With the unique RECELL spray-on product that uses a small amount of the patient's own skin, there is a moat that Avita can take advantage of for treating burns.
Main reasons that will underpin mid-long term growth for AVH / RCEL
- The approval of RECELL by the U.S. Food and Drug Administration (FDA) for the treatment of acute thermal burns in adults in September 2018 has created a large runway for growth for AVH. This has given them the opportunity to launch their Sales force and begin the sale of RECELL to burn centres in the USA, with the BARDA deal.
- Due to the novel approach to skin regeneration, RECELL has been met with a lot of enthusiasm by the medical experts and the sales is only bound to grow exponentially.
- The company has shown excellent management, leadership and vision.
- The pipeline future for RECELL product is the company's next aim, to target vitiligo (6.5 million people affected in the US)
- Also for 3-8 million people affected by Epidermis Bullosa (sponsored research ongoing with Gates Center for Regenerative Medicine)
- And for rejuvenation and tightening of skin after aesthetic procedures, another 3 million people affected.
- The goal to get approval was a long and arduous process, however, the process towards approval and the launch of the sales force showed excellent internal and external stakeholder management and ability to successfully execute a long-term plan.
- In the short period of time since the approval for RECELL was approved by the FDD AVH has managed to penetrate more than 25% of the burn centres with having sold products in 41 of the 134 burn centres in the U.S.
- Of the 136 of 300 burn surgeons at 59 U.S. burn centres have been trained and have performed a RECELL procedure, this bodes well for the future of the RECELL procedure as the runway for growth is open and U.S. always setting an established for procedural excellence.
Even with conservative estimates, the growth potential is x2 , x3 current price over the next 2-3 years.
I'm using the RCEL ticker on Yahoo Finance as they haven't had to reconstruct the ticker like on the ASX and the data is cleaner.
Big picture, even accounting for the cash they have had to spend in 2019, the 2020 numbers look better and they've had their best year coming into this year.
This is evidenced by Buy and Strong Buy ratings by analysts.
$45 USD / 5 = $9 USD. which is $12.87 AUD
Technical Chart Analysis
I initially saw the $8 AUD mark as a good entry. On 10th July towards the end of the day, the price fell sharply (around 10%) without any news. The market in general did have a small pullback, but AVH's fall was exaggerated. I picked up an initial parcel.
This Friday, 17th July, marked the end of a steady decline over the week, and I chose to buy another parcel, bringing my average purchase price down to $6.6.
The MACD and Stochastic RSI show that its well into oversold territory, trading under it's fair value.
A double bottom in it's history has most often been followed by a breakout.
If this downtrend continues, I'm going to accumulate away.
(20min delay)