Avita Medical Drops Nearly 30% On Updated Revenue Expectations
Taking a Look at Avita Medical (RCEL).
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What’s The Deal Avita?
This past week, Avita Medical (RCEL) issued a press release regarding its expected revenues for Q1 2024. The details disclosed reveal significant challenges facing the company, which have led to a nearly 30% drop in its share price. The company acknowledges it is struggling to convert new accounts for the wounds indication, a process that is taking longer than expected to translate into sales. Despite a healthy number of accounts in the value analysis committee (VAC) process, RCEL has missed its internal targets by a significant margin. This discrepancy raises questions about the accuracy of their initial projections.
Management remains optimistic, however, expecting to meet the lower end of the 2024 revenue guidance, projected at around $78.5M. This optimism exists despite the company's current trajectory suggesting otherwise. Nine months after its approval, the ramp-up of the wounds indication, which was expected to be supported by existing infrastructure in burns, has had little immediate impact. This slow progress suggests that if the VAC process is merely delayed, the situation could soon resolve. However, this will be an area to watch closely and should receive more color on their earnings call.
Another concerning issue is the significant deviation from their internal targets. At this point, given the numbers provided in the press release—including total accounts, new accounts added in Q1, and accounts in the VAC—I am skeptical about this company achieving its previously stated guidance range without adjustments.
Unfortunately, what was once a big winner in my personal portfolio has now become a questionable long-term investment. The market seems to be bracing for minimal revenue growth in 2024, possibly indicating a transition year. If this is the case, it would necessitate recalibrating expectations for the company's growth trajectory. While RCEL appears to still be in a solid position (I think), and there's really no immediate cause for panic, investors should remain vigilant. Upon the major decline, I added another 50 shares to my position and will remain cautious going into the Q1 2024 earnings call.