There are other investors who will be wondering about this deal that Avita has announced and how to understand it.
A look at MiMedx might be beneficial in understanding Avita’s deal with Regenity.
MiMedx (MDXG) is a US-based wound care company that markets placental-derived allograft products. Unfortunately for them, particulate or powder forms of placental-derived allograft products are required to use the BLA regulatory pathway to receive marketing approval in the United States. MiMedx has argued the toss with the FDA on this requirement for a number of years but hasn’t won the argument. As anyone who follows MSB will know, the BLA pathway is long, onerous and very expensive.
New management was brought in at MiMedx at the beginning of this year. The MDXG share price is where it was 10 years ago and the Company’s market cap is just under US$1bn, having peaked at US$1.8bn in early 2018. The new management at MiMedx decided that pursuing a BLA for the micronized placental product it was developing simply wasn’t worth it. In a “strategic realignment” it was decided that changes were needed to improve the Company’s operating margins and free cash flow generation. The decision was made to diversify into xenografts (animal-derived), where the 510(k) pathway could be used to drastically reduce time and cost to market. It was considered that developing the Company’s own xenograft from scratch would be a potential multi-year investment. Instead, it was decided to acquire exclusive rights from TELA to its manufacturing and supply agreement with Regenity Biosciences to sell and market an FDA-approved, 510(k)-cleared, bovine collagen-derived particulate product. TELA made the agreement with Regenity in May 2022 and launched its “NIVIS Fibrillar Collagen Pack” product on the US market in January 2023.
MiMedx announced the TELA/Regenity rights acquisition deal in March this year and launched the TELA/Regenity product, rebranded as “Heliogen” in the US this week.
What’s all this got to do with Avita?
Because Avita’s RECELL product is a medical device related to cellular products, it is required to seek US marketing approval using the PMA pathway (the pathway being followed for BTM for the treatment of full thickness burns in the US). As we know, that can be a very long and expensive process.
Like MiMedx, Avita management has been struggling to grow the Company in a financially meaningful way. The AVH share price is down 66% over the past 5 years. Current market cap is just A$355m.
By adding a non-cellular product that can be approved under the 510(k) pathway, AVH will be hoping to reduce development costs and accelerate revenue. The Company could have taken the route that Integra has always taken – acquire another company with a suite of existing products – but it’s not in the financial position to do so. So it’s taken a leaf out of the book of TELA and MiMedx and signed up Regenity to supply it with a bovine dermis derived product which is ready to receive 510(k) approval within mere months.
It will be interesting to see how Avita positions its bovine-derived collagen dermal matrix against Aroa’s ovine-derived collagen matrix, Myriad.
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