AVITA Medical, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Financial statements are unaudited interim statements; Grant Thornton reported that its review identified no material modifications needed for GAAP conformity, but did not express an audit opinion.
Business context and period developments
AVITA develops and commercializes the RECELL System, an autologous skin-cell therapy platform. In June, the FDA approved RECELL for full-thickness skin defects, and the company began a commercial launch. The FDA also approved RECELL for repigmentation of stable depigmented vitiligo lesions. AVITA submitted a PMA supplement for its automated RECELL GO device.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $11.8 million | $8.3 million | $22.3 million | $15.9 million |
| Gross profit | $9.5 million | $6.9 million | $18.4 million | $12.7 million |
| Gross margin | 81% | 83% | 83% | 80% |
| Operating loss | $11.2 million | $6.4 million | $21.1 million | $15.8 million |
| Net loss | $10.4 million | $6.3 million | $19.6 million | $15.7 million |
| Net loss per share | $0.41 | $0.25 | $0.78 | $0.63 |
Q2 commercial revenue was $11.7 million, up 42%, supported by increased sales within existing accounts and commercial sales through COSMOTEC in Japan. For the first half, commercial revenue was $22.1 million, up 43%. BARDA income declined as reimbursable clinical trials wound down.
Q2 operating expenses increased 53% to $21.2 million. Sales and marketing rose 88% to $10.0 million, mainly reflecting commercial-launch staffing and commissions; R&D rose 66% to $5.1 million, including RECELL GO development and launch-related medical-science-liaison costs. For the first half, operating expenses increased 36% to $40.7 million. Management attributed the period’s higher operating losses principally to these increased expenses.
Cash, liquidity and obligations
- At June 30, cash and cash equivalents were $37.5 million; marketable securities totaled $31.3 million, for combined cash and securities of about $68.8 million.
- Six-month operating cash use was $18.2 million, versus $12.9 million in the prior-year period. Cash and cash equivalents rose by $19.3 million, primarily because marketable securities matured; investing activities provided $37.2 million.
- Current assets were $77.5 million and current liabilities $13.8 million. The filing reports no significant external borrowing. Operating lease liabilities totaled $1.7 million.
- Management said available cash reserves were sufficient to fund operations for the next 12 months. It noted that future capital raising may be needed and that spending could be curtailed if the company cannot raise capital.
Outlook, risks and unusual items
- No numeric revenue, earnings or cash-flow guidance is provided. Management’s stated priorities include expanding RECELL use in burns and full-thickness skin defects, further developing RECELL GO, pursuing international commercialization, and improving margins as the business scales.
- AVITA anticipated vitiligo in-office reimbursement in 2025 before a full commercial launch. The filing stated that RECELL GO’s prioritized FDA review was expected to result in approval by December 29, 2023; this was an expectation, not an approval.
- Management cited macroeconomic, inflation, labor, healthcare-reimbursement and supply-chain uncertainties. Qualifying additional suppliers temporarily reduced Q2 gross margin, although the company said it maintained service levels and improved its position to mitigate supply risk.
- The filing identifies uninsured bank deposits above applicable insurance limits as a liquidity risk; AVITA said it had full access to its funds at the reporting date. Regulatory approval, commercialization, reimbursement, and continued access to financing are also important risks.
- A February office-lease remeasurement increased right-of-use assets and lease liabilities by about $1.1 million, with no earnings impact. A further five-year office lease commenced in July 2023. No material pending litigation or material subsequent events requiring financial-statement adjustment were reported.
Most important facts for investors to verify
- Whether the full-thickness skin-defect launch generates sustained revenue growth and whether commercialization costs moderate.
- Whether the expected 2025 in-office reimbursement for vitiligo is achieved, and the timing and outcome of FDA review of RECELL GO.
- Actual cash burn and liquidity versus management’s 12-month sufficiency assessment, including any future use of the 2023 at-the-market share-sale program.
- Whether supplier qualification and manufacturing levels support margin recovery without disrupting product availability.
- The continuing effects of expanded compensation liabilities, share-based awards and potential dilution.