Earnings call transcript: Avita Medical Q2 2025 reveals revenue miss, stock tumbles

Avita Medical Ltd reported its Q2 2025 earnings, revealing a net loss of $0.38 per share, exceeding analysts’ expectations of a $0.25 loss. Despite a 21% year-over-year increase in commercial revenue to $18.4 million, the company fell short of its revenue forecast of $22.51 million. Following the earnings announcement, Avita’s stock plummeted by 34.94% to $3.50 in premarket trading. According to InvestingPro data, the stock has shown significant volatility, with a beta of 1.63, and analysts maintain a consensus price target range of $12.50 to $19.31.

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Key Takeaways

• Avita Medical’s Q2 revenue of $18.4 million missed forecasts by 18.26%.
• The company reported a net loss of $9.9 million, a 36% improvement from the previous year.
• Stock dropped nearly 35% in premarket trading following the earnings report.
• Revised full-year revenue guidance lowered to $76 million-$81 million from $100 million-$106 million.

Company Performance

Avita Medical demonstrated a mixed performance in Q2 2025. While the company achieved a 21% year-over-year increase in commercial revenue, it fell short of expectations, causing concern among investors. The company’s gross profit margin decreased to 81.2% from 86.1% the previous year, reflecting increased operational challenges. The net loss of $9.9 million, or $0.38 per share, represents a significant improvement from the prior year’s loss, indicating efforts towards financial recovery. InvestingPro analysis shows the company maintains a healthy current ratio of 2.09, though it’s currently experiencing rapid cash burn with an EBITDA of -$49.77 million in the last twelve months.

Financial Highlights

• Revenue: $18.4 million, up 21% year-over-year.
• Earnings per share: Loss of $0.38, compared to a forecasted loss of $0.25.
• Gross profit margin: 81.2%, down from 86.1% in 2024.
• Cash and marketable securities: $15.7 million as of June 30, 2025.

Earnings vs. Forecast

Avita Medical’s earnings per share of -$0.38 exceeded the forecasted loss of -$0.25, resulting in a negative earnings surprise of 52%. The revenue of $18.4 million fell short of the forecast by 18.26%, marking a significant miss compared to previous quarters.

Market Reaction

Following the earnings release, Avita Medical’s stock experienced a sharp decline of 34.94% in premarket trading, settling at $3.50. This drop reflects investor disappointment with the revenue miss and lowered full-year guidance. The stock’s performance is notably below its 52-week high of $14.16 and close to its 52-week low of $4.71. Based on InvestingPro Fair Value analysis, the stock appears undervalued at current levels. The company’s overall financial health score is rated as "FAIR," with particularly strong metrics in relative value and growth potential.

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Outlook & Guidance

Avita Medical revised its full-year 2025 revenue guidance to between $76 million and $81 million, down from the previous range of $100 million to $106 million. The company anticipates a full recovery in ReCell demand in the latter half of the year and projects achieving free cash flow and GAAP profitability by 2026.

Executive Commentary

CEO Jim Corbett emphasized the company’s strategic focus, stating, "We expect full demand for ReCell to return in the second half of the year." He highlighted the company’s potential, noting, "We are a multi-product platform with eyes on a $3,500,000,000 opportunity."

Risks and Challenges

• Revenue shortfall and lowered guidance may impact investor confidence.
• Decreased gross profit margin suggests potential cost management issues.
• Transformation of the sales force may lead to short-term operational disruptions.
• Competition in the wound care market remains intense, requiring continuous innovation.
• Macroeconomic factors could affect the company’s international expansion plans.

Q&A

During the earnings call, analysts inquired about the company’s Medicare Administrative Contractors (MACs) claims resolution and the restructuring of the sales force. Management also discussed the enrollment progress of the CoHelix study and the anticipated benefits of their cost-saving initiatives.

Full transcript - Avita Medical Ltd (RCEL) Q2 2025:

Conference Operator: Good day, and thank you for standing by. Welcome to the Aveda Medical Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers’ presentation, we’ll open up for questions. To ask a question during the session, you will need to press 11 on your telephone.

You Please be advised that today’s call is being recorded. I would now like to hand it over to your first speaker today, Ben Atkins, vice president, investor relations. Please go ahead.

Ben Atkins, Vice President, Investor Relations, Avita Medical: Thank you, operator. Welcome to Aveda Medical’s second quarter twenty twenty five earnings call. Before we begin, I would like to introduce myself. My name is Ben Atkins, and I started at Avita in July, leaving Investor Relations and Corporate Communications. With many years of working in life sciences, I am thrilled to be part of Avita and this team, and I look forward to working with our investor community.

Joining me on today’s call are Jim Corbett, Chief Executive Officer and David O’Toole, Chief Financial Officer. Today’s earnings release and presentation are available on our website, www.avitamedical.com under the Investor Relations section. Before we begin, I would like to remind you that this call includes forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are neither promises nor guarantees and involve known and unknown risks and uncertainties that could cause actual results to differ materially from any expectations expressed or implied by the forward looking statements. Please review our most recent filings with the SEC for comprehensive descriptions of the risk factors.

Any forward looking statements provided during this call are based on management’s expectations as of today. I will now turn the call over to Jim for his comments.

Jim Corbett, Chief Executive Officer, Avita Medical: Good afternoon to everyone joining us in The U. S, and good morning to our colleagues and investors in Australia. We have a lot to cover today. I want to begin by grounding us in what defined this quarter, starting with the five key developments shown on slide four. First, commercial revenue for the second quarter was $18,400,000 up 21% year over year.

However, sequential revenue was flat and impacted by a temporary headwind that has become clearer to us since March. During the quarter, we gained a deeper understanding of a meaningful delay in how the Centers for Medicare and Medicaid Services and the Medicare administrative contractors implemented the conversion to the new CPT one codes for the use of resell, which went into effect in January. This delay, in turn, affected provider reimbursement and ultimately demand. To be clear, this is not a product issue, it’s a claims processing issue, specifically around how the procedure that utilizes resell is valued and how payment is determined. I’ll explain this in more detail shortly.

Third, as a result of this reimbursement disruption and its impact on revenue, we’ve lowered our 2025 financial forecast. That said, we remain confident in a second half rebound as resolution of these payment issues is already underway. More on that in a moment. Fourth, we work with Orbivant to secure a waiver for our Q2 trailing twelve month revenue covenant and to revise the covenants for the next four quarters, giving us flexibility as we execute against this updated growth outlook. Finally, we shared what we believe is the most consequential clinical evidence in Aveda’s history.

A real world analysis of the US National Burn Registry presented in June at the British Burn Association Annual Meeting, including over six thousand three hundred patients, showed that ReCell reduced length of stay by thirty six percent for patients with deep second degree burns covering less than 30% total body surface area. It confirms what clinicians have told us. Resell doesn’t just heal. It accelerates recovery, and in doing so, reshapes the economics of care. Since the data was presented, we’ve already seen interest and traction.

So let’s dig into the headwind I mentioned regarding claims. Turning to slide five. In November, the Centers for Medicare and Medicaid Services, or CMS, announced new Category one CPT codes for the use of resell in its rules update for 2025. Notably, CMS did not set the payment rate directly as it usually does. Instead, it assigned this task to Medicare Administrative Contractors or MACs through a process called contractor pricing.

This happens occasionally when CMS wants to make long term changes to a code. This work to change a code is underway and will take until January 2027. During this interim two year period, they can, and they did in this case, assign pricing responsibilities to their contractors. When the first claims for using resell were submitted under the new CPT codes, the MACs should have either adjudicated the codes and made payment or denied the claim. A denied claim or a short claim payment then leads to an appeal and a subsequent adjudication of the code’s value.

However, this did not happen consistently. Subsequently, there’s been a lot of healthy interaction, but no conclusion on contractor pricing. The claims started piling up from January all the way through June. For clarity, we were being paid, but our providers were not. This led to the inevitable situation where providers are uncertain about what or when they will be paid for using resell.

So while enthusiasm to use resell grew along with the published clinical and economic data, this uncertainty about provider payment dampened utilization. Picture a dimmer switch. That’s what it felt like. The light didn’t shut off, but it got dimmer every month as claims piled up with no clear adjudication. As an example, looking at our top 10 hospitals and their utilization of free cell compared to the 2024 to the 2025, we saw a reduction of approximately $5,000,000 in revenue in those 10 accounts alone.

We have determined that in retrospect, this issue has reduced demand for resell overall in the first half of this year by approximately 20%. There have been multi jurisdictional efforts by members of the American Medical Association and industry to resolve this matter. Those efforts are paying off. In recent weeks, multiple Medicare contractors have indicated their intent to adjudicate payment. We expect all the others to follow and believe that this problem will be resolved during the third quarter.

We expect demand for resell to pick up again during the current quarter and through the fourth quarter. As a result of this, we’ve adjusted our guidance to reflect the reality of the first half of the year and our expected recovery in the second half. In turn, we’ve also agreed with OrbiMed to amend our credit facility. The updated terms include lower twelve month revenue covenants through the 2026. As part of this amendment, OrbiMed’s fee was paid in equity instead of cash, demonstrating their long term commitment and confidence in our business.

David will review this and the complete financial details shortly. Clearly, we’ve had a very dynamic first half of the year that has disrupted our business. That said, the enthusiasm from hospital surgeons and patients for our products is stronger than ever. In May, at our Acute Wound Care Showcase, we presented our vision for therapeutic acute wound care centered around the patient with three complementary products and data to support them. One broad integrated portfolio targeted at the same wound, same patient, same doctor, and the same hospital.

Turning to slide six, this is a milestone worth highlighting. In June, during the British Burn Association, the largest real world analysis of resale to date was presented. Five years of US National Burn Registry data. The results showed a thirty six percent reduction in hospital stay for burn patients. That’s not just statistically significant, it’s clinically transformative.

This confirms our prior studies and what clinicians have seen time and again. Resell helps patients get home faster. Typically, these patients must stay in the hospital for a range of weeks, so reducing that time by over a third has real impact. Why does that matter? Because every extra day in a hospital can cost more than $11,000 per patient.

Multiply that by 36% fewer days and the value of earlier discharge becomes undeniable. With shorter stays, hospitals can also free up beds and treat more patients more efficiently. The impact we’re highlighting is about more than just the hospital’s bottom line. Getting home sooner also improves the patient’s recovery and quality of life. Let me take a moment here and share a story that’s resonating far and beyond our industry.

Slide seven. Abby Alexander was 18 years old when a fuel explosion in Cambodia left her with life threatening burns over a third of her body. She was flown to The US where her face and arm were treated with resell. Today, nearly six years later, Abby’s thriving. Her recent before and after photos have gone viral on Reddit and were featured in Newsweek and UK national media.

The difference is striking, minimal facial scarring and a clear message from her. I wish I had resell everywhere. Abby’s story is a powerful reminder of what’s possible. This is why hospitals aren’t just adopting resell as a product, but deploying it as a protocol for enabling faster recovery and more efficient care. Then, turning to slide nine, we have CoHelix, our collagen based dermal matrix.

CoHelix just made its peer reviewed publication debut in the Journal of Surgery. The data demonstrated graft readiness in as little as five to ten days. It typically takes fourteen to twenty eight days with competitive products. This is illustrated in this case study. A 48 year old man with multiple comorbidities presented with a full thickness wound on the right hand covering 11.25% total body surface area, a sizable open wound.

Ten days post Cohelix application the wound was skin grafted. The majority of the wound was re epithelialized within two weeks post skin graft. The patient showed strong functional recovery per the clinician’s assessment. This shortened, dazed graft is a breakthrough for complex wounds and leads also to shorter hospital stays. Building on our preclinical and clinical research, our post market clinical study CoHELIX-one will assess its performance in real world settings.

The study will look at time to graft, clinical efficacy, and cost savings in the treatment of trauma wounds and burns. Study sites are enrolling and will keep you updated as the data builds. Turning to slide 10. I want to cover some highlights within the portfolio that we believe show momentum for our vision to transform acute wound care. Since the presentation of data on resell at the British Burn Association in June, Two major hospitals, an academic medical center and a regional burn center, are in the process of adopting broader resell eligibility protocols to include all burns under 20% total body surface area.

This data has resulted in transforming resell, the supply cost, to resell as a protocol treatment that results in length of stay. With this approach, we have market tested a new strategy. This strategy is an outcomes based partnership agreement. In this agreement, the use of Rezell has a target reduction in length of stay. And if it does not achieve that result, the hospital receives a rebate.

We’ve reached agreement with two centers since June. This type of arrangement is driven by our belief in our resell data. It’s built on a very large database of patients, so it’s highly reliable. We trust it. We anticipate that these two centers alone will increase their resell units by approximately 150 additional patients each month.

It is worth noting that even if we have to pay a rebate, which we believe will not be necessary, our revenue base has increased substantially with the treatment of these additional patients. We see this business model as highly adaptable across the country in other facilities. Across The U. S, we sell is used in nearly all burn centers. As you know, during last year, we have been expanding into level one and two trauma centers.

This week, we received approval from CMS, The U. S. Agency that oversees Medicare for a special reimbursement called the NTAP, or New Technology Add on Payment, for ReCell when used on trauma wounds in hospitalized patients. What does that mean? It means hospitals can now receive additional payment from Medicare when resell is used in these cases above and additive to standard reimbursement.

It’s designed to accelerate access to breakthrough devices like ours by offsetting hospitals’ cost of adopting the technology. This is a strong signal from CMS. It recognizes resells clinical value and helps remove a financial barrier to adoption. The policy takes effect October 1 and will be in place for one year. We believe this will drive increased utilization in the inpatient setting and support further expansion into trauma and surgical wounds.

While the NTAP supports ReCell in the inpatient setting, we’re also expanding access in the outpatient care. That’s where ReCell GO Mini comes in. During our pre market approval study, we saw that the average trauma wound was about 400 square centimeters. That insight directly informed the design of ReCell GO Mini optimized for wounds four eighty square centimeters or smaller compared to standard ReCell, which treats nineteen twenty square centimeters. Now trauma surgeons can treat smaller wounds more efficiently in the outpatient setting with the appropriate sized spray on application of ReCell.

It’s precision designed for how ReCell is actually used in trauma care and it opens the door to broader adoption outside the hospital. A quick update on our international business. We expected CE Mark approval in Q3, but due to ongoing bureaucratic delays from our notified body, approval could move to Q4. While this has delayed our EU and Australia launch, we are prepared to go forward with an economically lean distributor led commercial model upon approval. Co Helix is off to a strong start since its launch in April.

As a reminder, Co Helix is a cost competitive, margin accretive, and has a low number of days to graft readiness. Value analysis committee submissions are pending in approximately 25% of the 120 to 130 U. S. Burn centers nationwide. As hospitals receive VAC approval, we’ve seen commercial momentum grow quickly.

In July, we established multiple ordering accounts. In fact, our largest account ordered nearly $300,000 of Co Helix during the month of July alone. We are really excited about the opportunity with Co Helix. Consider this. We sell over a thousand resell kits per month.

If just 10 of that thousand each covering on average 2,000 square centimeters instead use our Co Helix dermal matrix at its market price, it would generate an additional $36,000,000 in annual revenue. To reiterate, this presents an unmatched opportunity in our marketplace. We have resell that can reduce the length of stay by 36%. Additionally, Co Helix enables faster grafting seven to fourteen days sooner than our competitors. Then, as we expand from burn to include also trauma, we have Permuderm, our biosynthetic dressing.

We in source manufacturing of PermaDerm to our state of the Art Ventura location. As a reminder, PermaDerm acts as a temporary biosynthetic dressing to temporize wounds and manage moisture both prior to grafting, during graft healing, and during the aftercare period of graft healing. This quarter it was featured in 10 presentations at U. S. Burn conferences demonstrating its application across a variety of wound types and stages of treatment until healing is achieved.

This included a randomized trial showing single application and easier aftercare. Our PREMIODERM-one study, now actively enrolling, is comparing the cost of clinical outcomes between PREMIODERM and Allograft used in patients who need a skin graft to heal their wound. Our excitement in the versatility of Permuderm, its potential to replace Allograft and its integration into our portfolio is reflected in a stand up order in sales. As interest in our acute wound care portfolio grows, we’re expanding access to our products through strategic group purchasing organization contracts, GPOs, and several integrated delivery networks, IDNs. These agreements connect us to burn centers and level one and two trauma centers within those systems, allowing physicians in those facilities to use ReCell, Co Helix, and Permuderm.

I’d like to provide an update on the transformation of our U. S. Sales organization. To remind you, on April 1, we redesigned our commercial organization, taking into account the need for our reps to be present at both stages of the two stage procedure to optimize the selling of ReCell, Co Helix, and Premier Derm, which are used in both stages. This is a significant change from our prior strategy, which relied on heavy clinical support by clinical specialists who had no selling role.

During the implementation of this, we moved from a heavy service to more of a selling orientation. Consequently, we developed a more focused and efficient selling organization, taking our field headcount from 108 to 82 people, and consequently saved nearly $2,500,000 per quarter. Majority of the $2,500,000 came from this reorganization and results in an annual reduction in our cash needs of $10,000,000 which we realized effectively during Q2 period. So turning finally to slide seven, what does this all add up to? Innovation and integration.

A comprehensive wound closure solution designed to improve patient outcomes and optimize healing quickly. ReCell, Co Helix, Permuderm, working in sync like an orchestra. Each product accelerates care. Together, they accelerate value. When you reduce hospital stays, you reduce costs.

When you reduce healing time, patients go home to their families sooner. When patients go home sooner, you free up capacity. That’s what Avedis platform delivers and why this opportunity is unlike anything else in the market. We are a multi product platform with eyes on a $3,500,000,000 opportunity. Same wound, same patient, same doctor, same hospital.

But now, faster healing, better outcomes, lower costs. We’ve reset and we’re ready. At the same time, we’re strengthening our leadership to reflect this next chapter. As you will have seen in yesterday’s press release, I’m pleased to welcome Doctor. Michael Tarnoff to our board.

Michael was Chief Physician Executive and CEO at Tufts in Boston and held senior leadership roles at Medtronic and Covidium. His clinical expertise and leadership and surgical innovation will be instrumental as we scale. I want to recognize Lou Pinacchio, who has chaired our board through Evita’s formative years, from early commercial milestones to where we are today. Lou’s steady guidance helped shape the foundation we’re now building on, And I want to thank him for that effort. With that, I’m excited to welcome Carrie Vance as he transitions into the chair position.

Carrie’s deep commercial and operating experience and passion for medtech innovation help us accelerate into our next phase of growth. Now, I’ll pass it over to David to review our financials.

David O’Toole, Chief Financial Officer, Avita Medical: Thank you, Jim. For the three months ended 06/30/2025, our commercial revenue was $18,400,000 a 21% increase compared to the same period in 2024. This growth was mainly driven by the broadening deployment of our ReCell system, particularly ReCell Go, and despite of the headwinds during the 2025 that Tim spoke about. Additional contributions came from our new products Co Helix and Permeoderm, as well as the expansion from burn centers to new accounts targeting trauma centers. Gross profit margin for the second quarter was 81.2%, down from 86.1% during the same period in 2024.

Note that the gross margin for resell products alone was 84.3% for the quarter, which we believe will remain in this range for future quarters. The decrease in the overall gross margin percentage compared to the previous year was mainly due to product mix, a higher inventory reserve and other adjustments. Regarding gross margin and gross profit, we expected our gross margin percentage to decline as revenue from PermaDerm and Co Helix grew. As we have previously disclosed, we share the average sales price for Co Helix at 50% and for PermaDerm at 60%. These distribution arrangements will contribute substantial gross profit and operating cash flow, but will impact overall gross margin.

Total operating expenses for the quarter were $26,100,000 down from $28,700,000 in the same period of 2024. This decline was mainly due to a $2,000,000 reduction in sales and marketing costs, driven by lower employee related expenses such as salaries, benefits, commissions and stock based compensation. G and A expenses also fell by 800,000 primarily because of reduced salaries, benefits, deferred compensation, professional fees and corporate costs. R and D expenses increased slightly by $200,000 mainly from higher salaries and benefits. As previously disclosed, due to our recent commercial field transformation and added operational efficiencies implemented in Q2, we reduced our operating expenses by about $2,400,000 this quarter.

We expect to achieve the same or greater savings in each of the upcoming quarters, translating into an annual savings of 10,000,000 The $26,100,000 in operating expenses for the second quarter include non cash expenses of approximately $2,700,000 in stock based compensation and approximately $800,000 in depreciation and amortization. Other income expense increased by $900,000 to $2,500,000 of income for the quarter, consisting of non cash gains totaling $1,200,000 related to changes in the fair value of warrants and $900,000 related to changes in the fair value of the debt, along with $400,000 in investment income. The second quarter’s net loss was $9,900,000 or $0.38 per basic and diluted share, showing a 36% improvement from the net loss of 15,400,000.0 or $0.60 per basic and diluted share in the same period of 2024. As of June 30, our cash and marketable securities totaled $15,700,000 compared to $35,900,000 at 12/31/2024. Although the accounts receivable balance of approximately $11,300,000 as of June 30 will help our anticipated working capital needs in the third quarter, We still intend to raise additional capital to strengthen our balance sheet and support our working capital needs.

Turning to our Obramed credit agreement. At the June, we secured a waiver for the

Conference Operator: second quarter trailing twelve month revenue covenant, which was set at $78,000,000

David O’Toole, Chief Financial Officer, Avita Medical: Turning Additionally, on August 7, we entered into an amendment to the credit agreement, adjusting the revenue covenants for the next four quarters to $73,000,000 $77,000,000 $90,000,000 and $103,000,000 starting with the quarter ending 09/30/2025. As compensation for this amendment, we issued OrbiMed 400,000 shares of Aveda common stock. We appreciate OrbiMed’s ongoing support as they accept accepted shares instead of cash, a cash fee, further demonstrating their confidence in our long term strategy. Turning to our financial outlook for the rest of the year. Due to the headwinds in the first half of the year that Jim outlined, we are revising our full year 2025 commercial revenue guidance to $76,000,000 to $81,000,000 from the previously estimated $100,000,000 to $106,000,000 This new full year 2025 revenue guidance indicates growth of approximately 19% to 27% compared to 2024.

Additionally, we now expect to start generating free cash flow in 2026 and reach GAAP profitability in 2026. Compared to our earlier plan of generating free cash flow in the 2025 and achieving GAAP profitability in 2025. Even with the many challenges we have faced in the first half of this year, I want to reiterate our optimism for the future. There is clear evidence of green shoots or signs of growth across our business. These include, we finished the second quarter with June marking one of our strongest revenue months to date, as visibility to reimbursement began to emerge.

Even more encouragingly, revenue in July and August has signaled a strong start to the third quarter. From a revenue standpoint, we view the size and speed of orders we received from our first Value Analysis Committee, or VAC approved accounts this July, as an early indicator of the potential strong demand for Co Helix. With our proprietary position in the operating room and with burn surgeons, our ability to showcase the clinical benefits of Co Helix is unmatched compared to our competitors. We only need to achieve back approval and convert a small percentage of procedures to see a significant impact to our revenue. The new outcome based business model discussed earlier for certain facilities where resell wasn’t the standard practice for burns with less than 20% total body surface area has the potential to generate significantly more revenue.

Facilities where we are already implementing are just the beginning of this type of business model. In closing, we are hyper focused on executing our operating plan for the remainder of 2025. With that, I will turn the call back to Jim for his key takeaways for the remainder of the year before we answer your questions.

Jim Corbett, Chief Executive Officer, Avita Medical: Thanks, David. Before we open the line for questions, I want to briefly bring us back to what matters most. First, with the resolution of the claims backlog now underway, we expect full demand for resell to return in the second half of the year. Second, our revised guidance reflects that recovery and our momentum going into 2026. Third, the amendment to our OrbiMed agreement reinforces long term alignment around that path forward.

And finally, the real world data showing a 36% reduction in length of stay with ReCell isn’t just a clinical insight, it’s a value proposition that improves outcomes and strengthens hospital economics. Put simply, we’re focused, executing, and well positioned to accelerate. With that, operator, let’s open it up for questions.

Conference Operator: Thank you. To ask a question, you will need to press 11 on your telephone and wait for a name to be announced. To withdraw your question, please press 11 again. Our first question will come from the line of Josh Jennings from TD Cowen. Your line is open.

Josh Jennings, Analyst, TD Cowen: Hi. Good afternoon, Jim and David. Thanks for the download and for taking the questions. Just in terms of the resolution and the backlog of claims, sounds like it’s in progress, in process I should say in July. Maybe just take us through if you would just a couple of different scenario analyses.

I mean how quickly can all the MACs get on board? And maybe just give us an understanding of just how many claims what percentage of claims were being denied in the first half of the year if if there is a percentage and where that stands now in July and any improvement pace that’s been documented already and how you expect that to play out over the coming months?

Jim Corbett, Chief Executive Officer, Avita Medical: Well, without, thanks, Josh. It’s good to hear from you. And I’m gonna answer this question carefully because there’s some things underway, and there’s some confidential communications going on. But let me say, me answer your question in a few different ways. First of all, there is a multilevel approach to resolve the max speed to adjudicate.

So on one level, there’s been communication between the MACs and central Medicare because some MACs did not have a clear understanding of their responsibility and role. So that is largely being taken care of. Second, where you get, proof about the adjudication is from the MACs themselves to physicians. So that we have seen now in multiple MACs. The third thing you can also see is that among the claims data, which we do not have full access to, There is a perfectly adjudicated case, there’s a non adjudicated case, and a poorly paid adjudicated case.

Meaning there’s like three categories of resolution underway. So where we are now, we’ve had a very large change in the activity related to the MAX since about June 1. And during June and July, we’ve seen a steady increase in their interactions, the stakeholders interactions with the max, the processing of claims. So it’s happening. This is a category one code, not a category three code.

And there’s, you know, we have never, we I don’t think we could document a claim that was turned down or failed to be paid before January 1, when Medicare was reimbursing for the Medicaid and Medicare patients where resell was used. So, this came as a rather surprise because they rather easily could have just followed the payment practices that were in existence, although they were attached to other codes. So anyway, does that help? I might get to the answer for you.

Josh Jennings, Analyst, TD Cowen: Yeah. That does help. And I’m just with this recovery that you’ve described and the breakthrough in Q3 with multiple adjudicating payments and it sounds and you highlighted that the value that these multiple MACs are signing resupply split thickness skin grafts being higher than split thickness skin grafts alone. Can you talk about the premium that’s involved there and how strong of a signal that is for you that help you, kind of forecast this recovery in the coming next month?

Jim Corbett, Chief Executive Officer, Avita Medical: Well, you see the analysis that’s being used in the crosswalk, depending on the size of the wound, the RVUs basically continue to separate. If you can visualize this left end of the graph, right end of the graph, I mean, the graph, not the graph, the graph comparing the two where you have our views on the vertical axis and you have percent TBSA across the horizontal. As you go from 1,000 to 4,000 square centimeters, there’s a steady divergence in favor of resale utilization and payment versus split thickness skin graft only to the point where it’s 40% more by the time you get to forty forty percent four thousand square centimeters it’s kind of hard to visual I hope I could visualize that for you But there is a notable premium.

Josh Jennings, Analyst, TD Cowen: Thank you for that. And then maybe just lastly, sort of tack on a list here of questions. But I just noticed the update on Co Helix and some launch metrics, particularly just the interactions with VACs, 25% of the 130 US burn centers. Did you share or can you share the number of VAC approvals so far? And can we and what percentage, I mean, it’s impossible to predict, but how would you have us think about the percentage of the 130 U.

S. Burn centers that have where you get through back approval and Co Helix is, I guess, on the formulary, if you will, and you guys are rocking and rolling? Thanks for taking all the questions.

Jim Corbett, Chief Executive Officer, Avita Medical: Thanks, Josh. We’re gonna keep the number of VAC approvals at a at a very high level. And one reason is our experience is with VAC approvals of other products is they’re not all equal. And so what happens when we start disclosing them, the next logical question, are they all equal? And of course they’re not.

And it really turns in a little bit of a morass. So let me answer in the following way. First principle, we don’t get to choose to submit a VAC to a VAC. It actually has to be sponsored by a physician and or department in the hospital. So we can propose to them our value proposition, clinical data, our preclinical data, case studies, they choose to be interested or not.

So the idea that there’s more than 25% of the burn centers that have VAC approvals pending and submitted is a substantial number to happen in the first sixty days of a launch of a new product. So that’s just good news like that. The second is I can say that, during April, we trained and we’re introducing the product. So we really started our active selling in May. Having multiple, accounts that are ordering here in early July is terrifically quick, by our experience in terms of timing for getting approvals.

So obviously we have several, approved. And the third is the there’s a little bit of time. If if the doctors are experiencing fourteen to twenty one days ready to graft, and we’re doing it in seven, it still means they don’t really know how it’s working for seven days. So they find a patient, they do their first patient, and they have to wait till it’s ready to graft. And typically they want to see that the graft takes because ready to graft is an assessment, but the graft take is actually the real deal.

That’s the success of the procedure where you get through closure. So an evaluation really, therefore, if you think about all that, even with our shortened graft time and graft take time, it’s still a three to four week process. So I think the hospital that I mentioned in my comments, continues to order. May have ordered 300,000 during their first month of usage. They’re on path to, do that again in their second month of usage.

So, it is really, a great market for this product because it performs better. So, really, I do think it just fits our portfolio great, and it’s gonna yield great results for us. Excellent. Thanks a lot, Chen.

Conference Operator: Thank you. One moment for our next question. Our next question comes from the line of Ross Osborne from Cantor Fitzgerald. Your line is open. Hey, guys.

Thanks for

Jim Corbett, Chief Executive Officer, Avita Medical: taking our questions. Hey, Josh.

Conference Operator: So starting off and apologies if I missed this. But would you provide

Ross Osborne, Analyst, Cantor Fitzgerald: an update on how the mini rollout is going in terms of feedback, adoption, and where you stand in the back approval process there?

Jim Corbett, Chief Executive Officer, Avita Medical: Yeah, I can. It’s generally qualitative. The product itself is performing very well. That’s A. The physicians who use it tend to be trauma or surgical positions versus burn.

So we’re finding it to be a product for that level one and level two trauma center location. The wounds where resell is used and burns are actually bigger. 2,000 square centimeters we actually average more than one per case. Where in the level one and two trauma you may recall from our PMA the average patient was 400, which is two and a half percent TBSA. So we’re getting a good traction.

One thing we note though, is that in trauma and surgery, resell is really a year old, meaning a lot of physicians had never even heard of spray on skin of resell where the burns physicians have been added for a year. I mean, for five years rather. And that’s since approval. So more than that if you include the PMA time. So I think we’re getting good traction on the Mini.

But that said, it’s a process to get adoption and change the behavior of the physician. They get good results. By the way, burn data applies to all uses of resell. It just happens to be on, if you think what a burn is, you excise a big area, it’s still a wound, just like a trauma wound’s a wound. So I think we’ll see a lot more from many because the dermal matrix and permuturium allow us to approach the use of more patients.

So I think we’re looking for a strong second half from it.

Conference Operator: Great. Thank you for the color there. And then last one on CoHelix. How should we think about the enrollment period in terms of the duration?

Jim Corbett, Chief Executive Officer, Avita Medical: Oh, enrollment of the CoHelix one study you’re asking, right? Yes. Yeah. Well, first of all, it’s 40 patient protocol. Okay?

And it’s done using what’s called OPC, objective performance criteria. So what we did is we built a protocol around the time to graft and time to for graft take and close as the principal outcomes. And since we’re proving nearly a 50 to 100% reduction over the OPC, it takes a very small number to statistically prove when you are that much different. And so we only have to enroll 40 patients. Hard part is over.

We’re almost all our IRBs are open to enrollment at this moment. We have a few still left to go. So I think we get enrolled by year end. That’s what we expect. That’s 40 patients.

Great. Thanks for taking our questions.

Conference Operator: Thank you. One moment for our next question. Next question comes from the line of Ryan Zimmerman from BTIG. Your line is open.

Jim Corbett, Chief Executive Officer, Avita Medical: Hi, How are you? Oh, good.

Izzy, Analyst, BTIG: This is actually Izzy on for Ryan. Thanks for taking the questions tonight. So just to start out, given your current cash balance and your burn rate, I was wondering if Ormed has waived any of the minimum cash balance requirements. I believe it’s $10,000,000 And if not, how much do you still have available today?

Jim Corbett, Chief Executive Officer, Avita Medical: I’m going to have David answer that so we get the right CFO answer here.

David O’Toole, Chief Financial Officer, Avita Medical: Yeah. So, thanks for the question. The Orbit Med has not waived that provision in the amendment. And just to clarify that provision of $10,000,000 is measured at the end of a quarter, not during the quarter. We don’t expect to go below $10,000,000 at any time.

And so, we didn’t ask them to waive that amendment during the current process.

Izzy, Analyst, BTIG: Understood, thank you. And with the restructuring to the Salesforce you guys completed or began in first quarter, I was curious what other expense levers you have contemplated that will help manage your cash burn?

David O’Toole, Chief Financial Officer, Avita Medical: So, during the second quarter, as Jim mentioned, and so did I, we did a commercial transformation of our sales force, and we took a look at our entire organization, and we took out $2,500,000 per quarter. And we see that continuing. So, it’s $10,000,000 annually. We’re going to let that play out. We don’t see any other levers at this point that need to be pulled.

Izzy, Analyst, BTIG: Okay, helpful. And then last one for me. I was just curious if the 2023 ATM is still in place? And if so, how many shares are available in this? And if there are any restrictions on how many shares you can sell?

Thanks for taking the questions.

David O’Toole, Chief Financial Officer, Avita Medical: Yeah, the ATM is still in place. And it has, and this is public information, it has about 3,800,000.0 worth of shares that can be sold under the ATM.

Izzy, Analyst, BTIG: Thank you for taking the questions.

Conference Operator: Thank you. This concludes the question and answer session. I would now like to turn it back over to Jim, our CEO for closing remarks.

Jim Corbett, Chief Executive Officer, Avita Medical: Well, thank you very much for the questions, and thank you for the time with us today. We have a

David O’Toole, Chief Financial Officer, Avita Medical: lot of

Jim Corbett, Chief Executive Officer, Avita Medical: exciting activities that we’re doing that are going to lead to really a great second half. So we’re really looking forward to that and updating you in the coming quarter on how that goes. Thank you.

Conference Operator: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect. Everyone, have a great day.

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