Dr Boreham’s Crucible: Avita Medical

Small Caps | Mar 29 2023

Tim Boreham highlights the global addressable market opportunity for Avita Medical's skin graft technology, made famous by the Bali bombings.

By Tim Boreham

ASX code: AVH (Chess depositary instruments); Nasdaq code: RCEL (US shares)

Shares on issue: ASX: 71,794,370 CDIs; Nasdaq 10,968,887 shares equivalent to 54,844,435 CDIs = 126,638,805 CDIs and equivalents (five CDIs equals one US share)

CDI price: $3.89; Market cap: $486m

Chief executive officer: James (Jim) Corbett 

Board: Lou Panaccio (chairman), Mr Corbett, Jeremy Curnock Cook, Prof Suzanne Crowe, Jan Reed, Cary Vance (effective from April 1, 2023)

Financials (year to December 31, 2022): sales US$34.42m (up 4%)*, expenses US$59.1m (up 10%), loss of -US$27.1m (previous -US$25.1m deficit)

Cash of US$18.2m with US$68.1m of marketable securities

* Includes BARDA sales of US$370,000 compared with US$7.934m previously, and a move from June 30 to December 31 reporting; AUD 1.00 = US67c

Identifiable major holders: Vanguard Group 4.5%, Pura Vida Investments 3.4%, Black Rock Institutional Trust Company 1.85%, Michael Perry 1.4%, Thorney Investments 0.5%.

Avita Medical ((AVH))

Avita shareholders: put a ring around July 1, 2023 on your calendars and highlight the month of June as well.

Why? June is when the company expects US Food and Drug Administration approval for use of its Recell spray-on skin device for soft tissue injuries.

July 1 is when the company expects to launch the device for that indication, with a trained US sales force already boosted from 30 to 70 ahead of time.

Avita will also expect approval for a broader skin condition, vitiligo and have its treatment reimbursed and launched in January 2025.

Naturally, biotechnology boardrooms prefer ample wiggle room to allow for the inevitable delays and setbacks.

But Avita’s new CEO Jim Corbett is not one for prevaricating. Having been appointed in late September last year, he moved to abolish vague targets in favor of specific statements of intent.

This includes introducing specific quarterly profit guidance - as alien a concept to Australian boardrooms as little green men.

“The prior communication was we would submit for approval in the second half of 2022 and get approval in the second half of 2023,” Mr Corbett says.

“If an analyst hears that they say ‘what am I going to do with that [guidance]?’ Well, you can’t do a thing with that, damned honestly.”

Brought up in St Louis, Missouri, Mr Corbett was CEO of the Nasdaq-listed Micro Therapeutics Inc, Ev3 Inc and Alphatec Spine. He also helmed three private biotechs and has had roles at Baxter, Scimed Life Systems and Boston Scientific.

Mr Corbett replaces Mike Perry, Avita’s CEO since 2017. Chief financial officer Mike Holder and chief operating officer Kathy McGee have also left the building.

So far investors have embraced Mr Corbett’s straight-shooting approach, with the share price rising about 150 percent since his appointment.

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