February 19

AVITA Medical (AVH) : Skin solution

AVITA Medical is a regenerative medicine group with a technology platform positioned to address unmet medical needs in burn injuries, trauma injuries, chronic wounds, and dermatological and aesthetics indications. Avita has a distribution agreement with Stedical Scientific to exclusively sell its PermeaDerm products in the US for the next five years, with the option to renew thereafter. Avita will share 50% of the revenue. We increase our gross profit forecasts by 3% on average over the next nine years, but we maintain our $5.40 fair value estimate largely due to the weaker US dollar. There is an opportunity for Avita to cross-sell products, but we expect additional marketing expenses would also required.
PermeaDerm first received regulatory approval in 2016 and is a bio-synthetic matrix that complements Avita’s RECELL product for the treatment of wounds.

We expect Avita’s international expansion plan to help provide a path to profitability by late calendar 2025. A quicker transition to profitability is unlikely, however, and we concede there is a wide range of potential outcomes based on the success of its use in vitiligo, which is reflected in our higher risk rating. We expect Avita’s first cash-flow positive fiscal year to be 2026. Avita also announced fourth-quarter 2023 commercial revenue of US$14.1 million, up a relatively soft 4% on the third quarter but in line with our forecast. This was due to longer hospital approval timelines for certain customers previously flagged, and we do not foresee this affecting Avita’s long-term opportunity.


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