Avita Medical Reports Strong Revenue Growth & Positive Outlook
Taking a Look at Avita Medical's (RCEL) Earnings Report.
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Avita Medical Reports Strong Q3 2024 Financial Results and Gives Business Updates
Last week, Avita Medical (RCEL) reported their Q3 2024 financial results and provided a business update.
Key Financial Highlights:
Commercial Revenue: $19.5M, an increase of approximately 44% compared to the same period in 2023.
Gross Profit Margin: 83.7%.
Cash Position: Approximately $44.4M in cash, cash equivalents, and marketable securities as of September 30, 2024.
Recent Business Updates
Agreement with Regenity Biosciences (July 31, 2024): Entered into a multi-year development and distribution agreement granting AVITA Medical exclusive rights to market, sell, and distribute Cohealyx, a branded collagen-based dermal matrix.
Amended Credit Agreement with OrbiMed (November 7, 2024): Forgoing access to an additional $50M in funding in exchange for the removal of the 12-month trailing revenue covenant for the period ending December 31, 2024. This mutually beneficial arrangement enhances financial flexibility.
Future Milestones
FDA Approval of RECELL GO Mini: Anticipated by December 31, 2024.
510(k) Clearance of Cohealyx: Expected before year-end 2024, with a planned market launch in January 2025.
Post-Market Clinical Study for Cohealyx: Set to initiate in Q1 2025 to validate preclinical findings.
Financial Guidance
Fourth Quarter 2024 Revenue: Expected to range between $22.3M and $24.3M, reflecting growth of approximately 58% to 72% over Q4 2023.
Full-Year 2024 Revenue: Projected to be within the previously provided guidance of $68M to $70M, representing growth of approximately 37% to 41% over full-year 2023.
Profitability Goals: Confirming guidance to achieve cash flow break-even and GAAP profitability no later than the end of Q3 2025.
Third Quarter 2024 Financial Results
Revenue
Commercial Revenue: $19.5M for the quarter ended September 30, 2024, an increase of $5.9M or 43.8% compared to $13.6M in the same period of 2023.
Drivers of Growth: Accelerated transition to RECELL GO, deeper penetration within existing customer accounts, and acquisition of new accounts for full-thickness skin defects.
Profitability
Gross Profit Margin: 83.7%, slightly down from 84.5% in Q3 2023.
Reason for Decrease: Ongoing engineering and validation costs associated with the RECELL GO durable and disposable cartridge.
Operating Expenses
Total Operating Expenses: $30.2M, up from $21.1M in Q3 2023.
Sales and Marketing Expenses: Increased by $4.6M due to employee-related costs—including salaries, benefits, commissions, professional fees, and travel expenses—as a result of expanding the commercial organization.
General and Administrative (G&A) Expenses: Rose by $3.5M, driven by higher salaries and benefits, severance benefits, deferred compensation expenses, and professional fees, partially offset by lower other corporate expenses.
Research and Development (R&D) Costs: Increased by $1M, primarily due to employee compensation costs related to the expanded team of medical science liaisons.
Other Financial Metrics
Interest Expense: Increased by approximately $1.3M compared to Q3 2023, attributed to interest on long-term debt from the OrbiMed Credit Agreement, with a principal amount of $40.0M.
Other (Expense) Income, Net: Decreased by $1.7M to an expense of $1.1M from income of $0.6M in Q3 2023.
Current Period Details: Non-cash charges of $1.0M and $0.8M related to changes in fair value of debt and warrant liability, respectively, offset by $0.6M in investment income.
Prior Period Details: Income consisted of $0.7M from investments, offset by $0.1M in other losses.
Net Loss
Net Loss: $16.2M, or $0.62 per basic and diluted share, compared to a net loss of $8.7M, or $0.34 per basic and diluted share, in Q3 2023.
Cash Position
Cash, Cash Equivalents, and Marketable Securities: Approximately $44.4M as of September 30, 2024.
My Take
Avita delivered a solid quarter, and I continue to be impressed by their remarkably high gross margins—unusually strong for a company of their size, though these margins have fluctuated. I'm curious to see how their margins will evolve as they scale up and bring RECELL GO to market. While commercial execution is crucial, management has proven adept in this area. They've overpromised on guidance in the past, which has humbled them and led to a more cautious approach moving forward. However, I think Wall Street may be underestimating their potential with RECELL GO and Cohealyx. This suggests to me that the current stock levels are reasonable for accumulation. Personally, I'll be looking to acquire more shares of RCEL when I'm able.