing reports no material pending litigation, no material changes to internal control over financial reporting, and management concluded disclosure controls and internal controls were effective. The auditor issued an unqualified opinion on the financial statements but did not audit internal control effectiveness.

Investor verification points

Check subsequent FDA decisions and reimbursement developments for soft tissue repair and vitiligo, and whether launch timing and commercial coverage matched management’s plans.
Track commercial revenue growth, U.S. account adoption, Japan sales, gross margin, operating expenses, and progress toward reducing cash burn.
Reconcile reported cash and marketable securities, investment maturities, operating cash use, and management’s stated 12-month liquidity outlook.
Review the BARDA contract’s remaining funding, inventory obligations, and expiration or early-termination status.
Monitor supplier diversification, manufacturing capacity, product quality, and the status of the core patent-term extension.
Interpret FY2021 comparisons carefully: the audited financial statements include a six-month transition period, and MD&A annual comparison figures should be checked against the underlying statements and notes.