AVITA Medical, Inc.

Previous wording

AVITA Medical, Inc. (“we”, “our”, “us”) 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 U.S. Food & Drug Administration (the “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. In the United States, we also hold the rights to market, sell, and distribute PermeaDerm®, a biosynthetic wound matrix, under the terms of an exclusive multi-year distribution agreement (the "Stedical Agreement") with Stedical Scientific, Inc. (“Stedical”). We also entered into an exclusive multi-year development and distribution agreement with Collagen Matrix, Inc. dba Regenity Biosciences (“Regenity”). Following FDA 510(k) clearance, Regenity will manufacture and supply Cohealyx™, an AVITA Medical-branded collagen-based dermal matrix. Under the agreement, we will hold the exclusive rights to market, sell, and distribute Cohealyx in the U.S., with potential expansion into the European Union, Australia, and Japan.

Current wording

AVITA Medical, Inc. (“we”, “our”, “us”) is a leading therapeutic acute wound care company delivering transformative solutions. Our technologies are designed to optimize wound healing, effectively accelerating the time to patient recovery. Our solutions improve the healing outcomes for patients with traumatic injuries and surgical repairs, addressing critical healing needs that arise from unpredictable and life-changing events. At the forefront of our portfolio is our patented and proprietary RECELL® System (“RECELL System” or “RECELL”), approved by the U.S. Food & Drug Administration (the “FDA”) for the treatment of thermal burn wounds and full-thickness skin defects. RECELL harnesses the healing properties of a patient’s own skin to create an autologous skin cell suspension, Spray-On Skin™ Cells, offering an innovative solution for improved clinical outcomes at the point of care. In the United States, we also hold the rights to market, sell, manufacture, and distribute PermeaDerm®, a biosynthetic wound matrix, under the terms of exclusive multi-year distribution and contract manufacturing agreements with Stedical Scientific, Inc. (“Stedical”). We also entered into an exclusive multi-year development and distribution agreement with Collagen Matrix, Inc. dba Regenity Biosciences (“Regenity”). Regenity will manufacture and supply Cohealyx™, an AVITA Medical-branded, FDA-cleared, collagen-based dermal matrix. Under the agreement, we will hold the exclusive rights to market, sell, and distribute Cohealyx in the U.S., with potential expansion into the European Union, Australia, and Japan.

Previous wording

The single-use RECELL Autologous Cell Harvesting Device (“RECELL Ease-of-Use” or “RECELL EOU”) is approved by the FDA for the treatment of thermal burn wounds and full-thickness skin defects, and repigmentation of stable depigmented vitiligo lesions. Our next-generation device, RECELL GO™ Autologous Cell Harvesting Device (“RECELL GO”), is FDA-approved to treat thermal burn wounds and full-thickness skin defects. RECELL GO introduces enhanced features that streamline the preparation of Spray-On Skin Cells and improves workflow efficiency in the operating room. It consists of two components: the RECELL GO Processing Device (the “RPD”) and the RECELL GO Preparation Kit (the “RPK”). The RPD is a multi-use, AC-powered device that controls the RPK. The RPK is a single-use cartridge that contains the RECELL Enzyme™. The RPD regulates the pressure applied to disaggregate the cells and precisely controls the incubation time of the RECELL Enzyme to optimize cell yield and promote cell viability.

Current wording

The single-use RECELL Autologous Cell Harvesting Device (“RECELL Ease-of-Use” or “RECELL EOU”) is approved by the FDA for the treatment of thermal burn wounds and full-thickness skin defects. Our next-generation device, RECELL GO® Autologous Cell Harvesting Device (“RECELL GO”), is FDA-approved to treat thermal burn wounds and full-thickness skin defects. RECELL GO introduces enhanced features that support greater consistency and standardization across clinical settings. It consists of two components: the RECELL GO Processing Device (the “RPD”) and the RECELL GO Preparation Kit (the “RPK”). The RPD is a multi-use, AC-powered device that controls the RPK. The RPK is a single-use cartridge that contains the RECELL Enzyme™. The RPD regulates the pressure applied to disaggregate the cells and precisely controls the incubation time of the RECELL Enzyme to optimize cell yield and promote cell viability. RECELL GO mini™ Autologous Cell Harvesting Device (“RECELL GO mini”), which was approved by the FDA in December 2024, is a line extension of the RECELL GO system, designed specifically to treat smaller wounds up to 480 cm 2. It utilizes the same RPD but features a RECELL GO mini Preparation Kit, which includes a single-use RECELL GO mini cartridge optimized for smaller skin samples. These modifications are intended to align with the needs of clinicians treating smaller wounds. This design aims to support broaden adoption of the RECELL GO platform in trauma centers.

Previous wording

Become the standard of care in the U.S. burn care market by increasing penetration and adoption in burn centers with our recently FDA-approved RECELL GO

Current wording

Increase market penetration in U.S. burn centers, positioning RECELL GO as the standard of care in burn management

Previous wording

Expand adoption of RECELL technology for the treatment of full-thickness skin defects in the U.S. with RECELL GO

Current wording

Expand adoption of RECELL GO for the treatment of full-thickness skin defects throughout the U.S.

Previous wording

We are 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:

Current wording

Drive commercial revenue growth, generate positive cash flow, and achieve operating profitability

Previous wording

The macroeconomic environment may have unexpected adverse effects on businesses and healthcare institutions globally that may negatively impact our consolidated operating results. There remains significant uncertainty in the current macroeconomic environment due to factors including supply chain shortages, increased cost of healthcare, changes to inflation rates, a competitive labor market, and other related global economic conditions and geopolitical conditions. If these conditions continue or worsen, they could adversely impact our future operating results.

Current wording

The macroeconomic environment may have unexpected adverse effects on businesses and healthcare institutions globally that may negatively impact our consolidated operating results. There remains significant uncertainty in the current macroeconomic environment due to factors including supply chain shortages, increased cost of healthcare, changes to inflation rates, a competitive labor market, tariffs, and other related global economic conditions and geopolitical conditions. If these conditions continue or worsen, they could adversely impact our future operating results.

Previous wording

Changes in reimbursement rates by third party payors may place additional financial pressure on hospitals and the broader healthcare system. Healthcare institutions may take actions to mitigate any persistent pressures on their budgets and such actions could impact the future demand for our products. Geopolitical conditions may also impact our operations. Although we do not have operations in Russia, Ukraine or in the Middle East, the continuation of the military conflicts in these regions and/or an escalation of the conflicts beyond their current scope may further weaken the global economy that could result in additional inflationary pressures or supply chain constraints.

Current wording

Changes in reimbursement rates and coverage policy by third party payors may place additional financial pressure on hospitals and the broader healthcare system. Healthcare institutions may take actions to mitigate any persistent pressures on their budgets and such actions could impact the future demand for our products. Geopolitical conditions may also impact our operations. Although we do not have operations in Russia, Ukraine or the Middle East, the continuation of the military conflicts in these regions and/or an escalation of the conflicts beyond their current scope may further weaken the global economy that could result in additional inflationary pressures or supply chain constraints.

Previous wording

Expect post-market study, TONE, and the health care economics study, both related to our vitiligo initiative to be published in early 2025

Current wording

The post-market study, TONE, and the health care economics study, both related to our vitiligo initiative were published during the first quarter of 2025. However, the reimbursement environment for vitiligo remains challenging and uncertain. As a consequence, we are pausing from further commercial investment in vitiligo at this time.

Previous wording

Total revenues increased by 43.2%, or $5.9 million, to $19.5 million, compared to $13.6 million in the same period in the prior year. Our commercial revenue was $19.5 million in the three-months ended September 30, 2024, an increase of $5.9 million, or 43.8%, compared to $13.5 million in the corresponding period in the prior year. The growth in commercial revenues was largely driven by deeper penetration within customer accounts and new accounts for full-thickness skin defects.

Current wording

Total revenues increased by 67%, or $7.4 million, to $18.5 million, compared to $11.1 million in the same period in the prior year. Our commercial revenue was $18.5 million in the three-months ended March 31, 2025, an increase of $7.4 million, or 67%, compared to $11.1 million in the corresponding period in the prior year. The growth in commercial revenues was largely driven by deeper penetration within customer accounts, new accounts for full-thickness skin defect and, to a lesser extent, new product launches.

Previous wording

Total operating expenses increased by 43.3% or $9.1 million to $30.2 million, compared with $21.1 million in the corresponding period in the prior year.

Current wording

Total operating expenses increased by 3% or $0.7 million to $27.5 million, compared with $26.8 million in the corresponding period in the prior year.

Previous wording

Sales and marketing expenses increased by 43.8%, or $4.6 million, to $15.1 million, compared to $10.5 million in the corresponding period in the prior year. Higher costs in the current year are due to an increase in salaries and benefits of approximately $1.9 million, commissions expense of $1.9 million, and stock-based compensation expense of $0.4 million, plus $0.4 million in other selling expenses. The increase in salaries and benefits is due to the expansion of the sales force to support our growing commercial capabilities. Higher commissions were directly associated with the increase in revenues. The increase stock-based compensation is due to additional grants related to the expansion of the sales force.

Current wording

Sales and marketing expenses increased by 17%, or $2.2 million, to $14.8 million, compared to $12.6 million in the corresponding period in the prior year. Higher costs in the current year are due to increases in salaries and benefits of approximately $1.4 million, and commissions expense of $1.4 million, offset by decreases in professional fees of $0.2 million, deferred compensation expenses of $0.2 million, and $0.2 million in other selling expenses. The increase in salaries and benefits is due to the expansion of the sales force to support our growing commercial capabilities. Higher commissions were directly associated with the increase in revenues. The increase in stock-based compensation is due to additional grants related to the expansion of the sales force. The decrease in professional fees is due to higher expenses in the prior year related to pricing studies for future product development. The decrease in deferred compensation expense is driven by lower stock price used to calculate the deferred compensation liability for the deferred restricted stock awards.

Previous wording

General and administrative expenses increased by 26.7%, or $5.5 million, to $26.1 million, compared to $20.6 million in the same period in the prior year. The increase was attributable to an increase in salaries and benefits and personnel expenses of $3.2 million, an increase in stock-based compensation of $2.0 million, an increase in professional fees of $0.4 million, and an increase of $0.2 million in travel expenses plus an increase in other corporate expenses of $0.3 million, partially offset by lower deferred compensation expenses of $0.6 million. The increase in salaries and benefits and stock-based compensation are primarily attributable to headcount growth to support the expansion of our business. The decrease in deferred compensation expense is driven by a lower stock price used to calculate the deferred compensation liability for the deferred restricted stock awards.

Current wording

General and administrative expenses decreased by 29%, or $2.6 million, to $6.4 million, compared to $9.0 million in the same period in the prior year. Lower costs in the current year are due to decreases in salaries and benefits of approximately of $0.8 million, deferred compensation expense of $0.8 million, professional fees of $0.6 million, and $0.4 million in other corporate expenses. The decrease in salaries and benefits is primarily attributable to decreased headcount and lower severance payments. The decrease in deferred compensation expense is driven by lower stock price used to calculate the deferred compensation liability for the deferred restricted stock awards. The decrease in professional fees is due to lower consulting costs and lower legal fees.

Previous wording

Research and development expenses increased by 23.5%, or $1.0 million, to $5.4 million, compared to $4.4 million in the same period in the prior year. The increase in salaries and benefits of approximately $0.8 million was due to the increase in headcount resulting from the deployment of a team of Medical Science Liaisons, an increase in development costs of $0.2 million, an increase of $0.1 million in deferred compensation expenses, and an increase to all other development expenses of $0.2 million, offset by a decrease in professional fees of approximately $0.3 million due to higher expenses in the prior period related to RECELL GO and full-thickness skin defects.

Current wording

Research and development expenses increased by 21%, or $1.1 million, to $6.3 million, compared to $5.2 million in the same period in the prior year. Higher costs in the current year are due to increases in salaries and benefits of approximately $1.3 million, stock-based compensation expense of $0.2 million, offset by a decrease in professional fees of $0.2 million, and $0.2 million in lower other development expenses. The increase in salaries and benefits and stock-based compensation expenses is due to the increase in headcount resulting from the deployment of a team of Medical Science Liaisons. The decrease in professional fees is due to the completion of the vitiligo TONE study partially offset by clinical trial costs associated with PermeaDerm and Cohealyx.

Previous wording

Other (expense) income, net decreased by $1.7 million to expense of $1.1 million from income of $0.6 million in the prior period. In the current period, other (expense) income consists of non-cash charges of $1.0 million and $0.8 million related to the changes in fair value of the debt and warrant liability, respectively, offset by $0.6 million in income related to our investments and $0.1 million in other gains, net. The prior period income consisted of $0.7 million related to our investments offset by $0.1 million in other losses, net.

Current wording

Other expense, net increased by $0.7 million to expense of $0.8 million from expense of $0.1 million in the prior period. In the current period, other expense, net consists of a non-cash charge of $0.8 million related to the change in fair value of debt and $0.8 million in debt issuance costs, offset by a non-cash gain of $0.4 million related to the change in fair value of warrants and $0.3 million in income related to our investments and $0.1 million in other gains, net. The prior period expense consisted of non-cash charges of $0.9 million and $0.4 million related to the changes in fair value of warrant liability and debt, respectively, offset by $0.9 million related to our investments and $0.3 million in other gains, net.

Previous wording

We had approximately $18.6 million in cash and cash equivalents and $25.8 million in marketable securities as of September 30, 2024.

Current wording

We expect to utilize cash reserves until U.S. sales of our products reach a level sufficient to fund ongoing operations. We have funded our research and development activities, and more recently our substantial investment in sales and marketing activities, through the issuance of debt. We had approximately $14.9 million in cash and cash equivalents and $10.9 million in marketable securities as of March 31, 2025. As of the date of these financial statements, we believe we have sufficient cash reserves to fund operations for the next 12 months.

Previous wording

We expect to utilize cash reserves until U.S. sales of our products reach a level sufficient to fund ongoing operations. We have historically funded research and development activities, and more recently have funded a substantial investment in sales and marketing activities, through raising capital by issuing securities and the issuance of debt. On October 18, 2023, we entered into a Credit Agreement with an affiliate of OrbiMed Advisors, LLC. The Credit Agreement provides for a five-year senior secured credit facility in an aggregate principal amount of up to $90.0 million, of which $40.0 million was drawn during the fourth quarter of 2023. In addition, an aggregate of $50.0 million will be made available in two separate $25.0 million tranches, at our discretion, subject to certain net revenue requirements. The first tranche of $25.0 million is available on or before December 31, 2024. The second tranche of $25.0 million is available on or prior to June 30, 2025, and only if the first tranche was drawn upon. We have monthly interest rate payments for the debt at a rate equal to the greater of (a) forward-looking one-month term SOFR rate and (b) four percent (4.0%) per annum, plus eight percent (8.0%). In the event that we do not meet certain 12-month trailing revenue targets at the end of certain fiscal quarters, starting December 31, 2024, the outstanding balance of the loan must be repaid in equal quarterly installments of 5.0% of the funded amount through the maturity date. As of September 30, 2024, our projected revenues, for the trailing 12 months ending December 31, 2024, will exceed the minimum revenue requirements under the Credit Agreement. On November 7, 2024, we amended the Credit Agreement, see Note 16, Subsequent Events of our Consolidated Financial Statements.

Current wording

On October 18, 2023 (the “Closing Date”), the Company entered into a Credit Agreement (the “Credit Agreement”), by and between the Company, as borrower, and an affiliate of OrbiMed Advisors, LLC, as the lender and administrative agent (the “Lender”). The Credit Agreement provides for a five-year senior secured credit facility in an aggregate principal amount of up to $90.0 million (the “Loan Facility”), of which $40.0 million was borrowed on the Closing Date, less certain fees and expenses payable to or on behalf of the Lender. On November 7, 2024, the Lender and the Company mutually agreed to a third amendment (the “Third Amendment”) to the Credit Agreement. Under the terms of the Third Amendment and subject to the payment by the Company of a consent fee to the Lender, the Company and the Lender mutually agreed to (1) terminate two additional tranches of available debt in the aggregate amount of $50.0 million and (2) remove the trailing 12-month revenue covenant for the fourth quarter of 2024, which was set at $67.5 million. All revenue covenants for subsequent quarters remained in effect. The indebtedness under the Credit Agreement is secured by substantially all of our assets and will accrue interest at a rate equal to the greater of (a) forward-looking one-month term SOFR rate and (b) four percent (4%) per annum, plus eight percent (8%). In the event that the Company does not meet certain 12-month trailing revenue targets at the end of future fiscal quarters, the outstanding balance of the loan must be repaid in equal quarterly installments of 5% of the funded amount through the maturity date. In addition, if we don’t maintain a minimum cash and cash equivalents balance at the end of each reporting period, we may have to repay amounts outstanding in full as a result of an event of default. The Credit Agreement contains representations, warranties and covenants that are customary for this type of agreement.

Previous wording

Net cash used in operating activities was $40.9 million and $27.1 million during the nine-months ended September 30, 2024, and 2023, respectively. The increase in net cash used in operations was primarily due to higher operating costs.

Current wording

Net cash used in operating activities was $10.3 million and $20.9 million during the three-months ended March 31, 2025 and 2024, respectively. The decrease in net cash used in operations was primarily due to higher gross profit as a result of increased revenues.

Previous wording

Net cash provided by investing activities was $34.9 million and $58.9 million during the nine-months ended September 30, 2024 and 2023, respectively. The decrease in cash provided by investing activities is primarily attributable to higher cash outflows from purchases of marketable securities and lower cash inflows from maturities of marketable securities in the current year compared to the prior year, offset primarily by an increase in cash outflow for capital expenditures. The increase in capital expenditures in the current year is primarily related to the leasehold improvement in the Ventura production facility to enhance manufacturing output and materials related to our RECELL GO RPDs.

Current wording

Net cash provided by investing activities was $10.8 million and $15.1 million during the three-months ended March 31, 2025 and 2024, respectively. The decrease in cash provided by investing activities is primarily attributable to lower cash inflows from maturities of marketable securities and lower cash outflows from purchases of marketable securities in the current year, as well as a decrease in cash outflow for capital expenditures compared to the prior year. The decrease in capital expenditures in the current year is primarily related to higher leasehold improvement costs in the Ventura production facility to enhance manufacturing output in the prior year.

Previous wording

Net cash provided by financing activities was $2.5 million and $0.9 million during the nine-months ended September 30, 2024, and 2023, respectively. The increase in cash provided by financing activities is related to proceeds from the exercises of stock options and purchases of stock under the ESPP plan.

Current wording

Net cash provided by financing activities was $0.4 million and $0.6 million during the three-months ended March 31, 2025 and 2024, respectively. The decrease in cash provided by financing activities is related to proceeds from the exercises of stock options.

Previous wording

For the nine-months ended September 30, 2024, there were no dividends paid and we have no plans to commence the payment of dividends. As part of the Stedical Agreement, we have an obligation to Stedical to purchase sufficient products to achieve $5.0 million in customer sales. As of September 30, 2024, we have fulfilled this obligation. Under the terms of our exclusive development and distribution agreement with Regenity, we will make a $2.0 million payment upon receipt of 510(k) clearance by Regenity. We have a further obligation to make up to an additional $3.0 million payment on or before January 4, 2026 to guarantee development and manufacturing capacity (and related resources), contingent on positive results of certain clinical studies. With the exception of the milestone payments related to our exclusive development and distribution agreement with Regenity, we do not have any other purchase commitments or long-term contractual obligations except for lease obligations as of September 30, 2024. In addition, we have no material off-balance sheet arrangements (as defined in the applicable rules and regulations established by the SEC) that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. While have no committed plans to issue further shares on the market, we will continue to assess market conditions.

Current wording

With the exception of the milestone payment under the Regenity Agreement, we do not have any other purchase commitments or long-term contractual obligations except for lease obligations as of March 31, 2025. In addition, we have no material off-balance sheet arrangements (as defined in the applicable rules and regulations established by the SEC) that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. While we have no committed plans to issue further shares on the market, we will continue to assess market conditions.

Previous wording

Except as disclosed in Note 2 of our Consolidated Financial Statements, there have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024.

Current wording

Except as disclosed in Note 2 of our Consolidated Financial Statements, there have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in the 2024 Annual Report.