Ann: Q1 2023 Investor Presentation, page-48

Apologies in advance, I got carried away with this "summary" of the Q123 Investor Briefing and incorporated some previous information, but hopefully the following is beneficial to some existing and potential investors with their research or for reference. DYOR and all of the other usual disclaimers:

Investor Webinar Briefing - First Quarter 2023

Q12023 Investor Presentation

Other Related references:

· 10-Q

· AVITAMedical, Inc. First Quarter 2023 Earnings Conference Call

· 10-KAnnual Report 2022

· https://avitamedical.com

Note: CEO, James (Jim) Corbett's comments in green

I think it's worth remembering: Mr Corbett is aware he will join Avita’s conga-line of fallen CEOs if the definitivedeadlines and targets are not met.
“Investors will kill me if I don’t achieve them,” he says. - Dr Boreham’s Crucible: Avita Medical

FINANCIAL

Commercial Revenue:

· $10.5m; 40% growth same quarter prior year

· Gross margin increased to 86%

· $77.6 million in Cash, Cash Equivalents & Marketable Securities (Q1 cash burn: $8.7 million); “sufficient cash toexecute our strategy”

· Slower growth in first quarter in US burns “not attributable to any third-party matter, we expect that (growth) to pick back up” Reasons: The sale team are now also promoting in level 1 trauma centres where the additional 10,000 targeted burn procedures are, and continued penetration into existing accounts

· Japan burns revenue: $1,021,000 which was an inventory order for new accounts. Anticipate good quarterly replenishment orders in future quarters (don’t expect any additional inventory orders)

· My (mis)calculations of commercial revenue and growth:

· Expenses included one-off severance costs, R&D costs for RECELL GO, and sales force expansion and training ahead of schedule in preparation for soft tissue launch. More efficient than hiring slowly and were not ready for soft tissue launch according to Jim/sales model (less cash burn over 2-3 years). Don’t require a new CCO (less costs) to replace Erin who resigned due to new employment offer from private company

Guidance:

· “Goal with guidance is to be credible”

· Q223: $10.7 - $11.7m; 37% growth at midpointsame quarter prior year

· No allowance in guidance for soft tissue repair revenue in Q2 guidance. If FDA approval occurs in late May/early June, potential foradditional revenue during June. “Launching soft tissue early is going tohelp us have a faster ramp than we would have otherwise anticipated”

· VAC approvals data for new trauma centres will be announced in Q3 call

· Maintain FY23: $49 - $51m; 47% YoY growth at midpoint (includes soft tissue sales projections for Q3 & Q4)

· Confirmation that the Q1 expenses do not impact guidance of profitability crossover, excluding vitiligo and international launches, is anticipated to be around Q1’25 with $30M+ cash

· Cash burn rate: Haven’t provided guidance. One could estimate costs from financials - “not substantially changing what we’re investing over time”(Expenses: $19-20m/qtr?) subject to the vitiligo channel (internally or externally pursue) and any unknown investments they might consider over that time

· Operating expenses expected to peak as a percentage of revenue in Q3

· Contribution margin on a new field sales professional is breakeven with approximately five RECELL kits sold per month per individual. Currently, the average productivity of a direct sales rep exceeds 20 kits per month

· A sales professional, based on the burns experience/data, “pass that five pretty consistently in a short number of months” “lessthan half a year” and 20 kits in “well under a year”.“In factwhen we were launching with burns it was actually harder. We were less provenat that time. And the market was narrower in terms of, the indication we werepursuing.” For soft tissue: “We expect that the potential is quitehigher than that (20 kits per month), because of course, the marketcases, the patients that we are treating are approximately 4 times the numberthat are in burns.” – Q422 Call

· “whatwill really be exciting, quite honestly, is our exit rate in Q4, because it'sgoing to really position us forhigh growth in 2024.” – Q422 Call

· “On pace next year (2024) to grow at a muchhigher rate” than FY23 (47% growth)

· “Ithink we have some very strong growth years ahead of us with soft tissue andburns on their own not adding to either an international expansion or a launchof the vitiligo in January 25.” – Q422 Call

· YoY growth rate expected to be more than 50% over the next 3-5 years and that guidance excludes the vitiligo opportunity

· Gross margin expected to improve over the next 12-18 months due to increased efficiencies from increased volume and RECELL GO.

· $200M Shelf Offering:

o Renewed an existing shelf offering which was due to expire in coming months – new one expires in 3 years – “we’re juststructuring the company to be flexible”

o Company’s use them for capital raises, acquisitions, etc.

U.S. FIELD SALES EXPANSION

· Q1 Initiated recruiting and hiring process; grew from 30 to 69 towards goal of 70 (70 hired at time of Q1 investor briefing)

· Ahead of schedule; onboarding and training underway

· High quality sales reps who came from other surgical technology companies. Sales reps have their finger on the pulse of opportunities which is a very validating signal

· “Wehave a buddy program as part of our training where the new reps will travelparts of the week with one of our more veteran team and get the opportunity toboth be taught, trained, and coached, and actually support a case in one of theaccounts where we already are presently performing RECELL cases” - Q123 Call

· Recent small (10) in-house blinded interviews revealed: “by farand away, our field sales team got such high marks from any other company thatthese burn surgeons interact with. So that standard is one we intend to keep.” - Q123 Call

U.S. BURNS

· Value Analysis Committee (VAC) approved in 145 Burn centre accounts

· 25,000 targeted burn procedures, with Soft Tissue approval, there are an additional 10,000 targeted burn procedures (+30%) in level 1 & 2 trauma centers (small burns <30% TBSA). Sales team are now promoting into some of these accounts

· “thosesmaller burns, that are in the level one trauma centers we fully expect thatoutpatient activity to increase significantly because (if) you get a really badburn, you go to a burn center and if you get a second degree burn, perhaps youend up at a level 1 trauma center. So I think we will see that the outpatientfor burns increase. But of course, that is also where a lot of the soft tissuecases will go too.” - Q123 Call

· Case reports with RECELL used alone for deep partial-thickness burns with <20% TBSA (positive indication for soft tissue too):

EPIDERMAL REGENERATIONOBSERVED AT ONE WEEK FOR DEEP PARTIAL-THICKNESS FACIAL BURN USING RECELL®SYSTEM TREATMENT

RE-PIGMENTATION AFTERTREATMENT OF A FACIAL BURN WITH RECELL® ALONE

TREATMENT OF A FACIAL BURNWITH SPRAY-ON SKIN™ CELLS

LONG-TERM OUTCOMES OF ASMALL DEEP PARTIAL-THICKNESS BURN AFTER TREATMENT WITH RECELL® ALONE

TREATMENT OF 18% TBSA SCALDBURN WITH SPRAY-ON SKIN™ CELLS

TREATMENT OF A DEEP-PARTIALTHICKNESS FACIAL BURN WITH RECELL® ALONE

RE-PIGMENTATION OF A BURNINJURY TO THE POSTERIOR TORSO TREATED IN AN OUTPATIENT SETTING WITH RECELL®ALONE

RECELL® SYSTEM TREATMENTOF DEEP PARTIAL-THICKNESS BURNS IN A 10% TBSA FLAME BURN PATIENT

RECELL® TREATMENT OF DEEPPARTIAL-THICKNESS BURNS TO THE FACE AND FULL-THICKNESS BURNS TO THE NECK

· RECELL is being adopted as the standard of care in burn centres e.g., LSU Health:

“We’ve also made spray-on skin part of our hospitalstandard of care, so it’s offered to all patients who could benefit from it,regardless of insurance status or ability to pay. In fact, we’ve been able tostay profitable simply by taking care of everybody. That’s because our averagecost per patient has gone down, by getting people home faster.”

“Using ReCell, we’ve been able to cut recovery timesin half by accelerating healing and also reduce the hospital stay for allLouisiana burn patients by three days,” Dr. Carter said. “This means lesssuffering, less risk for complications and infections, and significant savingsfor both the patients and the state—at least $9 million over three years.”

https://www.lsu.edu/research/news/2022/0118-recell.php

U.S. SOFT TISSUE REPAIR

· “We’revery confident of our June (7) approval”

· No material deficiencies during the FDA 180-day review (clock didn’t stop)

· New field sales reps will be trained and ready for commercial launch

· “We’reclearly going to be able to start to promote in June”

· Expected launch 1 July 2023 (launch day of approval since recruitment and training is ahead of schedule)

· Currently VAC approved in 70 accounts; aiming to be VAC approved in over 1000 accounts over the next 1-2 years

· 5x market expansion will fuel revenue growth. Unlike with Burns, most surgeons would consider RECELL for small wounds (<5% TBSA or 1000cm2)

VITILIGO

· “We expect approval around June 17”

· No material deficiencies during the FDA 180-day review (clock didn’t stop)

· Currently pursing reimbursement for the use of RECELL in office; expected in January 2025

· Pilot launch July 1; cash pay (meaningful revenue not expected) & a post-market study “that will help private payers understand the health benefits of thesepatients who are suffering from the disfigurement particularly the perceiveddisfigurement they experience with Vitiligo and the associated health impactfrom that because that quality of life is really where it the benefits liemedically and from a cost point of view.”– Q123 Call

· U.S. Vitiligo market five times the size of combined Burns and Soft Tissue Repair

· U.S. commercial launch anticipated in January 2025

RECELL GO

· Protected by issued patents in the U.S. and certain other countries for automated device, which provides a further barrier to entry for potential competitors

Timeline:

· Maintains FDA BreakthroughDevice Designation (180-day interactive review)

· Completed validation testing process: the comparable to RECELL (to ensure that the automated device produces the equivalent buffering solution as the currently approved manual device). Possibly also the testing on number of uses per instrument and electrical standards

· On track for FDA submission of RECELL GO by June 30, 2023 (extraordinary effort by all involved to get the device to this stage)

· Anticipate FDA approval of RECELL GO by January 1, 2024

· Build inventory by Q423 in readiness for FDA approval

· Phase out current RECELL device and replace with RECELL GO during 2024

· International expansions in 2024 with RECELL GO

Increased Efficiencies:

· Designed to automate the process of cell disaggregation

· “Wesee RECELL GO as the enabler of adoption, the enabler of greater profitability,and the enabler of helping more patients get treated with RECELL and live theirlives in a more productive way”

· Simpler process: Take skin sample and put it in cassette, insert cassette in device, press green button, wait 33 min (hospital staff can perform other duties while waiting), load into spray applicator, and apply.

· Eases training burden: training currently occupies 50% of sales time. Training for RECELL GO is reduced to around 10% of sales time or about 5 minutes. Resulting in improved sales productivity

· Lower costs, reduction in packaging material, recyclable parts (including cassette), ESG friendly

· Cost per instrument $3,500 and will last approximately 300 uses. Paid approx. $6,500 per use which is approximately $2 million over the lifetime of one instrument

· Increase gross margin; “Over the next year ormore we will double volume and when we do that, our cost will fall 25%. So 83%will go to something materially higher.” – Q123 Call. Double volume again will reduce costs by a further 12.5% which will either improve or maintain gross margin (maintain GM in the event that they receive lower prices for international markets)

MANUFACTURING FACILITY

· Webelieve that our current manufacturing capacity at the Ventura facility issufficient to meet the expected commercial demand for the RECELL System forburns, as well as other indications under development, for the foreseeablefuture.– 2022 Annual Report

· Planning an efficient pathway for a 10x increase in volume capacity to the existing manufacturing facility in anticipation for future orders over the long term

INTERNATIONAL EXPANSION

Planning to launch in 20-25 Countries (U.S., Australia, Japan, most of Western EU)

· In Australia, the RECELL System is approved to use for the treatment of burns, acute wounds, scars, and vitiligo. In the EU the product has been approved for the treatment of burns, chronic wounds, scars, and vitiligo. However, until the company secures adequate reimbursement it won’t sell actively in these markets (ad-hoc surgeon requests are supplied on demand)

· Strategy by end-of-year 2023 (Q3 Call in November)

· All international launches with RECELL GO

Japan

· Currently working through a new business agreement with COSMOTEC

· Rough timeline: Avita will send COSMOTEC the FDA reviewed data for soft tissue and vitiligo in approximately 30 days, then COSMOTEC will advise their estimated PMDA submission date - anticipate knowing the submission date by the Q2 call so should also be able provide guidance on the approval and launch dates in Japan for soft tissue and vitiligo

· Rough timeline: RECELL GO – Q423 they’ll send COSMOTEC RECELL GO test data and some units for them to test against Japan standards. Once their testing is complete, they’ll provide an estimated PMDA submission date

Australia

· Regulatory readiness in place by the end of 2023

· Looking to have a partner (rather than direct sales like in U.S.) in early 2024

· Aiming for RECELL GO regulatory approval and launch in early 2024

CONSENSUS ESTIMATES

· Current consensus estimates for 2024-25 annual revenue, and therefore EPS, are below Jim’s guiding comments; by how much will depend on how well the team executes on their strategies. In the image below I've shown where revenue could end up based on 50% growth (yellow). I’ve used my imagination to show a couple of scenarios "at a much higher rate" (green and purple) presumably including international (2024) and vitiligo (2025) expansions on the top of the burns and soft tissue indications

At the base growth rate of 50% YoY (excluding vitiligo and possibly international) for 2024 and 2025 in comparison to consensus looks something like this:

AVH/RCEL CONVERSION

ASX code: AVH (CDIs 5:1); Nasdaq code: RCEL. 5 AVH CDIs equals 1 RCEL