For what it's worth, I feel relatively comfortable with this portfolio expansion for the following reasons:
1. They're continuing to invest in their long-term growth objectives as planned which implies that they must still be confident in achieving their other very important targets ~ we'll find out next week.2. Last year, Avita began animal testing with a range of dermal products alongside RECELL to evaluate which ones achieve the better outcomes. The best fit was the unique collagen-based dermal matrix developed in collaboration with AVITA Medical which is manufactured and supplied by
Regenity Biosciences. Similar products include
Aroa's Myriad Matrix™ (a collagen matrix derived from ovine forestomach),
Integra's PriMatrix® Dermal Repair Scaffold (acellular dermal tissue matrix from fetal bovine dermis, rich in type II collagen), to a lesser extent
PolyNovo's NovoSorb BTM and
PolyMedics' SUPRA SDRM® due to their synthetic matrix composition but they still operate in the same space so they'll be competition with the new matrix product.
3. $2M for a 510(k) clearance and commercialisation in Q424 is an efficient way (time and cost) to enter the new dermal scaffold market. R&D expenses + $3M towards a manufacturing expansion if clinical study results in 2025 are positive seems reasonable to me; cheap if a new standard of care is established. 50% of the sales price for the first 2 years and 60% to Avita after then seems fair too (sales will be lower in the first 2 years than subsequent years due to the normal adoption curve). If all goes well, then they can also use distribute the product to partners in EU, AU and Japan.
I'd say this deal would be more in Avita's favour than it would have been if they were to partner with one of the more established companies above, that's assuming they were interested.
Another recent deal Regenity made with MIMEDX for reference ($5M initial + $3-7M over two years):
MIMEDX Expands Portfolio with Fibrillar Collagen Wound Dressing4. Presumably, they're confident in the performance of the new dermal matrix after their animal testing if they plan to immediately go into studies comparing it with
other commercially available dermal matrices in full-thickness wounds, followed by delayed* treatment with a split-thickness skin graft plus RECELL in a two-stage procedure (the current standard of care), to demonstrate improved time to grafting and wound closure. Additional clinical studies will evaluate the use of the new dermal matrix in full-thickness wounds with immediate grafting together with RECELL in a single procedure, aiming to establish a new standard of care. AVITA Medical anticipates completing these studies in 2025.
Note: *Delayed
treatment: After the application of a dermal matrix/scaffold, it can take around 2-4 weeks before a wound is ready for a STSG with or without RECELL. There's a good slide showing two-stage process in the Polynovo link above for anyone not 100% sure of the process.
5. It's just one case, however, I think it provides a good indication of the potential time/patient/cost benefits. I watched a clinical webinar in August last year where a US surgeon discussed a successful one-stage procedure case (unfortunately, the webinar link has expired but I took notes):
A patient with a 3000cm2 necrotizing soft tissue infection - the surgeon treated the back first with Novosorb BTM knowing it would take 4 weeks to granulate/integrate. During this time, they treated the abdomen in a one-stage treatment with PriMatrix and Recell, and the wound was closed by 4 weeks. At 4 weeks, removed silicone layer on BTM and was ready for the second stage treatment i.e. skin graft. I've also seen one-stage case studies where the graft has not taken and the RECELL cells died due to the wound bed not providing sufficient support to the STSG and cells.
6. A one-stage procedure with the new dermal matrix with RECELL is very promising. The goal of becoming the new standard of care is the outcome I was looking for when they decided to add complementary products to their portfolio. It sounds like Regenity and Avita may have developed a matrix that contains the ingredients required for the cells from RECELL to
"Survive and Thrive" and
generate a dermal-like tissue in full-thickness wounds through rapid cell repopulation and revascularization of the dermal collagen matrix.
Synergies associated with adding products to the portfolio which achieve improved patient outcomes when compared to its competitors.
Given the points above, I can see the logic in this agreement and I look forward to seeing how it pans out.
The addition of
Robin VanDenburgh as the new Senior Vice President of U.S. Commercial Sales looks like a great fit for this role. It's also encouraging to read the comments on
LinkedIn by those who have worked with her in the past and how warmly she's being welcomed by Avita's employees (either morale is good or they're keen to see JC return back to his CEO duties, possibly both).
So, the combination of the recent updates that indicate to me that the business is executing as planned + the recent SP fall due mainly to macro factors IMO + upcoming catalysts this quarter (Q224 results, Q3 & FY24 revenue guidance, PermeaDerm FY24 revenue guidance, update on the number of new VAC approved accounts which will eventually need to place stocking & replenishment orders, results for the TONE & HCE? studies, CE certification for RECELL GO in EU and AU, RECELL GO mini updates, international partnerships?, wound bed preparation product?)
+ RECELL being used on ponies (is this the pony we've been looking for?) + Melody
contemplating doing something stupid = me strapping on my cape and being a buyer prior to results next week.
