Business context and reporting period
AVITA Medical is a commercial-stage regenerative tissue company whose lead product is the RECELL System for burns and other acute injuries. This 10-Q covers the three months ended September 30, 2021, the first quarter of fiscal 2022; this differs from the request metadata’s “2021 Q1.” Comparative results are for the three months ended September 30, 2020.
RECELL was commercialized in the U.S. for eligible burn indications. The company reports ongoing pivotal studies for potential expanded indications, including soft tissue reconstruction and vitiligo. Its Ease of Use device was submitted to the FDA in July 2021; this filing does not report an FDA decision.
Financial results and position
| Metric | Quarter ended September 30, 2021 | Prior-year quarter |
|---|---|---|
| Revenue | $7.02 million | $5.06 million |
| Gross profit / margin | $5.93 million / approximately 85% | $4.13 million / approximately 82% |
| BARDA income | $374,000 | $596,000 |
| Operating expenses | $12.26 million | $14.94 million |
| Operating loss | $5.95 million | $10.21 million |
| Net loss | $5.95 million; $0.24 per share | $10.23 million; $0.48 per share |
| Net cash used in operations | $572,000 | $7.71 million |
- Revenue increased 39%, primarily from broader utilization and deeper penetration within customer accounts. U.S. revenue was $6.92 million; commercial sales were $6.93 million, while BARDA emergency-preparedness services contributed $92,000.
- Gross margin improved to approximately 85%, which management attributed mainly to lower shipping costs and increased production at the Ventura facility.
- Operating expenses fell 18%. General and administrative expense declined $2.95 million, reflecting prior-year share-based compensation, one-time SEC domestic-filer costs, and severance. Sales and marketing expense rose 8% with increased travel; research and development expense was broadly flat.
- Cash and cash equivalents were $60.48 million at September 30, 2021, versus $110.75 million at June 30. The company also held $49.50 million of marketable securities ($29.70 million current and $19.80 million long-term). Cash, cash equivalents and restricted cash totaled $60.69 million. The quarter’s $49.64 million investing outflow was mainly purchases of marketable securities, so the reported cash decline largely reflects a shift into investments.
- Total liabilities were $9.68 million, including $1.81 million of operating lease liabilities; management reported no significant external borrowing. Current assets were $97.13 million and current liabilities $7.05 million.
Changes, outlook, risks and unusual items
- Net loss narrowed 42% year over year, with higher revenue and lower total operating expenses contributing. BARDA income declined 37% as activities supporting pediatric scald pivotal trials wound down.
- Management expects to use cash reserves until U.S. product sales are sufficient to fund operations. It said additional capital may be sought if needed; inability to raise capital could require curtailing research, development, or other programs. No quantified revenue, earnings, or cash-flow guidance was provided.
- COVID-19 reduced accidents, burn admissions, hospital access, and at times clinical-trial enrollment. Management said the pandemic’s future effects remain uncertain, including potential impacts on demand, trials, employees, suppliers, and product availability. About 50% of revenue excluding BARDA came from 20 accounts, creating customer concentration exposure.
- The company recorded a $19,000 impairment for an abandoned patent. It also remeasured an office lease, increasing right-of-use assets and lease liabilities by approximately $392,000, with no earnings impact. No material outstanding or threatened litigation was reported.
- Management stated disclosure controls were effective and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether revenue growth and improved gross margin persist as COVID-related conditions and hospital access change.
- Cash burn and the use, maturity profile, and liquidity of the marketable securities portfolio; distinguish investment purchases from operating cash use.
- Progress and timing for RECELL clinical studies, potential expanded indications, and the FDA’s review of the Ease of Use device submission.
- Dependence on a relatively small group of U.S. customer accounts, and the possibility of future financing or spending reductions if sales do not fund operations.