April 30, 2020 - 9:23am EST by
2020 2021
Price: 5.87 EPS -.25 -.25
Shares Out. (in M): 105 P/E 0 0
Market Cap (in $M): 575 P/FCF 0 0
Net Debt (in $M): 0 EBIT -25 -25
TEV (in $M): 575 TEV/EBIT 0 0

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Avita Medical (RCEL) operates as a regenerative medicine company.  It is in the first inning of revolutionizing burn care in the world. It is the first burn care product to get pre market approval in the US in over 20 years.  I think over the next five years RCEL can be a multi bagger investment as its system is adapted as the new standard of care. The company's patented and proprietary platform technology provides treatment solutions derived from the regenerative properties of a patient's own skin. Its lead product is RECELL System, a device that enables healthcare professionals to produce a suspension of Spray-On Skin cells using a small sample of the patient's own skin for use in the treatment of acute thermal burns. 

While now approved for acute thermal burns RCEL is working on expanded approved uses including pediatric burns and outpatient settings, soft tissue reconstruction regenerative dermatology and Vitiligo.  These markets alone represent a $2 billion opportunity alone.  They also recently started research on use in skin rejuvenation which is a $16 billion market in the US. 

The outcomes of the use in skin regeneration are stunning.   Pictures tell an amazing story in this case so here is a link to the recent company presentation which has a lot of pictures to show what this life changing therapy does for people. 


The current standard of care is skin grafts which you have probably heard of.  The difference between skin grafts and RCEL’s therapy are stunning. 

Skin Grafts – require large donor site with major pain associated with donor site.  Extended hospitalization with multiple costly surgical procedures and high risk of infection. 

RECELL System – Antilogous cell harvesting device that uses proprietary enzyme to prepare Spray-On Skin Cells within 30 minutes at point of care.  Treatment area is 80X donor area (credit card size sample can treat an entire back) for second degree burns. 

Along with better outcomes, RCELL results in 35% cost savings due to shorter and fewer procedures, decreased length of stay, and reduced resource use translates into burn center savings.  A study the company did estimated that a 200 patient burn center could reduce annual costs from $43 million to $30 million a savings of $13 million per year using RCELL versus Standard of Care. 

RECELL was fully rolled out in the US in January 2019.  In the short time since then, RCEL accomplished the following:

         $10 million in US sales calendar 2019. 

$4 million in US sales in Q1 2020 compared with $1.5 million prior year, an increase of 166%. 

There are 132 burn centers in the US with 300 burn surgeons.  Had 63 ordering centers by end of 2019 and expects to add 25 more centers in 2020.  166 surgeons trained and RCEL expects that to increase to 220 plus. 

Very fast adaptation and buy-in from the medical community that is often slow to adapt to a completely new treatment in a very short time is an indication of the superiority of the RECELL System. 


Current Approved US Use  

In-Patient Burns                 $200 million   14,000 In Patient RECELL candidates


Additional Opportunities

Expand within Burns:


Pivital Trial Stage

Out Patient Burns           $450 million   110,000 2nd and 3rd degree burns


Pivital Trial Stage

Pediatric Scalds              $250 million   65,000 Pediatric scald injuries


Pivital Trial Stage

Soft Tissue Recon.         $550 million   75,000 Trauma related Skin Graft Procedures


Feasibility Stage

Vitiligo                           $600 million   150,000 Vitiligo patients seeking treatment


Discovery Stage

Genetic Skin Disease         Collaboration Announcement H1 ‘20


Discovery Stage

Rejuvenation                      Collaboration Announcement H1 ‘20


Balance Sheet and Valuation

RCEL completed an institutional placement in November 2019 in which it received proceeds of about $80 million at the equivalent share price of about $7.50, higher than the current market price.   Current cash burn is in the range of $20 to $25 million, annualized.  The company has no debt.  With a $2 billion market opportunity in various stages, a 10% market share in 5 years gets to $200 million in sales.  Something in the medical industry growing that fast might trade at 10X sales, which is in the range of a 400% return.  Obviously this is big picture directional analysis based on the company executing well in the identified uses.   I have not considered rest of world opportunity or other indications being studied including Genetic Skin Disease and Skin Rejuvenation. 



RCEL has assembled a very deep and experienced management team and board.  


Leading the team is Dr. Michael Perry, Chief Executive Officer

Dr. Mike S. Perry was appointed as Chief Executive Officer (CEO) of AVITA Medical in June 2017, after serving on the Board since February 2013. He brings extensive experience across the global pharmaceutical value chain for healthcare products spanning diverse therapeutic areas, including substantial expertise in cell therapies and cell-based gene therapies. In his career, he has been materially involved in the successful development and commercial launch of over 30 prescription products, 14 of which achieved blockbuster status.

Prior to joining AVITA, Dr. Perry’s leadership positions included Chief Scientific Officer of Novartis’ Cell and Gene Therapy Unit from 2014-2017; Vice President and Global Head of Stem Cell Therapy for Novartis Pharmaceuticals Corp. from 2012-2014.

With additional positions held as Global Head of R&D at Baxter Healthcare; President and CEO of Cell & Gene Therapy at Novartis affiliates Systemix Inc. and Genetic Therapy, Inc.; Vice President of Regulatory Affairs at Sandoz Pharmaceuticals Corporation; Director of Regulatory Affairs at Schering-Plough Corporation; and Venture Partner with Bay City Capital, LLC, Dr. Perry brings successful global management, guidance and forward direction to AVITA. Since 2011, has served as a Director with Arrowhead Pharmaceutical expanding his reach in influential medical growth.


I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.


Continued adaption of RCELL System for Burns and other identified uses.  


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