With the current negative share price trend and the clear...

With the current negative share price trend and the clear temporary dominance of shorters, I thought it time to share why I remain invested in Avita.

For me, it is all about the very high quality of their assets, and the current value of these assets.

Why do I regard Avita's assets as very high quality and worth owning at even much higher share prices (all are my opinions)?:

1. Avita's Recell Go is world's best in terms of donor-site sparing. This is highly significant for as long as surgeons need to harvest the patient's skin for the treatment of burns or trauma sites. Patients are better off if their surgeons use Recell Go. Several technical research papers have been disclosed on this forum indicating that health economic analyses show that useof ASCS (Recell) ± STSG in acute thermal burninjuries results in reduced length of stay inhospital, fewer autograft procedures,lower rehabilitation costs, and reducedoverall costs compared with use of STSG alone.
2. Avita has proven the "Product Market Fit" for Recell (Recell's target customers are buying, using, and telling others about the company’s product in numbers large enough to sustain that product’s growth and clear path to profitability). Apart from the last quarter or two (depending on what happens this quarter), Avita has experienced very high levels of demand growth for the previous product, which required more training and health worker intervention than Recell Go requires. I am confident that the short-term "hiccup" in sales growth rates was due to two factors - a temporary reduction in burns admissions early this year, and some buyers holding off re-stocking or initial stocking until Recell Go was available. I do not believe it had anything to do with the product itself. IMO, demand growth will quickly recover with the launch of Recell Go. Current FY24 guidance indicates revenues exceeding $100M AUD. That level of sales also reinforces that market acceptance of the product is very strong.
3. Strong synergies with other burns products, with the combination of products resulting in even better patient outcomes than from Recell alone. Much has already been said by researchers and Avita that Recell works very well in conjunction with synthetic polymers such as novosorb BTM. There is considerable potential for this combination to reduce the need for STSG and therefore to further reduce donor site size achieving even better health economics outcomes for patients, hospitals and insurers.
4. Very high TAM relative to existing sales levels. The current TAM for burns and FTSD in the USA alone is around 435,000 pa. This compares with about 12,000 Recell units currently being used annually (US$78M / US$6500). The TAM will more than double when Vitiligo is included within the next 2 years or so. TAM will further increase as international markets open up.
5. Very low marginal costs. IMO, the manufacturing cost of each Recell Go disposable unit will be insignificant relative to the sale price of US$6,500. When it costs a company a relatively small amount to produce the product that they sell, it is reflected as high gross margins. This should ensure that Avita achieves strong cash generation for reinvestment and ongoing high levels of growth.
6. Visible path to profitability. Management has guided to profitability by no later than Q3 2025, but even if this were to extend into 2026, this is not too long before shareholders start seeing some strong financial benefits from the quality assets I have outlined above.

IMO, the current market cap of only AUD$310M does not reflect the above quality, existing revenue levels, (normalised) growth rates, TAM size and 2-year outlook for Avita's FDA approved products. My approach is not to obsess about daily share price movements, but instead to have confidence in the research that I have done and to try and estimate what is likely to happen over the next 2 years.