AVITA Medical, Inc. — Form 10-Q summary
Reporting period: Fiscal third quarter and nine months ended March 31, 2021; filed May 13, 2021. The filing is for 2021, notwithstanding the request metadata’s “2020 Q3” label. Financial amounts below are in U.S. dollars.
Business context and key financial metrics
AVITA is a commercial-stage regenerative tissue company whose lead product, RECELL, is FDA-approved in the U.S. for acute thermal burns in adults. It is pursuing clinical studies for expanded indications, including vitiligo, pediatric scalds and soft-tissue reconstruction.
| Metric | Three months ended March 31, 2021 | Nine months ended March 31, 2021 |
|---|---|---|
| Revenue | $8.8 million | $18.9 million |
| Gross profit / margin | $6.6 million / 76% | $15.0 million / 79% |
| Operating loss | $6.0 million | $21.8 million |
| Net loss | $6.0 million; $0.26 per share | $21.9 million; $1.00 per share |
| Operating cash used | Not separately stated | $22.0 million |
At March 31, 2021, cash was $114.9 million and restricted cash was $0.2 million; current assets were $123.7 million and current liabilities $7.1 million. Total liabilities were $9.1 million, including $1.7 million of operating lease liabilities; the company reported no significant external borrowing. Cash and restricted cash totaled $115.1 million. Net cash used in investing activities was $1.0 million, while financing provided $64.0 million during the nine-month period.
Changes versus comparable periods
- Third-quarter revenue rose 126% year over year; nine-month revenue rose 82%. Growth was driven substantially by BARDA product deliveries. Commercial revenue also grew: U.S. sales increased 21% in the quarter and 46% for the nine months, per management.
- BARDA product sales contributed $4.1 million in the quarter and nine-month period; BARDA accounted for approximately 47% of quarterly and 22% of nine-month revenue. Third-quarter gross margin fell to 76% from 84%, which management attributed to BARDA’s lower contracted product price; nine-month gross margin was 79%, described as flat year over year.
- Third-quarter net loss narrowed from $15.0 million to $6.0 million; nine-month net loss narrowed from $29.1 million to $21.9 million. Lower operating expenses and higher revenue contributed to the improvement.
- Research and development expense increased 65% for the quarter and 64% for the nine months, primarily reflecting increased vitiligo trial activity and pipeline investment. General and administrative expense declined, partly because prior-year share-based compensation was higher.
- Operating cash use increased to $22.0 million from $16.8 million for the nine months, reflecting higher R&D and cross-listing costs. The company raised approximately $69.1 million gross through a March 2021 share offering, incurring $5.1 million of issuance costs; shares outstanding increased to 24.8 million from 21.5 million at June 30, 2020.
Outlook, risks and unusual items
- Management said existing and future resources and operating revenue were expected to cover working capital needs for at least 12 months, while also noting that the company expects to use cash reserves until U.S. product sales can fund ongoing operations and may seek further capital. If unable to raise capital, it may need to reduce spending, including on R&D.
- COVID-19 restrictions affected hospital access, product promotion, clinical-trial enrollment and procedure volumes; management said the pandemic’s future impact remained uncertain. Supply-chain disruption and delays to studies could also affect results.
- Management reported that approximately 50% of revenue excluding BARDA came from 20 accounts, leaving sales exposed to disruptions at hospitals and burn centers. BARDA concentration and the lower-margin nature of its product deliveries are also relevant to assessing revenue quality and margins.
- The BARDA contract covers procurement of 5,614 RECELL units and emergency-preparedness services. As of March 31, 2021, 3,020 units had been delivered and accepted; the contract requires inventory management through December 31, 2023. Remaining performance obligations were estimated at $4.5 million.
- No material litigation was reported, and no material subsequent events were identified. The company reported effective disclosure controls and no material change in internal control over financial reporting.
Important facts for investors to verify
- How much future growth is expected from recurring commercial hospital sales versus BARDA deliveries, and how BARDA sales affect gross margin.
- Current RECELL adoption, account concentration and the persistence of U.S. commercial growth as pandemic-related restrictions change.
- Clinical-trial enrollment, timing and regulatory progress for expanded indications, particularly vitiligo, pediatric scalds and soft-tissue reconstruction.
- Cash runway under ongoing operating cash use, the assumptions behind management’s 12-month liquidity statement, and any future financing needs or dilution.
- BARDA delivery, storage and replacement obligations, including the estimated inventory-rotation costs and recognition of remaining contract revenue.