AVITA Medical Inc

OVERVIEW

AVITA Medical is a commercial-stage regenerative medicine company transforming the standard of care in wound care management and skin restoration with innovative devices. At the forefront of our portfolio is our patented and proprietary RECELL® System (“RECELL System” or “RECELL”), approved by the United States Food & Drug Administration (“FDA”) for the treatment of thermal burn wounds and full-thickness skin defects, and for repigmentation of stable depigmented vitiligo lesions. RECELL harnesses the regenerative properties of a patient’s own skin to create an autologous skin cell suspension, Spray-On Skin™ Cells, delivering a transformative solution at the point of care. This breakthrough technology serves as the catalyst for a new treatment paradigm enabling improved clinical outcomes.

CORPORATE HISTORY

AVITA Australia, the former parent company of AVITA Medical, was founded in December 1992. AVITA Australia began trading its American Depositary Shares on the Nasdaq Capital Market (“Nasdaq”) under the symbol “RCEL” on October 1, 2019. Today, our common stock trades on the Nasdaq under the symbol “RCEL” and our CHESS Depositary Interests (“CDIs”) are traded on the ASX under the symbol “AVH.”

STRATEGY

AVITA Medical is focused on becoming the leading provider of regenerative medicine addressing unmet medical needs in burn injuries, full-thickness skin defects, and in skin repigmentation, such as vitiligo. We will continue to drive commercial revenue growth to generate positive cash flow and achieve operating profit. To achieve these objectives, we intend to:

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Become the standard of care in the U.S. burns industry by increasing RECELL penetration and adoption in burn centers

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Expand into U.S. trauma centers to increase utilization of RECELL for the treatment of full-thickness skin defects

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Launch RECELL GO™ following FDA approval to increase market adoption and expand our customer base

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Expand our global presence within the European Union and Australia through the exclusive use of third-party distributors

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Continue to build upon commercial activities in Japan through our partnership with COSMOTEC Company, Ltd (“COSMOTEC”) with our current Pharmaceuticals and Medical Devices Act (“PMDA”) approval for RECELL with an indication in burns

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Continue to pursue business development opportunities that are complementary to our core RECELL System indications and/or our targeted markets, such as the agreement with Stedical Scientific, Inc. Refer to Footnote 20 for further details

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Establish commercial payor coverage for the RECELL System in the U.S. for the treatment of vitiligo lesions; initial phase of coverage expected during the fourth quarter of 2025

PRODUCT PORTFOLIO

RECELL Platform

RECELL is a single use, stand-alone, battery operated, autologous cell harvesting device containing enzymatic and buffer solutions, sterile surgical instruments, and actuators. RECELL is FDA approved for the treatment of thermal burn wounds and full-thickness skin defects, and for repigmentation of stable depigmented vitiligo lesions. The platform technology of the RECELL System enables a thin split-thickness skin sample from the patient to be processed and prepared, producing an autologous cellular suspension called Spray-On Skin Cells. These Spray-On Skin Cells are prepared at the point of care in as little as 30 minutes, providing a new way to treat thermal burn wounds and full-thickness skin defects.

The regenerative skin cell suspension includes the patient's own skin cells, including keratinocytes, fibroblasts, and melanocytes, all of which play critical roles in skin regeneration. The application of these cells stimulates healing and repigmentation throughout the wound bed. The patented and proprietary platform technology underlying the Spray-On Skin Cell suspension originated in Australia, based on the seminal work of Professor Fiona Wood and fellow scientist Marie Stoner. In September 2018, the FDA approved RECELL as a Class 3 device through a premarket approval (“PMA”) for the treatment of second and third-degree acute thermal burn injuries in patients 18 years and older. Following receipt of our original PMA, we commenced commercialization of the RECELL System in January 2019 in the United States.

In June 2021, the FDA approved expanded use of RECELL in combination of meshed autografting for acute full-thickness thermal wounds in both pediatric and adult patients, and for full-thickness thermal burns greater than 50% total body surface area (“TBSA”). As a result of having achieved an expanded indication for use in pediatric burns, the Biomedical Advanced Research and Development Authority (“BARDA”) funded U.S. Pediatric Burns trial has been closed to new enrollment.

In February 2022, the FDA approved a PMA supplement for the RECELL Autologous Cell Harvesting Device, an enhanced ease-of-use device aimed at providing clinicians a more efficient user experience and streamlined workflow.

On June 7, 2023, the FDA approved a PMA supplement for full-thickness skin defects based on results from our pivotal trial for soft tissue repair and reconstruction. Following this approval, we commenced a commercial launch on June 8, 2023.

On June 16 2023, the FDA approved a PMA application for the repigmentation of stable depigmented vitiligo lesions. Following FDA approval, the Company established a three-step framework to secure reimbursement. The first step is a post-market study called, TONE. TONE will evaluate repigmentation using the RECELL device and will also seek to measure the improvement in the quality-of life following treatment of stable vitiligo with RECELL. We expect to submit the study for publication by the end of 2024.The second step is to capture the longitudinal healthcare costs for a vitiligo patient through a health economics, which is also expected to be submitted for publication by the end of 2024. Following publication of both studies, it is expected that conversations with commercial payors will begin during the second quarter of 2025. Subsequently, we anticipate commercial coverage will be rolled out on a regional basis, considering state and geographic factors. The initial phase of coverage is likely to begin in the fourth quarter of 2025, with appropriately sized commercial support as coverage is established.

Additionally, on June 29, 2023, we submitted a PMA supplement to the FDA for RECELL GO™. RECELL GO maintains the FDA Breakthrough Device designation from predecessor devices. On September 29, 2023, the Company received notice from the FDA that additional information regarding the PMA supplement is required for the continuation of a substantive review for RECELL GO. This request, which is not unique to the Breakthrough Device Program, placed the application file on hold while the Company addresses the FDA's questions. A category of questions posed by the FDA requires additional in-house testing, which is substantially completed. Consequently, we expect to submit a response to the FDA no later than February 28, 2024. Upon the submission to the FDA, the application will reenter the 180-day cycle, with 90 days remaining in the review period. This timing would imply FDA approval on May 30, 2024, with a product launch on May 31, 2024.

TARGET MARKETS

Burns

Acute thermal burns are life-threatening and debilitating injuries that are among the most challenging and expensive to manage. These injuries require complex surgical procedures, long and costly hospitalization, and have a high potential for clinical complications and requirement for rehabilitation and scar treatment. In the U.S., approximately 40,000 people have burn injuries severe enough to require hospital admission annually, and it is estimated that 3,300 patients die each year. The majority of patients treated on an inpatient basis in the U.S. are treated in specialized burn centers.

Severe burns (typically defined as second- and third-degree) are commonly treated with autologous split-thickness skin grafts (“STSGs”) to achieve definitive closure of the burn wound. In a STSG, or autograft, donor skin is harvested from a healthy area of the patient’s skin. The donor skin is then typically perforated into a mesh that can be expanded and transferred to cover the prepared burn injury. Treatment with STSG results in additional trauma for the patient due to creation of a new donor site wound. Although the use of STSG has been a standard treatment for more than 50 years, autografting is associated with significant pain, itching, infection, dyschromia, dyspigmentation, delayed healing, and hypertrophic scarring of the donor site.

The clinical benefits of earlier wound closure are well recognized and include increased survival, reduced hospital length of stay, decreased pain duration, and reduced infection-related complications. However, in large burn injuries, the patient may have insufficient donor skin available to allow for immediate and complete treatment of the entire burn injury area when using traditional grafting techniques. The lack of available healthy donor skin in patients with large burn injuries is often the central problem impacting time to autografting and definitive closure of the wounds. In extensively burned patients, surgeons often must wait until the donor sites have healed so they can re-harvest from the sites, resulting in delays in treatment and closure, requiring multiple procedures, and extending hospital stay. While waiting for donor skin, the burn wounds may be temporarily covered by allogeneic skin (allograft, cadaver skin) or xenograft (typically pig skin). The overall cost of treatment with STSG is expensive - for example it would cost approximately $579,000 and 59.4 days in hospital for a patient with a 40% TBSA mixed-depth burn injury to recover and return to normal day to day activities.

The pivotal studies leading to the RECELL System’s FDA PMA for the treatment of acute thermal burns demonstrated that the RECELL System treated burns used 97.5% less donor skin when used alone in second-degree burns, and 32% less donor skin when used with autograft for third-degree burns, compared to standard of care autografting. In these studies, a statistically significant reduction in donor skin required to treat burn patients with the RECELL System was realized without any associated compromise to healing or safety outcomes. Donor site outcomes from the clinical trial for second-degree burns also revealed a statistically significant reduction in patient-reported pain, increased patient satisfaction and improved scar outcomes.

Retrospective studies demonstrated that fewer autografting procedures are required for definitive closure of full-thickness burns when using the RECELL System versus conventional autografts. In pediatric cases (N = 284), treatment with the RECELL System resulted in a 56% reduction in the mean number of autograft procedures required compared to National Burn Repository (“NBR”) data. Additionally, in adult patients with greater than 50% TBSA (N=318), the RECELL System resulted in a 60% reduction in the mean number of autograft procedures versus NBR data.

In addition to robust clinical data, RECELL has proven health economic benefits and a compelling cost-effectiveness model which shows that treatment using the RECELL System for deep partial-thickness burns reduces total treatment costs by an average of 26%, or approximately $37,000, for patients with 10% TBSA and approximately $150,000, for patients with 40% TBSA. For full-thickness burns, treatment using the RECELL System reduced total treatment cost by 3%, or approximately $6,000 for patients with 10% TBSA and by 42% or approximately $243,000, for patients with 40% TBSA. These cost reductions are attributed to decreasing the length of hospital stay, reducing the number of procedures required to close the burn wound, and minimizing the donor site size and associated wound care. All of these cost savings estimates are net of the cost of the RECELL System.

A budget impact model was developed and has been used to calculate the annual budget impact of current standard of care for the treatment of burns versus treatment using the RECELL System for a burn center with 200 patients. The model shows that treatment using the RECELL System reduces annual total treatment costs from approximately $39.4 million to $32.6 million, saving 17% or approximately $6.8 million per year. In addition, real world evidence has been published by the Doctors at IQVIA and funded by the Company and BARDA indicating that these economic savings are demonstrated in a wide range of burn sizes.

The market for the treatment of burns in the U.S. is highly concentrated, with approximately 140 burn centers and approximately 300 burn surgeons who treat the majority of severe burn patients in the country (i.e., ~75%). Accordingly, our target market was predominantly burn centers, of which half are trauma centers. With FDA approval for full-thickness skin defects, we are expanding into these trauma centers, with the goal of capturing approximately 30% of RECELL-eligible burn injuries that are treated outside of dedicated burn centers.

Looking ahead, our goal is to establish RECELL as the standard of care for any burn injury that requires grafting for patients with 5% TBSA injury or greater. In the U.S., we estimate that there are approximately 35,000 patients annually that could benefit from our technology. Each RECELL System can treat up to 10% TBSA, and many patients require more than one device.

AVITA Medical has a policy of providing the RECELL System to a provider only after they have been certified, which includes extensive training in the use of the product and in the aftercare of the patient. In general, we have found that most U.S. burn centers follow the industry-standard process of evaluating the RECELL System and then taking it through their hospital’s Value Analysis Committee (“VAC”) prior to purchasing. In general, most surgeons follow a typical adoption curve, starting from where they see the greatest economic and clinical value, which is the use of RECELL for treatment of larger burns. With time and continued use, surgeons typically progress to adoption of RECELL for smaller, less severe burns and facial burns.

In the U.S., several existing reimbursement codes were in place prior to the commencement of commercial sales of the RECELL System. For inpatient treatment of burn patients, U.S. hospitals are reimbursed under Diagnosis Related Group ("DRG") Codes based on diagnosis of a patient’s injuries. For physicians, Current Procedural Terminology ("CPT") codes for use in RECELL System procedures are recommended by the American Burn Association and are the same for both inpatient and outpatient use. In August 2020, we filed a Transitional Pass-through Payment Application (“TPT”) with The Centers for Medicare & Medicaid Services (“CMS”) to support a separate, additional Medicare payment for use of the RECELL System in the Outpatient Setting. On November 3, 2021, the Company was informed that CMS approved our TPT submission with the code effective as of January 1, 2022. The new “C” code provides additional payment which offsets the cost of the device in hospital outpatient facilities and ambulatory surgical centers for Medicare beneficiaries over a 2-to-3-year period before converting to a permanent code. Following the granting of the code, the Company is working with commercial carriers to ensure broader coverage. The new “C” code is not indication specific and lays the foundation for growth in other indications outside of acute thermal burns (such as soft tissue repair).

Full-Thickness Skin Defects

A wound is a breach in the integrity of the skin, with full-thickness wounds extending through the dermal layer to deeper tissues. Full-thickness skin defects include traumatic avulsion (e.g. degloving), surgical excision (e.g. necrotizing soft tissue infection), or resection (e.g., skin cancer). The cause or origin of the wound directly impacts healing potential, response to treatment options, and likely complications.

Traumatic Wounds. Traumatic wounds are subdivided by mechanism of injury into lacerations, abrasions, avulsions, crush, penetrating, or bites. Traumatic wounds often arise in high-energy circumstances and result in extensive zones of injury with damage to multiple tissue types. Missing cutaneous tissue, macerated edges, and contamination are common and can complicate wound healing. In the U.S., we estimate there are approximately 122,000 annual procedures that are eligible for treatment with RECELL.

Surgical Wounds. Surgical wounds are precise incisions intentionally created to access underlying organs, relieve compartmental pressure, excise diseased cutaneous tissue (infected or severely inflamed or necrotic), or to harvest tissue for autografting (flaps and grafts). In the U.S., we estimate there are approximately 12,500 annual procedures that are eligible for treatment with RECELL.

Surgical Excisions for Cancer. Surgical excisions for cancer are procedures used to remove and treat various skin cancers. In the U.S., we estimate there are approximately 136,000 annual procedures that are eligible for treatment with RECELL.

Chronic Wounds. Chronic wounds are wounds that do not heal within an expected time frame. These types of wounds include diabetic foot ulcers, venous leg ulcers, pressure ulcers, and non-pressure ulcers. In the U.S., we estimate there are approximately 128,000 annual procedures that are eligible for treatment with RECELL.

Similar to the burns indication, full-thickness skin defects are associated with large areas of skin loss and as such, some of the top unmet needs identified by surgeons are closely aligned:

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Reduced donor skin harvesting

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Reduced scarring

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Reduced pain

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Uniform pigmentation with surrounding skin

Given the interest to reduce donor skin harvesting, just as with the burns indication, we designed a clinical trial to demonstrate the use of less donor skin without compromising healing outcomes relative to conventional autografting. The trial was essentially a repeat of the successful previous trial in full-thickness burns, but with a population of patients with full-thickness, non-burn injuries. The study design included two co-primary endpoints based on pairwise comparisons where each subject received both RECELL treatment and standard of care treatment: one endpoint had a hypothesis of superiority for donor skin sparing and the other co-primary endpoint had a hypothesis of non-inferiority for healing. Both co-primary endpoints were met, demonstrating statistically significant donor sparing and non-inferior healing outcomes with RECELL versus standard of care, meaning less skin from the patient is required to repair and close the wound without compromising the healing outcomes relative to convention autografting. In addition to these results, RECELL has been successfully used outside the U.S. for many years and there exist several case reports on the treatment of traumatic injuries that have been the subject of peer-reviewed scientific publications and presentations at medical conferences.

In the U.S., we estimate that there are approximately 400,000 full-thickness skin defect procedures annually that are eligible for treatment with RECELL. The majority of our current burn accounts represent opportunities for use of RECELL in the treatment of full-thickness skin defects. In the second quarter of 2023, we expanded our commercial organization from 30 to 70. Our team is targeting approximately 800 acute wound accounts, representing both burn and trauma accounts. In the first half of 2024, we plan to further expand our commercial organization from 70 to 100.

The approval for the treatment of full-thickness skin defects represents a significant opportunity in which we are leveraging our existing resources while also creating synergies with the burns market. Approximately 50% of the U.S. burn centers are classified as trauma centers. Those trauma centers currently utilizing RECELL are now able to use RECELL to treat full-thickness skin defects as these centers have already approved RECELL through their respective VACs. Further, we are expanding our burn market opportunity by virtue of our approval for full-thickness skin defects as we are extending our reach to include trauma centers.

We anticipate RECELL being used in both the inpatient & outpatient settings across a wide range of wound sizes. From a reimbursement perspective, the same DRG code that is currently being used to treat inpatient burns is now being applied for the treatment of full-thickness skin defects. Additionally, the outpatient TPT “C” code we have been granted for RECELL can also be utilized for the treatment of full-thickness skin defects in the outpatient setting.

Vitiligo

Vitiligo is a disease that causes the loss of skin pigmentation, or color, in patches. The extent of color loss from vitiligo is unpredictable, can affect the skin on any part of the body, and may also affect hair and the inside of the mouth. Vitiligo occurs when melanocytes, the pigment-producing skin cells, die or stop producing melanin, the pigment that gives skin, hair, and eyes color. Vitiligo is believed to be an autoimmune disorder in which a patient’s immune system attacks and destroys the melanocytes in the skin. It may also be caused by heredity factors or a triggering event, such as sunburn, stress, or exposure to industrial chemicals. Vitiligo affects people of all skin types, but it may be more noticeable in people with darker skin. It is estimated that worldwide vitiligo prevalence is between 0.5 to 2% of the population. The condition is not life-threatening or physically painful, but it can significantly alter physical appearance and have negative emotional and psychological consequences, thus causing a cascade of medical conditions with associated costs.

Vitiligo cannot be cured at present, and treatments generally fall into one of two categories:

Treatments to arrest the spread of vitiligo, such as steroid creams and non-steroidal anti-inflammatory creams. There are also a number of therapies under development designed to target the underlying autoimmune disease. One challenge in terms of achieving the desired patient outcome is that stopping the spread of vitiligo may not restore pigmentation to the areas already damaged.

Treatments to restore pigmentation include skin grafting, laser phototherapy (with and without topicals), and Melanocyte-Keratinocyte Transplantation Procedure (“MKTP”). MKTP requires expensive and substantial laboratory equipment and is currently only available in a handful of locations in the U.S.

RECELL does not treat underlying autoimmune disease. Rather, it works to restore pigmentation.

According to the FDA panel in 2021, there is a high level of depression, anxiety, and negative quality of life among vitiligo patients. Interest in vitiligo treatment tends to increase in individuals who have lesions in more visible areas (such as the face, neck and hands) as well as the younger female population. In 2022, over 400,000 patients pursued treatment for vitiligo in the U.S. We estimate that there are approximately 1.3 million people in the U.S. with stable vitiligo and a total addressable market of approximately $5 billion. Vitiligo rates a 7.61 on the Dermatology Life Quality Index (“DLQI”), which is in the same range of other aesthetic dermatological disease analogs which receive healthy positive reimbursement such as Rosacea (5.2), Psoriasis (9.3) and Atopic Dermatitis (12.79).

The market is expected to grow, especially over the next decade, with the advent of novel treatment options including oral and topical Janus Kinase (“JAK”) inhibitors, such as Opzelura. Although these new products will both stabilize and re-pigment some patients, it is anticipated that many patients will need additional modes of treatment for re-pigmentation. Products (immunosuppressants) working to stabilize vitiligo and RECELL (working to restore pigmentation) are complementary. Further, large pharmaceutical companies with immunosuppressant assets in development will likely invest in disease awareness campaigns which will further grow consumer awareness and the market.

Following FDA approval, we established a three-step framework to secure reimbursement. The first step is a post-market study called, TONE. The second step is to initiate a health economics study to capture the longitudinal healthcare costs for a vitiligo patient. We expect to submit these two studies for publication by the end of 2024. Following publication of these studies, we plan to start conversations with commercial payors during the second quarter of 2025. Consequently, we anticipate commercial coverage will be rolled out on a regional basis, considering state and geographic factors. The initial phase of coverage is likely to begin in the fourth quarter of 2025, with appropriately sized commercial support as coverage is established.

INTERNATIONAL STRATEGY

In international markets, the RECELL System has received various approvals and registrations to promote skin healing in a wide range of applications including, burns, full-thickness skin defects, and vitiligo. These endorsements include

TGA registration in Australia, CE mark approval in Europe, and PMDA approval in Japan under the Pharmaceuticals and Medical Devices Act for burns. Our global commercialization strategy is focused on Australia, the European Union, and Japan.

In February 2019, we entered into a partnership with COSMOTEC, an M3 Group company, to market and distribute the RECELL System in Japan. Following the approval of reimbursement pricing by the Japanese Ministry of Health, Labor, and Welfare, COSMOTEC began the commercial launch of RECELL in September 2022.

As part of our strategic growth plans, we plan to expand our global presence within the European Union and Australia through the exclusive use of third-party distributors. In November 2023, we entered into our first European distribution partnership with PolyMedics Innovations GmbH. PolyMedics Innovations will lead our expansion into Germany, Austria, and Switzerland.

We plan to actively identify new distribution partners in our focused markets over the next 6 to 12 months.

RESEARCH & DEVELOPMENT

Our research and development activities are focused on advancing our innovative products and building a comprehensive portfolio of solutions, as well as developing clinical applications to advance the management of wound care. Additionally, we continue to conduct clinical studies to provide further efficacy and health economic evidence.

We continue to commit resources to product development to ensure the RECELL system continues to evolve and that we maintain robust patent protection. In June 2023, we submitted a PMA supplement to the FDA for RECELL GO™. RECELL GO is comprised of a reusable durable base unit and a single-use sterile cartridge. The RECELL GO system aims to control the current manual process of cell disaggregation and filtration, as well as soak time, reducing variability across medical providers compared to the current device. This revolutionary design will also reduce training requirements, allowing us to leverage our sales team more effectively. In turn, we believe the reduction in training medical professionals will lead to increased adoption across our indications and the broader market. Additionally, RECELL GO offers us an opportunity to expand our intellectual property portfolio. With each iteration of our RECELL System, we anticipate preservation of the therapeutic power of Spray-on Skin Cells, deployed in devices that become appropriate for use in an increasing range of clinical settings. This is particularly important as we aim to enter the dermatology space, where there is a shift toward an emphasis on the volume of patients treated in a day.

RECELL GO maintains the FDA Breakthrough Device designation from predecessor devices. On September 29, 2023, we received notice from the FDA that additional information regarding the PMA supplement is required for the continuation of a substantive review for RECELL GO. This request, which is not unique to the Breakthrough Device Program, placed the application file on hold while we address the FDA's questions. A category of questions posed by the FDA requires additional in-house testing. The testing is already underway and we expect to submit a response to the FDA no later than February 28, 2024. Upon submitting a response to the FDA, the application will reenter the 180-day cycle, with 90 days remaining in the review period. This timing would imply a product launch on May 31, 2024.

TONE will evaluate repigmentation using the RECELL device and will also seek to measure the improvement in the quality-of life following treatment of stable vitiligo with RECELL. TONE, including publication, is expected to be complete by the end of 2024. The second step is to initiate a health economics study to capture the longitudinal healthcare costs for a vitiligo patient, which is expected to be completed by the end of 2024. The purpose of these studies is to demonstrate how treating vitiligo with RECELL can significantly reduce the lifetime healthcare cost of patients. As a result, commercial payors will stand to benefit economically by providing coverage of RECELL for the repigmentation of stable depigmented vitiligo lesions. Following publication of these studies, we expect conversations with commercial payors to begin during the second quarter of 2025. Commercial coverage will be rolled out on a tiered basis based on state and geographic factors. The Company anticipates that the initial phase of reimbursement coverage will likely begin in the fourth quarter of 2025, with appropriately sized commercial support as coverage is established.

SALES AND MARKETING

Our commercial organization is focused on clinical case support, staff training, and building awareness to further expand interest in the clinical and economic benefits of RECELL. It is not uncommon in the treatment of wounds to have rotating staff and it is our commitment for all those working with RECELL to be comfortable with the technology both during the procedure as well as during aftercare.

We sell RECELL in the U.S. through our direct commercial organization of 70 individuals, which consists of 10 managers, 40 regenerative tissue specialists, and 20 clinical training specialists. Our commercial organization is composed of highly experienced medical sales representatives as well as former burn and trauma nurses. This organization covers both thermal and non-thermal wound accounts. We plan to further expand our commercial organization to 108 in the first half of 2024.

HUMAN CAPITAL

AVITA Medical’s investment in the U.S. commercial success of RECELL has led to the development of best-in-class teams supporting sales, clinical education and training, reimbursement, medical affairs, as well as corporate management and infrastructure. As of December 31, 2023, we had 207 full-time and part-time employees. As of December 31, 2023, 99% of our workforce was based in the United States, with a significant number of our management and professional employees having prior experience with leading medical product, biotech, or pharmaceutical companies. None of our employees are covered by collective bargaining agreements.

We embrace differences, diversity and varying perspectives amongst our employee base and are proud to be an equal opportunity employer. We do not discriminate based on race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, genetic information, marital status, sex, gender, gender identity, gender expression, age, military or veteran status, sexual orientation or any other protected characteristic established by federal, state, or local laws. A diverse workforce as well as an inclusive culture and work environment are fundamentally important and strategic to us, beginning with our Board of Directors and CEO and extending to all levels of the Company. As of December 31, 2023, the Directors of the Company were 28.5% female, our senior executive team was 30% female and our total employee base was 50.2% female. In addition to promoting gender diversity, we encourage ethnically diverse talent when recruiting as well as providing employee training and development focusing on workplace diversity and inclusion.

INTELLECTUAL PROPERTY

We seek to protect our intellectual property, core technologies, and other know-how through a combination of patents, trademarks, trade secrets, confidentiality agreements, licenses, and IP assignments with our employees, consultants, business partners, suppliers, customers, and others. Additionally, we rely on our research and development program, clinical trials, know-how and marketing programs to advance our products and product candidates, and to expand our intellectual property rights.

As powerful complements to our IP rights, we also believe that the regulatory approval processes around the world will continue to provide additional and significant barriers to entry against meaningful competition.

As of December 31, 2023, AVITA Medical’s patent portfolio comprised 22 patent grants and 31 pending patent applications worldwide, with patent coverage either secured or in progress in the U.S., China, Japan, Australia, Brazil, Canada, France, Germany, Hong Kong, Italy, Spain, the United Kingdom, and at the European Patent Office (“EPO”).

AVITA Medical’s patent portfolio covers the original RECELL product, all-in-one RECELL, RECELL GO, methods of using the RECELL System, methods of evaluating the therapeutic potential of Regenerative Epidermal Suspension (“RES”), a cell-free and allogeneic RES supernate, and methods of preparing a cell suspension with exogenous agents to promote wound healing. We expect that our research and development pipeline, strategic partnerships, and improvements to the RECELL System and RES will result in additional and diverse patent applications in the next calendar year.

In 2019, AVITA Medical filed a Patent Term Extension (“PTE”) application with the U.S. Patent and Trademark for U.S. Patent No. 9,029,140, which covers the RECELL System, as a result of patent term lost to the FDA regulatory process. The PTE application was approved, and the patent term of U.S. Patent No. 9,029,140, has been extended to April 9, 2024. AVITA Medical’s other patents have expected expiration dates ranging from 2032 to 2033, while AVITA Medical’s pending patent applications, if granted, would have expiration dates ranging from 2032 to 2042.

Additionally, AVITA Medical owns and defends a global trademark portfolio comprising 142 registered trademarks, common or state law trademarks, and pending trademark applications, including “AVITA Medical,” the AVITA Medical logo, “RECELL,” “Spray-On Skin,” the RECELL System logo, “RES,” and others in the U.S. and international markets. In addition to patent and trademark protection, the Company also relies on trade secrets, know-how, and other proprietary information to develop and maintain our competitive position. We have robust confidentiality and invention disclosure procedures in place that incentivize our employees to innovate and allow us to maintain our rights to AVITA Medical innovations.

FACILITIES

AVITA Medical leases approximately 17,500 square feet of administrative and office space in Valencia, California that is currently leased through October 31, 2026. The Company operates an FDA-registered production plant in Ventura, California, in a 27,480 square foot facility that is currently leased through September 30, 2027. The Ventura facility has one 3-year option to extend the lease, at our sole option, which allows for a total lease extension period through September 30, 2030. The Company also has an administrative office lease in Irvine, California of approximately 10,700 square feet that is currently leased through the end of July

2028. We also lease a limited amount of incubator space in Irvine, California for scientific research and product development activities.

MANUFACTURING, SUPPLY AND PRODUCTION

We produce the RECELL System in the Ventura facility under current Good Manufacturing Practices (“cGMP”) and per ISO 13485, which also meets the regulatory requirements of other jurisdictions in which we sell the RECELL System. We maintain a state of regulatory compliance and inspection readiness at all times, and any future material changes to our production processes for the RECELL System will be submitted for approval to the FDA and regulatory authorities in other jurisdictions as required.

Within the Ventura facility we perform the final manufacturing, assembly, packaging, and warehousing of the RECELL System. Also included within the Ventura facility is a secure controlled-temperature warehouse that complies with the vendor-managed inventory (“VMI”) requirements of the contract with BARDA. The VMI contract with BARDA terminated on December 31, 2023.

AVITA Medical sources multiple components, sub-assemblies, and materials from third-party suppliers, who are required to meet our cGMP quality specifications and associated regulatory requirements. To ensure continuity of supply, we maintain multiple sources of supply for key components, subassemblies and materials, and the majority of critical raw materials and services have multiple qualified suppliers. While a small number of materials remain single sourced, we are actively working to qualify and validate additional suppliers for these materials as we continue to evaluate methods of removing risk from the supply chain for the RECELL System. We believe that our current manufacturing capacity at the Ventura facility is sufficient to meet the expected commercial demand for the RECELL System for burns, as well as other indications under development, for the foreseeable future.

AVITA Medical serves the U.S. burn market by shipping the RECELL System directly from our Ventura facility to U.S. burn centers. From time-to-time we may also store small quantities of the RECELL System at satellite distribution sites within the U.S. to better support access of the RECELL System to our U.S. customers.

BARDA CONTRACT

We have a contract with BARDA, under the Assistant Secretary for Preparedness and Response, within the U.S. Department of Health and Human Services. The contract provided funding for the development of the RECELL System. We entered into the contract on September 29, 2015, with the original contract period ending on December 31, 2023. We have executed a contract modification with BARDA to extend the period of performance to September 28, 2025.

Under the original contract, BARDA has provided funding and technical support for the development of the RECELL System. BARDA funded the completion of two randomized, controlled pivotal clinical trials, as well as Compassionate Use and Continued Access programs, and development of the health economic model demonstrating the cost savings associated with the RECELL System. BARDA exercised a contract option to fund a randomized, controlled clinical trial for a pediatric early intervention study which commenced enrollment in March 2020, and closed to enrollment in June 2021, subsequent to FDA-approval of an expanded RECELL indication for use that includes treatment of pediatric patients. The BARDA contract also supported the Company’s clinical trial in soft-tissue reconstruction, which led to the full-thickness skin defect indication. Also included in the BARDA contract was a provision for procurement of the RECELL System under a vendor-managed inventory system to bolster emergency preparedness in the amount of $7.6 million and an additional $1.6 million to support the logistics of emergency deployment of RECELL Systems for use in mass casualty or other emergency situations. We were contracted to manage this inventory of product until the earlier of the federal government requesting shipment or at contract termination on December 31, 2023. As of December 31, 2023, we had received cumulative payments of $40.3 million under the original BARDA contract. Under the new contract, BARDA shall have access to AVITA Medical’s RECELL inventory in the event of a national emergency. BARDA shall pay for the devices requisitioned under this inventory along with a nominal annual maintenance fee to ensure first right of access.

COMPETITION

We currently believe that there is no direct competition for the RECELL system. Additionally, our innovative technology is supported by robust intellectual property rights and we believe that regulatory approval processes around the world will continue to provide additional and significant barriers to entry against meaningful competition. Despite these meaningful competitive advantages, the medical device, biotechnology, and pharmaceutical industries are highly competitive and subject to rapid advancements in technology, as well as changes in practice. In the future, we may face competition from various sources, including medical device, pharmaceutical, and wound care companies, academic and medical institutions, governmental agencies, medical practitioners, and public and private research institutions, among others. Consequently, any product that we successfully develop and/or commercialize will compete with both existing therapies and any new therapies that may emerge in the future.

In the burns and non-burn wound markets, our indirect competitor is primarily split-thickness autografts. While RECELL complements autografts for the treatment of various wound injuries, split-thickness autografts represent the traditional surgical procedure and the current standard of care. However, based on our clinical trials, we believe that the RECELL system offers sustainable competitive clinical and economic advantages over the traditional surgical procedure. Additionally, in the burns market, Vericel Corporation markets Epicel® as a permanent skin replacement for deep-dermal or full-thickness burns; however, Epicel is a cultured epidermal autograft grown ex vivo and exclusively used to treat burns comprised of greater than or equal to 30% of TBSA.

GOVERNMENT REGULATIONS

The production and marketing of the RECELL System and any additional product candidates developed in future ongoing research and development activities are subject to regulation by numerous governmental authorities including the FDA in the U.S. and similar agencies in other countries throughout the world. Pursuant to its authority under the Federal Food, Drug, and Cosmetic Act (the “FD&C Act”), the FDA has jurisdiction over medical devices in the U.S. The FDA regulates the design, development, manufacturing, and distribution of medical devices to ensure that medical products distributed domestically are safe and effective for their intended uses. The FD&C Act classifies medical devices into one of three categories based on the risks associated with the device and the level of control necessary to provide reasonable assurance of safety and effectiveness. Devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices, or devices deemed not substantially equivalent to a previously 510(k) cleared device are categorized as Class III. These devices typically require submission and approval of a PMA. The RECELL System is categorized as a Class III medical device, and in September 2018 the FDA granted our PMA for use in the treatment of acute thermal burns in patients 18 years and older. In June 2021, the FDA approved a supplement to our PMA to expand the use of RECELL in pediatric patients with full-thickness burns. In June 2023, the FDA approved a supplement to our PMA to expand the use of RECELL for full-thickness skin defects and an original PMA to expand the use of RECELL for the repigmentation of stable depigmented vitiligo lesions.

To support PMA supplements in the U.S. or applications for approval in other regions, the completion of additional clinical and non-clinical studies and supporting development activities will likely be required. Clinical trials can take many years to complete and require the expenditure of substantial resources. The length of time varies substantially according to the type, complexity, novelty and intended use of the product candidate. We cannot make any assurances that once clinical trials are completed by us or a collaborative partner, that we will be able to submit as scheduled a marketing approval request to the applicable governmental regulatory authority, or that such request and application will be reviewed and cleared by such governmental authority in a timely manner, or at all. Although we intend to make use of fast-track and abbreviated regulatory approval programs when possible and commercially appropriate, we cannot be certain that we will be able to obtain the clearances and approvals necessary for clinical testing or for manufacturing and marketing our product candidates. Delays in obtaining regulatory approvals could adversely affect the development and commercialization of our product candidates and could adversely impact our business, financial condition, and results of operations. During the course of clinical trials and non-clinical studies, product candidates may exhibit unforeseen and unacceptable safety considerations. If any unacceptable side effects were to occur, we may, or regulatory authorities may require us to, interrupt, limit, delay or abort the development of our potential products.

Any products manufactured or distributed by us pursuant to regulatory approvals are subject to continuing regulation by the FDA and similar agencies in other countries, including maintaining records supporting manufacturing and distribution under cGMP regulations, periodic reporting, advertising, promotion, compliance with any post-approval requirements imposed as a conditional of approval, recordkeeping and reporting requirements, including adverse events experiences. After approval, material changes to the approved product, such as adding new indications or other labeling claims, or changes to the manufacturing process, are subject to prior approval by FDA and other regulatory agencies. Medical device manufacturers and their subcontractors are required to register their establishments with the FDA, certain state agencies and international agencies. Subcontractors are subject to periodic announced and unannounced inspections by the FDA and other agencies for compliance with cGMP requirements. We have established processes in place for categorization of vendor criticality and the associated activities for qualification and monitoring of vendors. These activities include but are not limited to, requiring certification of supplier in conformance to relevant cGMP regulations and other FDA and international agency regulatory requirements, approved supplier lists, and regular Company conducted audits. In addition, all goods and services purchased from suppliers by us must be purchased from only those suppliers on the approved supplier list. Furthermore, the Company itself will continue to comply with all relevant FDA requirements and regulations and any applicable international agency regulatory requirements in its continued manufacturing and promotion of its FDA approved commercial product.

In addition to FDA approval in the U.S., the RECELL System has received various approvals and registrations in international markets. The RECELL System is TGA-registered in Australia, received CE-mark approval in Europe, and received Japan’s Pharmaceuticals and Medical Devices Act (PMDA) approval for burns in Japan.

HEALTHCARE LAWS AND REGULATIONS

AVITA Medical is a manufacturer of a medical device and therefore we are subject to regulations by the FDA and various federal and state healthcare laws and regulations. These regulations govern our advertising and promotional practices, our interactions with healthcare providers (“HCPs”), and our reporting of any payments made to HCPs. AVITA Medical is committed to the highest standards of business conduct in accordance with the AdvaMed Code of Ethics.

Interactions with Healthcare Providers

Providing any benefits or advantages to HCPs in order to induce or encourage the use or referral of AVITA products is strictly prohibited by both U.S. and international laws and regulations. Restrictions under applicable Federal and State healthcare laws and regulations include but are not limited to the following:

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The Federal healthcare Anti-Kickback Statute (“AKS”). AKS prohibits any person from soliciting, offering, receiving, or providing any remuneration in cash or in kind, whether directly or indirectly, to induce or reward the referral, purchase, lease, order, or recommendation of any item or service for which payment may be made in whole or in part under a federal healthcare program such as Medicare and Medicaid.

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The Federal False Claims Act (“FCA”). FCA may be enforced by either the U.S. Department of Justice or private whistleblowers should they choose to bring civil (qui tam) actions on behalf of the federal government. The FCA imposes civil penalties, as well as liability for treble damages and for attorneys’ fees and costs, on individuals or entities who knowingly present, or cause to be presented, claims for payment that are false or fraudulent to the federal government. FCA also imposes similar penalties on those who make a false statement material to a fraudulent claim, or who improperly avoid, decrease, or conceal an obligation to pay money to the federal government.

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State and foreign laws and regulations may apply to sales or marketing arrangements and claims involving healthcare devices or services reimbursed by non-governmental third-party payors.

Additionally, certain state laws require medical device companies to comply with voluntary guidelines in our interactions with healthcare providers promulgated by global trade associations and relevant compliance guidance issued by the U.S. Department of Health and Human Services, Office of Inspector General. Such laws prohibit medical device manufacturers from offering or providing certain types of payments or gifts to health care providers; and/or require the disclosure of gifts or payments to healthcare providers.

Interactions with Foreign Officials and Entities

The U.S. Foreign Corrupt Practices Act (“FCPA”) prohibits any U.S. individual or business from paying, offering, or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party, or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the U.S. to comply with accounting provisions requiring the companies to maintain books and records that accurately and fairly reflect all transactions of the companies, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations. We are also subject to similar regulations under the Australian bribery laws and other anti-corruption laws that apply in countries where we do business.

Federal and State Reporting

Pursuant to the federal National Physician Payment Transparence Program (Open Payments) Act, AVITA Medical is required to report annually to the Centers for Medicare and Medicaid Services within the U.S. Department of Health and Human Services. Additionally, in adhering to federal reporting requirements, all relevant state marketing reporting regulations, any payments, and transfers of value to physicians and teaching hospitals, as well as other categories of disclosures must be reported annually.

Privacy

AVITA Medical must comply with the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) which imposes criminal and civil liability for, among other conduct, making false statements relating to healthcare matters and executing a scheme to defraud any healthcare benefit program. It also imposes criminal and civil liability and penalties on those who violate requirements such as mandatory contractual terms which are intended to safeguard the security, transmission and use of individually identifiable health information.

Various state and foreign laws also govern the privacy and security of health information such as the European Union General Data Protection Regulation (“GDPR”). GDPR governs the use of individual health data and other personal information and imposes strict obligations and restrictions on the ability to use, access, process, and disseminate health data from clinical trials and adverse event reporting, among others.

ENVIRONMENTAL, HEALTH AND SAFETY MATTERS

We are subject to extensive environmental, health and safety laws and regulations in a number of jurisdictions, primarily in California and the U.S., governing, among other things: the use, storage, registration, handling, emission and disposal of chemicals, waste materials and sewage; chemicals, air, water and ground contamination; and air emissions and the cleanup of contaminated sites, including any contamination that could result from spills due to our failure to properly dispose of production waste materials. Our operations at our Ventura manufacturing facility produce a small amount of waste materials that are considered minimally hazardous, and we use a third-party waste disposal company to remove any waste generated during operations from the facility. Our activities require permits from various governmental authorities including local municipal authorities. Local and state authorities may conduct periodic inspections in order to review and ensure our compliance with the various regulations. We are not presently aware of any violations or deficiencies. These laws, regulations and permits could potentially require the expenditure by us for compliance or remediation.

AVAILABLE INFORMATION

The Company files annual, quarterly and current reports, proxy statements and other documents with the Securities and Exchange Commission (“SEC”) under the Exchange Act. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The public can obtain any documents that we file with the SEC atwww.sec.gov. In addition, copies of announcements made by the Company to ASX are available on the ASX website (www.asx.com.au) and also, under the heading “Investors: Press Releases” at the following link on our website (https://ir.avitamedical.com/press-releases). We maintain a website at www.avitamedical.com. Since becoming a domestic U.S. issuer on July 1, 2020, our filings with the SEC, including without limitation, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, are available free of charge on our website under the heading “Investors: Financials _SEC Filings” at the following link on our website (https://ir.avitamedical.com/financials/sec-filings), as soon as reasonably practicable after we file or furnish them electronically with the SEC. Information contained on our website is not part of or incorporated into this annual report.

ORGANIZATIONAL STRUCTURE

Prior to the Corporate Restructuring initiated during fourth quarter, the Company had a total of six subsidiaries and their corporate details and business activities are listed below:

By the end of the fourth quarter of 2023 the business activities of AVITA Medical Pty Limited, AVITA Medical Europe Limited, Visiomed Group Pty Ltd, C3 Operations Pty Ltd and Infamed Pty Ltd were liquidated. AVITA Medical Americas LLC was transferred from C3 Operations Pty Ltd to be directly held by the Company in preparation for each of AVITA Medical Pty Limited, AVITA Medical Europe Limited, Visiomed Group Pty Ltd, C3 Operations Pty Ltd and Infamed Pty Ltd to be deregistered during the course of 2024.

After the Corporate Reorganization (expected to occur by the end of the third quarter in 2024), the Company’s entity structure will be as follows: