I finally got around to compiling some notes based on what we've been recently told, along with some of my thoughts/miscalculations, in case they're helpful to anyone:
Share Price:
[JC Q124 Briefing]: “The current share price really reflects our Q4 and Q1 where we missed our guidance. So, we missed on our execution and the share price reflects that. And the only way for us to get that back, is to demonstrate and perform going forward."
[JC Q124 Briefing]: “We have a lot to recover with and we intend to make that become reality"
“On a go forward basis, we are really well prepared”:
Commercial Organisation is in place
108 sales team are trained and ready for the field (promoting RECELL GO & PermeaDerm) ~ 260% growth YoY (n=30 in Q123)
Ample inventory ready for immediate shipment (GO and PermeaDerm)
Manufacturing facility upgrade to approximately 80,000 kits/year on track for completion in July 2024
U.S. Commercial Revenue Growth Drivers Q224 Revenue:
[JC Q124 call]: “To supplement our understanding of burn accounts, our team of 29 clinical training specialists will be physically present at our burn account sites, dedicating at least 60% of their time in burn centers. We believe that this approach will reinvigorate our burns business.” “Assuming approval, our top 28 burn accounts will be prioritized for conversion to RECELL GO in June.” ~ Sounds like Q224 revenue growth will come from existing burn accounts
RECELL GO:
[FDA Approval of RECELL GO - 30 May 2024]: “In the United States, the Company will launch RECELL GO in its top burn treatment centers in June, and other existing accounts will be converted to RECELL GO throughout the year. New accounts will receive RECELL GO with their first order, eliminating the need for conversion.”
"IT'S GO TIME. The new RECELL GO™ System streamlines preparation of RECELL® Spray-On Skin™ Cells with 1/3 fewer steps."
"RECELL GO introduces enhanced features that streamline the preparation of Spray-On Skin™ Cells. This next-generation device significantly reduces the training burden on medical staff, improves workflow efficiency in the operating room, and controls the RECELL Enzyme™ incubation time to ensure optimal cell yield and viability. These advancements simplify the user interface, enabling medical teams to provide quality care readily and consistently to their patients."
New Trauma Accounts:
[DO Q124 Briefing]: “The new accounts that we had expected to drive the revenue growth in the first quarter, just didn’t happen” ~ No orders/revenue from new accounts in Q124. It also sounds like RECELL GO was only launched in the top 28 burn accounts in Q224, so revenue from new accounts should commence from Q324 which aligns with the substantial revenue ramp up in 2H24 required to meet the $78.5M FY24 revenue guidance.
Pipeline of new VAC approved trauma accounts where they are “targeting at least 45 new accounts per quarter” and “there is a process where we get (the) initial order relatively quickly” ~ followed by replenishment orders
New accounts wouldn't be VAC approved if they weren't planning on making orders so I wonder what an average initial stocking order for a new account would be for a product with a 21-month shelf life ~ minimum of 10 kits?
RECELL eligible procedures have increased from 25,000 burn procedures in 140 accounts (average 178 procedures per burn account) to 435,000 burn & FTSD procedures in 140 burn & 700 trauma accounts (average 250 procedures per burn account & 570 procedures per trauma account) ~ Trailing 12-month market penetration into burns is around 20% (7200/35000) and FTSD is close to 0% = lots of accessible market penetration remaining
PermeaDerm:
“Launched PermeaDerm into our product portfolio in March 2024” (23 March 2024)
[JC Q423 Call]: "The biosynthetic wound matrix of PermeaDerm fits so many more applications than RECELL. And often, when we’re selling RECELL or promoting it or discussing possible uses of it with a doctor, we might discuss several different patient indications and different patients before a RECELL is chosen to be used on a patient. But all of those patients will be candidates for PermeaDerm in this case. So, it will give our reps an opportunity to have many reasons to fulfill the needs of the customer.”
[JC Q124 call]: “There's going to be a meaningful contribution from PermeaDerm (in 2024)”. “We're going to be giving more guidance around what that revenue looks like from PermeaDerm for the second half of the year in August on our second quarter earnings call.” ~ guessing around $3M but could be up to $6M depending on what the previous sales were from the previous distributor OVIK Health, who transferred their customer lists to AVITA, and how willing RECELL customers are to use PermeaDerm.
"For the first three years of the agreement, the minimum purchase should increase annually by an amount equal to the percentage growth in the Company's annual US based revenues excluding PermeaDerm revenue, or a minimum increase of at least 20% over the prior year purchase commitment." ~ 2024: $5M, 2025: $6M, 2026: $7.2M. Potential revenue (minimum): 2025: $10M, 2026: $12M, 2027: $14.4M. Maybe OVIK Health didn't pass a similar requirement and hopefully AVITA has a greater capacity and better access to more accounts/physicians.
PolyMedics Innovations in EU:
“Expect non-U.S. sales within Germany, Austria, and Switzerland following the launch of RECELL in January 2024” ~ PMI is currently building early KOL sponsorship & focussing on getting reimbursement. Broad adoption isn’t expected until after reimbursement has been granted which could be around the anticipated CE Mark approval of RECELL GO - possibly in September or October. Initial stocking order in Q3 or Q4 2024? (previous small orders look like they’re being used for training purposes only)
Japan:
Restore revenue growth in Japan for the remainder of the year? FY23 Revenue: $3.37M. FY24 Revenue: $3.5M-$4M?
Financials:
[DO Q124 call]:“The ramp is significant for the last half of the year. When we achieve that through the initiatives that we've talked about, that is going to start to get to a point where our cash burn is not very significant with that ramp-up in revenue.And so we believe in the lower end of our guidance and when we achieve that, we'll be heading into 2025 with a significant run rate for revenue.And so we've talked about getting to cash flow breakeven by the middle of next year. And as we enter 2025 with the revenue we believe we're going to be achieving, that cash flow breakeven GAAP profitability can be done.”
Other Upcoming Catalysts
RECELL GO mini:
[May Presentation]: “Plan to submit PMA supplement for RECELL GO mini in June (2024)” and [February Presentation]: “Expect to receive FDA approval by year-end (2024)” ~ I wonder if could be approved sooner since the only difference between RECELL GO and RECELL GO mini is the cartridge that accommodates a smaller donor skin sample. I imagine that reviewing the validation data would take less time. I also note that the timing expectation on FDA approval was left out in the May presentation.
Designed to capture the broader smaller wound size (<2.5% TBSA) in the FTSD market and for the Vitiligo market once reimbursement has been established.
[JC Q124 Briefing]: “RECELL GO mini fits into the current reimbursement codes”
[DO: TD Cowen]: “The cost of goods sold will be exactly the same. So, the thought there is our gross margin will be less with RECELL GO mini but we’re going to make it up in volume because of the fact that there are so many significant smaller wounds in that expanded label, full-thickness skin defects.”
[JC Q124 Briefing]: “We haven’t made final pricing decisions yet. I think that you could expect that it could be in the order of 20% less than RECELL GO/1920 version” ~ $6500/1.2 = US$5400
Vitiligo:
TONE Study & Health Economics Study: “We expect we will be able to provide preliminary (6-month) insights from the data during our second quarter earnings call in August.” ~ Implies 12-month data in February 2025.
“We plan to submit the TONE study and our separate health economic study for publication by the end of 2024, positioning us to begin commercial payer coverage discussions during the second quarter of 2025”
International Expansion:
[JC Q124 call]: “We expect to receive CE mark for RECELL GO between September and December”
Plan to actively identify new distribution partners in major EU countries and Australia during remaining part of the year (2024)
[JC Q124 Briefing]: “EU and AU will be launching throughout the year”
[JC Q124 Briefing]: Japan: Currently, at very early stages of RECELL GO submission. Possible update in August.
Product Portfolio Expansion:
Plan to continue expanding portfolio to transform into a broad wound care business
[May Presentation]: "Sufficient capital to meet goals and reach profitability"
[May Presentation]: "Two $25 million tranches available at our option; do not foresee a need for either tranche"
Revenue Test Date: 31 December 2024
Product Revenue Base on a trailing 12-month basis: $67,500,000
If revenue is below $67.5M: Edited to make it a bit more understandable for me ~ the Borrower shall repay the outstanding principal amount of the Loans on the last day of each Fiscal Quarter, in equal quarterly installments equal to 5.00% of the outstanding principal amount of the Loans on the applicable Test Date on which the Borrower first failed to satisfy the Product Revenue Base test set forth herein through the Maturity Date (October 18, 2028), together with the applicable Repayment Premium and the Exit Fee, unless sooner required to be repaid pursuant to the terms of this Agreement.
$25 million will be made available, at the Company’s discretion, on or prior to December 31, 2024, subject to certain net revenue requirements ($67.5M)
AVH Price at posting:
$2.51 Sentiment: Buy Disclosure: Held
(20min delay)